Episode #553: Merging Hospitality and Real Estate: JaJa Jackson's Blueprint for Flexible Living Success

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0:48 It's easy to use. Go to the prospectwizard.com get a free 30 day trial. Talk to my boy Dave Gallen. He will get you all set up. And let the leads flow based on the Wizard. Go get him. This is Pete Moore on Halo Talks nyc. I have the pleasure of bringing a friend of mine from 27 years ago when we entered Harvard Business school. Class of 1999, Jaja Jackson. We reconnected at our alumni event back in Boston several months ago and he's been one of the leaders on the investment side in the hospitality sector. So, zsa, good to have you on the show. It's a pleasure to be here, Pete. Great to see you, Captain Halo. Thank you, thank you. Yeah. H A L O.

1:36 So we're trying to replace the word wellness with health, active lifestyle, outdoors, and my desire to become a superhero at some point and get that award and take over Batman and Spider Man's role in leading this industry is, is where I'm headed. So I got my hat of EBITDA on. I know you've created a lot of EBITDA over the years on the real estate side. So can you give our listeners a little bit of background? Maybe talk about being at Airbnb on the ground floor and now at Iconics Capital? Yeah, sure, sure. So Airbnb, back in 2014, I joined the the strategy and real estate function. There we were. It was a very interesting time in the world where Airbnb had moved from its startup phase into its mainstream phase. It was still a private company and Airbnb was trying to figure out how it could participate in the world of class A, multifamily and just apartments in general. And having done 14, 15 years as a real estate developer creating homes, safe homes and communities for people in some of the world's best cities, I was able to partner With Chip Conley, who is a hospitality guru, to figure out how Airbnb and the multifamily world could work together. That then turned into an introduction to iconic capital, where I'm on the team today.

3:04 And we created a platform that merges the very best of Airbnb with the very best of multifamily living. And that's what we do today. So when you took the leap and worked for Airbnb, which now obviously looks like a no brainer decision for you, was there an entrepreneurial cord that, that struck at the time for you? Oh, 100%. Prior to entry into the Airbnb world, I had created a startup coming out of Harvard business school in 99. With my partner Jason Palmer, we created a platform for colleges and universities. So I had a taste of what it meant to go from zero to one, work with venture capital, put a board together, build a team. We did all those things, but prior to that, I had been working with really institutional blue chips McKinsey & Co.

3:56 Emerald fund. So getting into the entrepreneurial part of a very mature business like multi family real estate or residential real estate was kind of a perfect combination of experiences I had had and very mature business businesses and then working with entrepreneurs and what it takes to be lightning quick, figure things out, be creative and invent. So it was a very special time. And what you accomplished through that, obviously you had like, permitting, you had, you know, local communities that were kind of fighting against, like, hey, I don't want this. I don't want my apartment complex turning into like a hotel at the same time. Know, the way I looked at it is, you know, we're living in the United States. You have property rights. You should be able to, you know, take that property and do pretty much what you want with it in order to generate ancillary income.

4:52 So what are some of the things that were like key takeaways or learnings or like milestones? You're able to say, like, here's the problem and here's the solution that we figured out strategically how to make this work for everybody, all the stakeholders involved, 100%. So let's break this response into two parts. The first part is during the Airbnb years, that was about five years of, of time where we began with some of the largest multifamily REITs in America. EQR, Avalon Bay, others like that. And we really just sat down, I went into the offices and said, hey, I think you've got an opportunity to make your residents happier and to make more money. If you will embrace this hospitality concept called home sharing. And mostly what I heard back was, we don't want to do that. And Here are the 12 reasons why. Most of them were fear driven. You know, many of the people who were leading apartment providers at that time had never actually experienced Airbnb.

5:58 Today, millions, hundreds of millions of people have, but at that time, they had not. And, and of course, when you, when you're running a 300 unit multifamily building, it's a precious commodity. You've got to make sure that the hallways are always right for the resident. You've got to make sure the asset is maintained. You got to make sure things don't break. And if you have someone who you don't know coming in for a night or three nights or a week or a month, that's, that's a no go. So after canvassing all these different blockers, what we were able to do is figure out ways to respond to the safety issues and the trust issues. That's really what it takes whenever you're merging two platforms, hospitality plus anything, you're talking about people engaged with product, and it all has to start with trust. So we built software and policies at Airbnb that would allow the multifamily businesses, the blue chip class A players, to slowly walk into the hospitality space called Friendly Buildings Program back in the day has been taken over by some great people, like Jesse Stein, who leads that business now at Airbnb, and Nate Placharczyk and others who were all instrumental in creating that. And then the second part of the response is because that was moving in the right direction. Iconic Capital, who was an early investor in Airbnb, saw an opportunity to use that investment thesis that multifamily could outperform if it was willing to have a hospitality element. And we

7:32 put together over $800 million. They asked me to come over to Iconic and work with Jeff Felder, where we launched this platform about six years ago. It's interesting because a lot of people, we run this Halo academy. We talk about business models and we talk about almost like to creat of a new asset class or like taking an asset class and basically like optimizing or like changing some of the levers of it, you know, to create outsized returns, you know, off of the risk return line, diagonal line. So, you know, what, what's the magnitude, you know, either percentage wise or, you know, return wise, to say, hey, we took an asset class that had like a 10 or 12% return, you know, capital appreciation adjusted and we were able to basically drive more revenue through it.

8:21 And that revenue was not a blip. That revenue is now like embedded in the asset class. Yes, yes. All right. I love how you describe that because that's the way we do it. I think that's the right way to think about it. So for this asset class, which we will call flexible living, for the. What we call it flexible living, it's a multifamily baseline product that would produce. Let's just call it, let's call the baseline. Your net income is zero. Okay. Let's just call it zero. Because I want you to see the magnitude of the change when you use the Central S E N T R A L. That's the name of the platform, the manager that we created to do this. When you employ Central to manage your class A property, you, you will increase your net operating income by between 15 and 40%. Wow. Which is unheard of in multifamily. Without doing either a massive renovation or a brand new construction, things that require a tremendous amount of risk. In this case, all you're doing is changing the operator and in some cases investing in furnishings to extend the value and the operation of your amenities in common spaces.

9:42 So that translates into an unlevered yield increase of, you know, that can be between 1 and 5 or 6%. And it's tremendous. This is something. Now We've seen over two or three years of consecutive operation in our own portfolio of 4,000 plus Class A multifamily units across the United States. And now we've seen it with 10 or 12 other institutional owners who are using Central today. This is Pete Moore. I want to let you in on a little secret. There's this company called Promotion Vault. And what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and one month free or giving away shakes or giving away T shirts. What you want to do is build a rewards program that lasts, that people value and that doesn't discount your own products and services. So here's the deal. There's something called Rewards Vault. The Rewards Vault is going to allow a member to set up their own profile. They are going to answer questions, you are going to get those answers. You're going to be able to target those members and you're going to reward them inside your club, inside your spa, and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues and to be rewarded properly for the actions A lot of companies are cutting back on rewards. You shouldn't be promotion vault. Your answer, Trust me, this is real.

11:16 If I take a look at iconic, just to give people an understanding of now, you basically have created a competitive advantage in as a buyer, right? So now you're not just like it. I'm not just a financial buyer. I actually became a strategic buyer because I've got a technology and I've got a system in place that I can potentially pay more. I probably don't need to pay a significant amount of dollars more, but I might have to pay a little bit more on the, on the entry point. However, my exit is already now embedded in an appreciation like on day one, because I know what I'm deploying. Is that a fair summary? I like exactly how you summarize it.

11:59 However, I would just adjust this. When you buy that multifamily asset, that class A property, and you decide you're going to operate it as flexible living, you're going to change the asset class from core multifamily to flexible. You're going to purchase that asset at a traditional multifamily cap rate, right? You're not going to pay a premium at all. And then you're going to deploy the right manager to operate it in a different way. And there you're not going to pay a higher price either unless you start to get that extra revenue and that extra bottom line. So it's an all upside proposition if you do it properly. We underwrite everything just like multifamily the way we always have. All of it is in the lift. So, so let's take like the way you think and the things that you've actually done successfully, such as deployed this. And I know you're, you're, you're an active lifestyle guy. You, you, you're, you know, at the end of the day, you probably still think you're, you're a college athlete because you never, you never not right?

13:02 I'm going to, I'm going to the gym right after this. All right, awesome. So we won't hold you up too long, but from a standpoint of like looking at the, the health club industry, which you've been a participant in and an avid user of, what are some of the things that, that you walk into your club right now and you're like, I can't believe like they don't do this or like, why, why is the health club industry not the equivalent of like the four seasons? From a standpoint of like, how does I used to go to Summer camp, right after the first week. You know 600 kids names, right? Every kid, you know their name somehow. And then I go into the health club and they were looking at their phone when they check you in. They don't know anything about what I'm, what I'm looking to achieve. They don't know if I've got an event coming up that I'm training for. They're not using really you as a, it's not a relationship. It's like a relationship with your credit card or your bank account. What is some of like the low hanging fruit that if I said hey Zaja, do me a favor, like you've accomplished your mission over there. Like come come a pine on the halo sector. Like what do you see personally that you're like guys, you got to think about this differently. Yeah, yeah. Well this is, this is, I'm happy to respond to that. And I'm going to pull some of the best of from the multifamily central operating model. Right. Because we had to solve the same problem in multifamily. It was a, it's a sleepy industry that's done very, very well with, with sometimes without much effort and gotten very happy in some, some old ways. The innovation was around

14:36 delivering a higher quality experience to the resident. In this case in your question, Pete, we're talking about when I walk into a health club or my gym or fitness facility and the first thing we do now inside of our multifamily buildings is we make sure that the person who is working that front desk, the first point of contact with the customer is an employee of the business, not outsourced third party. And this is important. That person owns a little bit of central, they own part of the property management company because we need everybody to think like an owner, okay.

15:18 From day one and from point one in the customer relationship. So this means instead of the phone, when they're looking down at the phone, they're looking for the customer before they even walk in the door. We make sure that the people in most cases are standing up so that there's engagement at the eye to eye level. There's some physical contact and a connection between these two individuals or the groups. We have people wearing the appropriate outfits that set the tone for what's going to happen next and what that person wants to do. And then perhaps I was going to say most importantly but equally important is the technology that's backing up this human being. Okay. So our experience teams have software that helps them to know every person who's going to walk in the door if they're a resident or a guest who is expected at the property.

16:11 Gotcha. And this is how they're able to then know what's the mission of the particular day, Know a little bit about that person. If it's possible and if all those things aren't true, just simply create a relationship right there on the spot. Awesome. So how important is the fitness or workout recovery amenities at the properties you guys have flexibilized? Yeah. Yeah, that's a new word. Yeah, I make up all the time, bro. I'm just going to keep going. Yes. Yeah. Remix. You know, when. When Central is the operator and Central will select multifamily buildings that have really good fitness facilities. Okay. And when I say that, I'm talking about the physical space, the equipment that is there a range of things from sauna or to cold plunge to all the necessary upright equipment, freeways.

17:08 Okay. So that's kind of your baseline. That's your standard. The thing that we found is important to do is to make sure that the community and this could be either you're visiting your membership community or your residents. In our case at Central, we're talking about the residents that they have a platform to meet each other before they're working out, to join groups of people who are interested in the same type of fitness culture and to coordinate meetups with professionals. Now the professionals, this is really interesting. Who are your trainers in your club or your ambassadors is really important in a central.

17:49 They have recruited former professional athletes in a lot of cases and people with the necessary certifications to live in the building. Oh, wow. Okay. Now what this does is it creates an opportunity for those relationships to be less transactional and much more of a culture of engagement. Fitness, health and wellness. Not just a transaction that's, you know, X number of push ups, pull ups and sprints. We're talking about healthy psychology, building friendships, having experiences that transition from the gym onto the patio into the.

18:30 Into the morning's breakfast or some other type of food event. So we're integrating health and wellness, the physical part, into the psychological part. Because we all know now science is telling us that loneliness is a stressor on the body that makes people not okay. And so we need to address both the physical and the psychological elements. The culture of wellness needs to always think about that. Yeah. So about eight years ago, I was at the Clinton Health matters conference and I paid to speak there. And the thing that struck me is Clinton was doing a panel with the top four health insurance CEOs and he goes to this guy, Bruce Broussard, who is the CEO of Humana, and he says, what's the biggest issue in the healthcare industry right now?

19:14 And the guy took a pause and he says, loneliness is the biggest issue. This was eight years ago. So I, like, grabbed onto that, and it would basically change the mission statement of Integrity Square to, like, I'm trying to connect capital with companies to solve loneliness, obesity, and diabetes. Like, that's what I'm trying to do. And now loneliness is kind of like top of mind with everyone. So I'm usually on the front end of something. It takes like eight years for me to, like, get to, like, mainstream. But the fact that you mentioned that is such a huge title wave change in the way an executive like yourself would say, like, hey, I'm like, redeveloping this property. You know, I got xyz. But it's like, embedded in the why of what we're doing and the how of how we execute it. Yes. And your point about professional athletes and for our audience here, I want people to, like, just pause and take note. Like, my favorite thing to do is catch footballs. Okay. Like, I wasn't allowed to play tackle football as a. As a goalie in soccer. My mom wanted to preserve my brain, which now I guess I want to thank her. At time, I was pissed.

20:20 Yeah. And I. I mean, I still got four years of eligibility left, so I mean, I could become tight end if I invest in school someday. But the point is, you're talking about having talent at the location, and that talent needs to be proliferated to everyone. So if my health club that I belong to hires a personal trainer who used to be a wide receiver at Rutgers, I need to know that. Right. I need to know if there's a quarterback that is part of your staff. So when I want to throw a football, I could hit that guy up, and that becomes a personal training session to me. So. So the focus on talent, I think, is like a really big takeaway of, you know, what we're talking about here. Yeah. As well. And if it's okay to interrupt, I'll add, of course, an element of that is inspiration.

21:08 You know, when you. When you see a professional athlete and they've had a career of any type at that level, there's a certain amount of inspiration that comes along with that person's presence and experience. And that can be what gets people off the couch. You know, just to use the metaphor, get me off the couch, I'm curious about this person. Make that person accessible Non threatening. Take some video of that person, talk about, see that this is a real human being who you can engage with and is going to make your life more interesting. That's how you can connect with that community and get them into the club. You got to get them off the couch. This is Pete Moore. Here's the last tip for you of the podcast.

21:52 We are partnered up with a company called higher.hiredose.com they are the leader in workout recovery products, infrared technology, LED light masks, neck enhancers and other products such as PEMF mats and sauna blankets. If you have not gotten on the workout recovery train yet, your time and your stop is now. You got to get these products in there before these workout recovery and spas end up saturating your market. Having your members walk out of the club and going into one of their locations for 200 bucks per month where they're paying 39 to you. Let's become an expert in workout recovery. If we are already an authority in workouts, higher dose, check it out. There's a wholesale code and we look forward to helping you augment your products and services to meet the demands of your members. And hey, let's get people happy, healthy and sweating. And the recovery should be just as good as the workout.

22:59 Yeah. One of the things we were when I was kind of market framing the health club industry years ago was like Planet Fitness. That's a return on marketing and parking. Right. That's basically I want to get people in, I want to run them through here as quickly as possible like a Southwest airline. If I build a lifetime, I'm building like a trophy asset and if you can afford to pay, you come in. And I used to tell these middle market clubs like if you want to be relevant and you want to succeed, you got to play this game on return on relationships and results. So it's like R O R R is the way. So the way your, your whole. It's not just you like kind of ingraining this in the people that are around you. But how do big companies that you've been involved in actually either hire the people that get it or how do you educate them on becoming knowledgeable about like this is like in your DNA now or I'm going to put it in your DNA. Yeah, yeah. Well, you know there, there are two ways like you just mentioned. You can recruit it in, identify the talent and bring it in or you can grow the talent internally from raw material. The raw material route. Let's talk about that. First, if you can get intelligent People to understand your business and be willing to make a commitment to, to join the team. You know, and it's interesting, a lot of times when I was doing the interviewing, I would ask a person if I, if things had gone well in the interview process, can you give me a two year commitment to this, to this work? Love that. And if they, if they

24:32 can't say that or they're hesitant, that's not my person. And here's why. Because if I'm bringing you in, I need to be able to invest in you and put, and build out the skill set necessary to create the culture that has to exist in my business to be successful. So that's on the green shoot side. Or if you're, if you're building it, you can get intelligent people. They've got to have personality, they've got to understand your business, they've got to have charisma. But they also need to be committed so that I can train them or that the organization can train them. Then there's the other, the other path is that you identify people who already have these skills. And in that road, the mistake I see people make is they're not willing to pay for the people who are fully developed in the skill set you need. You've got to invest just like you invested in your business to get it going. You've got to invest in a person to bring them onto the team. Long term pay for a high quality individual. I think it pays off. That return on relationship concept you just mentioned starts with your employee and then you can have your return on relationship with your membership or your residence or your guest in your, in your, in your hotel or your apartment building. Yeah. So I gave you a copy of the book when I saw you back in Boston. Right. So like chapter one is, you know, pay for talent. So I love that you said that. And the second thing is I always tell people like, go and hire someone. Ask them that question, like, I'm hiring you for this season. Like, can you commit to me for like this,

26:05 this 2025 football season? Right. So I want to hire you. I don't want to be people like hire people like all the time. It's like, I want to hire January 1st and be like, you're in or you're out, right? You're in. And then I'm not hiring anybody else. And if somebody lose, somebody leaves. It's like somebody going on the injured reserve list, right. And like it's the next man up. So I feel like that's, that's like a way to think about it. Well, look, we got to get you to the gym. We can probably talk for hours. Let's get this podcast ripped and get it out into the market. And I want everyone here to think, like, zaza things and the way you can, like, reframe what you're doing inside the four walls of your club and also just change the culture by hiring athletes and people that have already shown up. Know what it takes to win, know the dedication, and actually, like, be present, you know, and build those relationships. I love that. I want to add a couple other things for this community of people. Consider partnering with apartment owners. Okay. Apartment owners have hundreds, sometimes thousands of individuals inside of buildings that already exist with great fitness centers and wellness centers built into the product.

27:18 But we they don't know how to operate it, and they may not have figured out the importance of health and wellness to retention of their residents. If you've got a great product, reach out to Central S E-N-T R A L.com and tell them what you want to do, and they can connect you with owners around the country who really understand this. Great. All right, buddy. Great to see you. Let's continue this. I'll give you a call after this podcast launches, but appreciate the words of wisdom and I told you you needed no prep for this. Hey, feels good.

28:18 Sa.