Today's guest is Larry Taylor. Larry Taylor is the founder and Chief Executive Officer of Christina. Mr. Taylor is responsible for vision, strategy and leadership. Mr. Taylor is a seasoned investor with over 40 years of real estate experience in the Westside region of Los Angeles. Show summary: In this podcast episode, Larry explains how his company identifies valuable properties and adjusts their portfolio in response to market shifts. He...
Today's guest is Larry Taylor.
Larry Taylor is the founder and Chief Executive Officer of Christina. Mr. Taylor is responsible for vision, strategy and leadership. Mr. Taylor is a seasoned investor with over 40 years of real estate experience in the Westside region of Los Angeles.
Show summary:
In this podcast episode, Larry explains how his company identifies valuable properties and adjusts their portfolio in response to market shifts. He also discusses the expansion of Christina's investor base, now open to all 50 states, and the opportunities this presents. The episode concludes with Larry sharing his insights on the desirability of owning real estate in the Westside region of Los Angeles and the host directing listeners to Christina's website for more information.
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The perception of buying rent controlled properties (00:00:00)
Larry Taylor's background and starting in real estate (00:01:11)
The impact of regulatory environment on real estate business (00:04:53)
The importance of performance certainty in property sales (00:12:14)
Adapting portfolio strategy in response to changes in tax and securities laws (00:13:55)
The benefits of real estate ownership and the government's support (00:16:17)
The growth of investor base and potential for discounted properties (00:22:29)
The vision of owning the best real estate (00:23:49)
Contacting Christina (00:24:28)
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Connect with Larry:
Linkedin: https://www.linkedin.com/company/christinala/
https://www.linkedin.com/in/lawrence-taylor-7679479/
Web: https://christinala.com/
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Larry Taylor (00:00:00) - There's a perception amongst investors that buying rent controlled properties which have depressed rent rolls because those rents have not been allowed to go to market is a bad investment. And I say, oh no, no, no, that's a good investment. You're never going to have a vacancy. And the value can only go up because ultimately, no matter what, rents will rise because they have to rise.
Sam Wilson (00:00:25) - Welcome to the how to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Larry Taylor is the founder and chief executive officer of Christina. He is a seasoned investor with over 48 years of real estate experience in the West Side region of Los Angeles. Larry, welcome to the show.
Larry Taylor (00:00:51) - Hello there. And how are you?
Sam Wilson (00:00:53) - I'm great sir. How are you today?
Larry Taylor (00:00:55) - I'm doing really great and I appreciate the opportunity to be on your show.
Sam Wilson (00:00:59) - The pleasure is all mine. Larry, there are three questions I ask every guest who comes on the show in 90s or less.
Sam Wilson (00:01:06) - Can you tell me where did you start? Where are you now? And how did you get there?
Larry Taylor (00:01:11) - Uh, I am a self-made self-starter. Uh, started as a USC junior. I was a scholarship student. I formed the my first real estate company while I was a student. Uh, the premise of that was to buy real estate in the west side of Los Angeles during the, uh, Nixon wage and price level freeze. And, uh, today we're doing the same thing in the same location.
Sam Wilson (00:01:40) - Wow. Most people. I would assume. Maybe I'm wrong, but. You know, the strategy shift over the years or the asset classes or the type shift. I mean, doing the same thing and the same location for 48 years. It sounds like you guys have either, um, just gone really, really niche or I just found a gold mine and just don't want to leave it. What? What's the story there?
Larry Taylor (00:02:09) - Well, the West Side region of Los Angeles is like the Permian Basin.
Larry Taylor (00:02:14) - Basin? Basin is to oil. It's drilling oil on a proven field.
Sam Wilson (00:02:21) - Okay.
Larry Taylor (00:02:22) - It's fully it's fully developed. It's highly desirable. It is the best year round climate of the United States. Has the highest concentration of millionaires and billionaires in the world. It's the center of tourism center of an entertainment center of technology, two largest ports, and the two busiest ports in the United States. I could go on and on, but, um, uh, if you're drilling oil in a proven field, you're always going to hit oil, right?
Sam Wilson (00:02:50) - Right. I mean, you a lot of things have changed. I think maybe we maybe you said this off air. Maybe we said this, uh, at the beginning of this recording. I'm not not quite sure which one it was, but I think you said you guys formed your company in September of 1977.
Larry Taylor (00:03:06) - That's correct.
Sam Wilson (00:03:06) - A lot of things have changed in in your region, I would think in particular both socially regulatory wise. I mean, a lot of things have kind of come down the pipe that have have made, uh, a lot of people kind of steer away from California.
Sam Wilson (00:03:20) - I know you just mentioned at least ten reasons. I think right off the top of your head as to why what you're doing is, is, is the right time and the right place to be there. But kind of give us, if you can, some of the history of how some of the changes of have have, uh, come about and then how they've affected the way you guys have done business.
Larry Taylor (00:03:38) - Well, first of all, California is a huge state. Yeah, California, the the economy of California, if it was a separate country, would be the sixth largest economy in the world. Uh, there's a world of difference in California, where the northern part of California doesn't resemble the southern part. Um, it's a very, very huge area. And Los Angeles is a very, very huge geographical community. And so when people talk about California, you might as well be talking about southern South America, or you might as well just talk about Western Europe. I mean, California is a huge and diverse, uh, state, which is, you know, larger than most countries.
Larry Taylor (00:04:28) - And so when people talk about California, I don't know what they're talking about, because I can only talk to you about the hundred square miles of the west side of Los Angeles. I don't know anything about the rest of California.
Sam Wilson (00:04:41) - Got it. Very good. But can you. Can you give us a little insight maybe as to kind of the, the way the regulatory environment has shaped the way you guys do business, if it has it all.
Larry Taylor (00:04:53) - Well, of course it has. And its constantly regulations are constantly are constantly being enacted, reenacted, revised. Um, and and that's just not just Los Angeles or just California. It's the entire United States. So the regulatory environment is, you know, again, it creates opportunities. If you look at it strategically, it's the regulatory environment that creates opportunities rather than, uh, acts to, you know, uh, restrict opportunities.
Sam Wilson (00:05:34) - Can you give some insight?
Larry Taylor (00:05:36) - Sure. For example, a couple of years ago, California passed Assembly Bill 330, which ultimately became Assembly Bill uh, SB eight, which basically was designed to stimulate the creation of housing because the state of California is generally considered to be lacking of housing.
Larry Taylor (00:06:00) - So this was an idea that was passed by the state legislature to encourage housing and all the communities. And in California, however. There was an exception that was added very, very last minute to that bill which said, yes, we want to accelerate the ability to build housing by eliminating local restrictions or being able to expedite local over local restrictions. Unless what you're going to do is remove existing affordable, rent controlled housing, in which case, if you remove something that's already rent controlled or restricted in some fashion and you decide to build something on that site, you have to bring back that which you removed. At the same rent or less than what they were when you removed them. What that does is it takes away all of the incentive to remove existing rent control. So you can't really remove it. What happens is if it can't be removed, it can only become more valuable. So in a sense, what everybody's saying. Oh my God, oh my God, oh my God. This new regulation which was designed to stimulate housing, I'm saying, is all that did was it may stimulate the growth of housing in areas where there isn't already housing, but where there is protected housing, it is now protected from demolition into perpetuity, which means no more competition.
Larry Taylor (00:07:43) - So if you have a fully developed area and all of these properties are protected and nobody will ever come in and tear them down and build new, that which exists can only become more valuable because the demand exceeds the supply. So in that situation, regulation actually made a rent control property more valuable, which.
Sam Wilson (00:08:05) - I think entirely. I mean, that's that's all together. I mean, it's unique, you know, in the, in the just in the, in the concept itself. But let's assume maybe that you aren't the one holding those properties. How does that how how can that situation be made advantageous for an investor looking to get into that market?
Larry Taylor (00:08:27) - Well, it's advantageous because there's a perception amongst investors that buying rent controlled properties which have depressed rent rolls because those rents have not been allowed to go to market is a bad investment. And I say, oh no, no, no, that's a good investment. You're never going to have a vacancy. And the value can only go up because ultimately, no matter what, rents will rise because they have to rise.
Larry Taylor (00:08:56) - Period.
Sam Wilson (00:08:58) - Right. They have to. And is that is that what you guys are? Let me ask this a different way. What are you guys specifically focusing on then? Are you guys building new or are you buying existing assets like what's your what's your core focus?
Larry Taylor (00:09:11) - Our core focus is to buy existing. Properties from people that need to sell, not from people that want to sell. And we are not property specific. We are property agnostic, location specific. We like street retail, for example. That's been one of our primary property types that we focus on. We like pedestrian oriented street retail property. Uh, that's one of our hallmarks. We're not really specialists in any one particular property type, because rent is rent. Uh, space is space. Uh, doesn't really matter as long as you're buying in the right location. Location, location, location is going around is as a we've all grown up with location, location, location. They never said apartments, apartments, apartments only or they never said only the southern five states.
Larry Taylor (00:10:08) - Miami, uh, you know, Florida, Arizona. Texas, right? No, it's always been location, location, location. And there aren't that many locations in any one particular state or country, uh, that are investable. And what I mean by investible is where development is restricted. Demand exceeds supply and the entry barrier is very, very high. Those are the components that add to success in investing in real estate. There's very few places in the United States or any country that are investable, right? Period.
Sam Wilson (00:10:54) - That's wild, I love that. So you guys are. You guys are, um, you mentioned there you said asset kind of agnostic, and you want to find people that need to sell, not want to sell. Why are people needing to sell in today's environment?
Larry Taylor (00:11:10) - In any environment, there's always death. Okay. And, you know, for anybody that has a net worth of over 12 or 13 million, uh, they have to pay a state taxes. So if they have a portfolio of real estate, they have to sell the real estate to pay the estate tax.
Larry Taylor (00:11:31) - So death, divorce, bankruptcy, foreclosure, partnership disputes, there's always something like that happening, particularly in a vast environment like the hundred square miles of the West Side region in Los Angeles. There's always, I like to say, there's always someone dying.
Sam Wilson (00:11:49) - There is. There is.
Larry Taylor (00:11:52) - As long as it's not me.
Sam Wilson (00:11:54) - That's, uh. That's that's a good idea. I like that, yeah. So you I mean, in being market or, I guess, asset agnostic, how do you how do you effectively weed through the. I mean, there's got to be just a ton of property coming across your guys's desk. How do you weed through that and actually find the assets that are worth pursuing?
Larry Taylor (00:12:14) - Well, when you've been on the ground in the same location for nearly 50 years, they find you. Number one. If it's listed for sale, it's retail. We're not interested. Okay, so. But they find us. We have a long track record of performance. Certainty of performance to people.
Larry Taylor (00:12:36) - Who need to sell is more important than price.
Sam Wilson (00:12:42) - Can you clarify that?
Larry Taylor (00:12:44) - Yeah. If you need to pay your estate taxes nine months from the date of death, okay, you're going to be more focused on selling a property to somebody who definitely is going to be able to close and provide you with the money that you need to pay your taxes. Yeah. So, I mean, certainty of performance is what comes from companies that have track records within a given geographical location of performance.
Sam Wilson (00:13:14) - How have you how have you guys adjusted your portfolio over the years? I mean, I know, I know, you said, you know, the finding the assets that are it sounds like off market assets finding people that need to sell. You're not necessarily asset specific, but I would imagine I mean, you guys have gone through the savings and loan crisis. You've gone through the.com bust, you went through the GFC. I mean, you went through Covid. You guys have seen all sorts of of incredible market shifts.
Sam Wilson (00:13:43) - I mean, that's that's a wild ride to have gone through the last 50 years. How have you changed or repositioned your portfolio accordingly along the way, if at all?
Larry Taylor (00:13:55) - Well, we did change about ten years ago in response to changes in the tax law and changes in the securities law brought about by the, uh, Jobs Act. Um, it became very clear for real estate investors to be able to benefit from the tax treatment. They had to be able to own multiple properties because the depreciation and amortization, uh, deductions, which are non-cash deductions, which allows an owner of real property to actually earn a positive income. But after tax report a loss, those losses are suspended for most, uh, property owners, unless they own other properties that are producing income, which they can use to offset, they can use the losses to offset the income. So what we did was we formed private equity companies, and we said, we'll have one company that will buy ten properties, and we will allow our investors to invest in the company.
Larry Taylor (00:15:06) - By owning an interest in the company, they'll own an interest in ten properties. And then as properties are throwing off income, other properties are throwing off losses and therefore they'll be able to use the losses within the portfolio and not have to pay tax. So and then we set it up as a private equity company, because a private equity company basically says don't expect great results in the first, second, third, fourth, fifth, sixth year. Real estate is a long term. Most of our real estate partnerships when we were syndicators had a 30 year to 35 year term. Wow. So our private equity companies on average have a 30 year term. Now, if you're lucky enough to own great real estate, the smartest thing that you can do is having purchased it. The dumbest thing you can do as ever selling it. My only regret in the last 50 years is having ever sold anything. Wow. So the government rewards you to keep it, and the government penalizes you by taxation to sell it.
Larry Taylor (00:16:17) - So, you know, in the typical investor mind, which is different than the real estate mind, which is how much am I investing? How much am I going to get back? What's my cash flow? What am I going to get my money back? That works for stocks. That works for bonds. Maybe that works for businesses. Uh, works for a lot of things. It does not work for real estate. Hmhm real estate is buying the best property and the best location at the lowest possible price, and mining it for all of the tax benefits and the appreciation and value creation. Because the government rewards you by allowing you to continue to make money, build value and never pay tax. That's what makes real estate work.
Sam Wilson (00:17:06) - I love it that that's that that's extremely clear. I want to kind of circle back to your greatest regret. Is selling it comet and maybe tie that back into the 30 to plus year hold that you guys project on this. What type of investor gets in and how do you attract that investor? I mean, you know we've got a fund right now.
Sam Wilson (00:17:27) - It's an eight year fund. And people are like, oh, eight years. That's a long time. And I'm like, I don't I don't think it's that long. So obviously it sounds really short compared to what you just, uh, you just said it 30 plus years. How do you attract, attract capital that is looking at a 30 plus year hold?
Larry Taylor (00:17:46) - Well, there's all forms of capital throughout the world, and there's all forms of investors who have different strategies and different requirements. But ownership of real estate is something that's been around longer than human beings. And and so, I mean, real estate has been around longer. And once you own something and you extract value, for example, if you own a property that you purchased for X amount of dollars, call it a $10 million, right. And over a 20 year period, it becomes worth $35 million. And you originally invested 5 million and borrowed 5 million. And then over the first ten years, you earned $3 million in operating income.
Larry Taylor (00:18:33) - But in the 10th year, you had an opportunity to put a $15 million loan on the property, but you only paid ten and you only had five in, but you got three out. Now you have a loan for 15 million. You get three times or four times your money out tax free. And the interest that you pay is deductible at the property level as an operating expense. Now. Five more years go by, go down, and now the property is worth $30 million. And you have a financing opportunity to borrow $20 million. So you pay off your $15 million, put another $5 million in your pocket, and you still own the property. You still pay no tax. Then when you finally die and you have already set up your estate plan, that asset goes to your beneficiaries at a stepped up basis so that they pay little or no tax when they sell the property. You may have an estate tax issue, but in our structure, where you only own a portion with other investors in that in that private equity company, if you're transferring to your beneficiaries a percentage interest in, let's say, ten properties that are owned in this private equity company, the government allows you to apply a discounted value up to 35%.
Larry Taylor (00:19:57) - So let's say 15 years after you made an investment in one of our private equity companies and you invested 10 million, and now that 10 million is worth 20, right? You can leave it to your your beneficiaries that like 16. Okay, so real estate has been the greatest form of wealth creation. Ever. Okay. And I don't discount the stock market and I don't discount the S&P 500 and so on and so forth. But those investments do not offer the tax benefits that the government gives to real estate. And there's a reason for that because stimulating real estate stimulates the economy. So when government is always looking for ways to get people to invest in real estate because it is illiquid. You can wake up in the morning and sell a stock. You can wake up in the morning and sell a bond. You can wake up in the morning and sell out a mutual fund. You can't wake up in the morning and say, oh, I'm going to sell my building in 30 minutes. Okay. So again, but when the government stimulates real estate, it employs a lot of people.
Larry Taylor (00:21:08) - When there's construction, it puts together a lot of a lot of people are working architects, engineers, plumbers, electricians, carpet manufacturers, furniture makers. I'm saying is the way to stimulate an economy is always to stimulate real estate. And that's been going on in this country for the last 100 years. So real estate still is the most significant beneficiary of the government's largesse.
Sam Wilson (00:21:37) - Undoubtedly. Undoubtedly. Larry, I've got one. Uh, maybe two final questions here for you. I've certainly enjoyed your insights. Uh, I love your enthusiasm. What you bring to the table. I mean, you guys have done some really, really cool things, and I love just how you've hyper focused in one very, very specific part of the country there in the West side of Los Angeles. But maybe give me this insight if you can. What what's the favorite part of your business now and then? Where are you guys going?
Larry Taylor (00:22:07) - My favorite part of the business right now, of course, is growing. Christina real estate investors and opening up Christina Real Estate Investors to more and more participants across the United States because the Jobs act allows us now to market the opportunity to invest to in to people in 50 states.
Larry Taylor (00:22:29) - Right. Whereas before we were limited, very, very limited to just California. So that is very exciting. And the other thing that's exciting is, uh, as the Federal Reserve has raised interest rates 11 times consecutively in the last couple of years to rates that we haven't seen in more than 22 years. It's creating a lot of what I call finance stress on very, very good properties. And so we might start to see for the first time, we're starting to see some investors who bought in the last 20 years, or 15 or 10, particularly in the last five, that might be willing to throw in the towel, uh, because if they borrowed at three and they have to re borrow at seven, and the lender is saying, we need you to pay down the loan, they might be more willing to sell the property at a discount. So we're starting to see some pretty good properties become available at some very attractive prices. So between the growth of our investor base coming from 50 states and the potential to have that unlimited and the ability to buy great real estate, but like I said, staying within the hundred square miles of the West Side region of Los Angeles, it's a bigger location to bigger geographical area than Manhattan.
Larry Taylor (00:23:49) - And wouldn't you love to own Manhattan? Some of the biggest titans in real estate will tell you that they've made their greatest fortunes only owning real estate in Manhattan. So I mean, like, this is our our vision, which is, you know, own the best. Forget the rest.
Sam Wilson (00:24:06) - I love it, I love it, Larry, thank you for taking the time to come on the show today. I certainly appreciate it. I've enjoyed, uh, I've enjoyed having you and I've learned an absolute ton from you. I think what you guys have done, and something we'll continue to do is, uh, inspiring. So thank you very much for that. If our listeners want to get in touch with Christina, what is the best way to do that?
Larry Taylor (00:24:28) - Go on our website. It's very, very friendly. Uh, it'll immediately direct you to, uh, our company just by filling out a few things and giving us your information, and you'll get an immediate response.
Sam Wilson (00:24:40) - Fantastic. And for those of you who are just listening, that website is Christina.
Sam Wilson (00:24:44) - Christina la.com. That's Christina la.com. And Larry, thank you again for your time today. I do appreciate it.
Larry Taylor (00:24:54) - You're welcome. Thank you very much. I appreciate the opportunity. I hope your audience enjoyed it.
Sam Wilson (00:24:59) - Hey, thanks.
Sam Wilson (00:24:59) - For listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
