177: Toby Banta, Executive Managing Director @ Eastern Real Estate

When Toby Banta stepped in as Executive Managing Director at Eastern Real Estate nearly six years ago, the firm was hitting its stride. Even as COVID sent markets spinning, Eastern closed twelve deals in just two years - spanning multifamily, industrial, commercial, and hospitality - not only in New England but across the country. 

Then, the market shifted. 

Over the next three years, Eastern closed just two deals. For a fourteen-person office, a slowdown like this hit hard. But instead of forcing deals, Toby and the team stayed disciplined, passing on anything that didn't meet the Eastern standard. 

That selectivity is now paying off. 

Toby leads investment strategy and asset execution at Eastern Real Estate alongside co-founders Dan Doherty and Brian Kelly. His primary responsibilities span sourcing new acquisitions, joint ventures, and capital formation, as well as serving on the Investment Committee. Toby's expertise has been built on nearly twenty years in real estate, working across every side of a deal, and the completion of over thirty investments totaling more than $6 billion.

Inside this week's episode:

• Why the Eastern team structures every deal with multiple paths to success and refuses to make a binary bet 
• The $140 million, 360-unit ground-up deal in Portsmouth, and how Toby and his team got it into the ground in a market that institutional capital largely passed on 
• How Eastern's practice of putting its own capital into deals alongside its investors shapes the way Toby and his team evaluate risk at every stage 
• What Toby learned about risk and opportunity by working across leasing, capital markets, investing, and development before landing at Eastern 
• The legendary Wang HQ deal: acquired for $525,000 and sold for over $100 million just four years later

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Transcript

Rens Hayes IV 0:08

Hi, everyone, welcome to Design Development, your hub to learn directly from top performance in real estate design and construction. I'm your host, Ren Space, co-founder of HO structural engineering, a lifelong learner, and I'm personally obsessed with high-powered organizations and the leaders academic. Let's go. Thanks for joining us today on design development. It's my pleasure to introduce Toby Banta, Executive Managing Director at Eastern Real Estate. Toby, thanks for joining us today. Thanks for having me. I'm excited to dig in here, Toby. It's been a pleasure getting to know you. I want to first dig into what's the biggest risk in real estate?

Toby Banta 0:44

Ooh, that's a big one off the gate. I think the biggest risk, it depends on where you sit in the real estate ecosystem, right? But I think for us, what we do as real estate investors and developers, it's overextending yourself and it's misalignment with partners, whether it be capital partner, lender, operating partners. And I think that's if I look back at some of the deals that haven't gone the way we wanted, it was from those things, like overextension and misalignment of Yeah.

Rens Hayes IV 1:09

Overextension, right? Like everyone, I would hope most people know, like when you get too leverage, too much debt, that's when in the macroeconomic picture changes. Like that's big risk. But I like that you brought up aligned interests with with your partners. And when I think of a long term and real estate's a long-term game, right? Even if you are a merchant developer and you're on a five to seven year deal cycle, you're still talking multiple years. And if two good people are making a deal together, but they're not aligned interest-wise in what they're trying to achieve over the few years, two good people can have friction, right? It's not just good and bad people.

Toby Banta 1:42

I think you get these deals have long gestation periods, right? You think about a development deal, it's not just how long it takes to build it and lease it up, it's the time before it, right? To permit it, put it together, and the markets move here pretty quickly, as we all know. And so I think there's been moments in time if you're going to permit a deal for a year and a half that the market moves and changes. And you, as a developer, are incentive to get a deal into the ground, into production. And if the market's not there, the market's changed, you maybe misaligned. And so I think for us, we try and have milestone events along the way where we're like, hey, is this thing still work? Are the fundamentals still there? Can we still capitalize? Is it still a good risk adjusted bet? And there's been some hard conversations when you walk away from a deal that you have a lot of hours and pursuit capital into. But when you look back a couple of years down the road, I think we're very happy that we did, well, as much as it hurt at the time being, that we passed on those deals right then.

Rens Hayes IV 2:32

Milestones. I think that's a great frame, Toby. And as I think about the seat that your team is in when you're dealing, when you're building partnerships or joint ventures to create a real estate asset, having milestones that set expectations on when you're going to communicate to make sure that like real estate changes, things change. So that commute that those lines of communication, when I come back to this simple statement, it's your experience is your expectations minus reality. Right. So if your reality doesn't meet your expectations, your experience is less. And then that comes from a lack of communication. So by setting milestones, it tells your partners when they can expect to hear from you. And if they want to talk in between, by all means. But you you can't just get somebody's money and talk to them in five years, right?

Toby Banta 3:17

Yeah, yeah. Yeah. No, I agree. I think listen, there's reporting that everyone has to do, should do that, but there's also someone told me a long time ago, bad news doesn't get better with time, right? It's bad stuff happens, you got to address it and deal with it right then and there. But I think even before you get to the deal, before you close on the deal, like making sure that you've mitigated risks along the way. And for us, it's a check-in, hey, we've done our body of work on the diligence front, right? There's some risks that are out there. This is how we're gonna bracket it. You can't buy, you can't de-risk everything. And now it's time to make a decision on go no go hard in a deposit. And that's a milestone for us, just like it is the day we close, just like it is the day we put a shovel in the ground. And so having those various check-ins when you're looking everyone on the team in the eye and saying, We're all in here. It's a small team for us. So we sit around a conference table with five people that are giving a thumbs up, thumbs down. And uh, you know, usually we're pretty aligned in that. And as I said, that misalignment is where you have risks and deals, even if you don't, even if you don't know it at the point in time, as things duration moves along, those misalignments can get more and more fractured.

Rens Hayes IV 4:22

Tell us about Eastern real estate today. Offices, you mentioned that team size there.

Toby Banta 4:27

Yeah, so we're based in Boston. Eastern was, I'll give you a little of the history. Eastern was founded like 25 years ago by Dan Doherty and Brian Kelly. Um, they were retail brokers originally, CBRE back in the day, then founded Atlantic Retail and ran that business for, I think, about 10 years, began investing in retail as well, and ultimately sold that business to the to their partners, employees, and in the next day founded Eastern Real Estate. Eastern is purely a real estate investment shop. For 25 years, Dan and Brian were investing their own capital uh alongside friends and family institutions and attaching the capital to the opportunity. Historically, it was a lot of retail, big box, suburban, grocery anchored stuff. And I'd say over the last 15 years diversified into other alternative asset classes via multifamily, industrial hospitality. I joined almost six years ago now and saw it as an opportunity. I'm 20 years younger than Dan and Brian, not to age them or myself, but I saw it as an opportunity to learn from the two of them. Great real estate investors, super successful individual. And together, they do different things really well. And for me to be able to sit between those two gentlemen and grow a business here. So they've given me a lot of leash here to evolve the platform at Eastern. And I think where we're today is where we are today is certainly different than where we were five years ago. Markets changed a lot in that time frame. COVID, everything else going on in the geopolitical climate, right? So we've all gotten through that. But today, first relatively small shop. There's 14 people in the office. We're just one office here in Boston now in the seaport. And we look for, I would say generally like a competitive edge, right? That we have to have, we're not looking to buy the market. We're really looking to buy something with a little bit of arbitrage in it, whether we have an angle, some type of a competitive dynamic that puts us in a position to be successful. So I think what we do well, we I say we're an investor first, a developer second. We certainly have the capabilities to develop. We have a head of development, head of asset management, really strong in the analytical, really strong in reporting, in-house legal, but we're pretty lean. We all wear a lot of hats around here. And uh, we've all sent around the block. And that I think allows us to think pr critically about new opportunities, make decisions dynamically, very much an entrepreneurial spirit that comes from Dan and Brian in the last that's how they've run the business for 25 years. And I think that continues today with each deal we do and each person we hire and employ here.

Rens Hayes IV 6:49

What's maybe the best lesson or piece of advice you've received from Dan and Brian?

Toby Banta 6:54

From Dan, it comes to alignment and making sure that our capital, we put a decent amount of our own capital into these deals. That's and that our capital, our goals and objectives are aligned with that of our investors, that of our that of our lenders. I think Dan will always say, there's only your greatest asset, right, is your time, right? There's only so many hours in a day. And let's not confuse being busy with being productive and stepping back and realizing like, how can I move the needle here? How what can I do or what what can our team do to collectively advance things to the benefit of our partnership versus just pushing paper and blocking the tackling?

Rens Hayes IV 7:32

I think that's such an important frame, especially in today's world. Time and effort don't necessarily drive results. So you have to really make sure you have the people around you and create time to sit back and reflect on am I doing the right things that are going to lead to the result I want? It comes back to that whole experience as expectations minus reality. A lot of people are sitting there doing the same thing day after day, expecting the result to change. But that's not how that works, is it? Do you guys both do ground up development and acquire existing assets? Are you generally a merchant, uh investor, developer where you're buying and then flipping in a given time period, or do you also long-term hold a nimble network?

Toby Banta 8:14

We look at we're a bit of everything, right? We're entrepreneurial, flexible, that's in our DNA, our core. It's hard to peg us as what we do, but I would say fundamentally, we want to be involved in real estate deals that we'd be happy to own for 20 years. And you don't own them all for 20 years, sometimes it's 20 months, but we think about good real estate, obviously, good locations, good partners. And if you had to say historically, we've probably been on the more merchant build side of things where we're taking risks up front, we're entitling, we're creating value there, we're building and realizing that. I think a lot of Dan will say sometimes these assets most valuable day is the day you cut the ribbon. And there's a lot of problems that happen downstream after that. So that said, like we've had assets in portfolio for 20 years. Really, it's it's just about what is right for each bespoke investment opportunity for us.

Rens Hayes IV 9:03

That's great. And so in in terms of alignment with, say, your capital partners, do you have different partners that are both short and long-term capital? Yeah, and I, for one, absolutely subscribe. This kind of I feel like this takeaway comes from Warren Buffett. It's don't buy a stock if you're not willing to hold it for 10 years. And I can see how that decision in real estate is really important. If you're trying to make a buck in the next 12 to 24 months, you can get caught.

Toby Banta 9:27

For sure. Yeah, no, it's all long-term, it's a long duration business that we're in. But as I said, we match capital to each individual deal. Some cap some opportunities require institutional capital, whether that be for risk profile, size of deal, time period allotted to us. Some deals are better for private networks with a core group of individuals who've invested with us for a long time. It really depends on each opportunity how we how we capitalize. And frankly, a lot of times we don't know going in, right? You put a deal under contract, you get control of it, and you're trying to figure it out. And it could go a bunch of different ways in terms of the risk that you're going to take on the path to execution. We have a deal under contract now, and you're like, I don't could go an institutional partner, or we could decide to club it up with a handful of our long-term investors.

Rens Hayes IV 10:10

Your team geographically, yeah, I think I I see that you do work across the country. You've had a lot of development in Santa Barbara or California. Talk to us about geographic.

Toby Banta 10:19

Yeah. So Brian's been in Santa Barbara for 20 years. He's lived out there. So I think inherently real estate's a local business, at least what we do. We are not an allocator of capital. We are a hands-on operator investor and developer. So I think where we have traveled nationally outside of Boston and Santa Barbara is where there's unique opportunity. We had an inside angle, whether to the tenant or a product type. Santa Barbara, Brian, as I said, Brian's been boots on the ground there for a long time. So we've done a lot in that area and then traveled to LA as well a little bit. I'd say in today's world, California is a tough place to do business. So we're doing less and less California and looking back at like where we have a competitive edge, what makes Eastern good? Like, why does someone who's got a dollar to put into real estate want to give it to Eastern? And we'll where how do we outperform? And I think that is local here and in the greater Boston marketplace. Our network is here, we live here, we operate here, our families are here. Many of us grew up here. And so I think as much as we have done in Florida over the years and California today, probably 90% of what we look at is in the greater Boston, sort of doing the geography.

Rens Hayes IV 11:22

Wow. And so what was that say investment part or your development portfolio look like when you joined in about 2020? So today we're looking in greater Boston. That's where we see opportunity. What kind of projects were you doing in 2020?

Toby Banta 11:35

Yeah, in 2020, I I joined, I guess it was August of 2020, right? So market was pretty strong at that point. We were, I guess, heading into COVID. We were in COVID at that point. We had the we took advantage in that time period of uncertainty in the in the United States, frankly, from COVID reaction, office, multifamily, industrial. There was dislocation out there, and markets were in flux and in transition. So we did in my first two years here, we did 12 deals. And that was 20, you know, summer of 20 to summer, summer of 22. Some great buys, some great repositionings, sold a bunch of those when the opportunity was there. And in the last three years, so from summer of 22 to fall of 25, we did two deals. We're a deal shop, right? So going from doing 12, let's call it six deals a year to two deals over the course of three years is pretty painful. Frustrating, not a lot of high fives around the office. But I think what we were able to do is stay disciplined in our approach, make sure we weren't extending ourselves, like I said, to do a bad deal just to put one on the board. And but yeah, it's it's uh it's been a challenge of late. I think the markets have opened up a little bit for us. Some of the effort over those three years have paid off with a couple deals that we've now closed on and put into production. But our deals span, as I said, different flavors. So the 12 deal we did, we bought like four transitional malls, bought two in LA, we bought one in Burlington, Vermont, we bought one in Worcester, we bought a couple industrial deals, we did a couple multifamily development deals, we did a hotel deal, and uh again, it was all for whatever reason, opportunities that we thought there was some edge, some card for us to play that gave us a outsized return relative to the risk.

Rens Hayes IV 13:13

That's a ton of volume for a 14-person team. Not knowing like the inner workings necessarily of a business, I'm just thinking like across that type of geographic expansion, that type of market sector diversification for only like 14 people to be able to identify, evaluate, and manage those four deals. How do you manage that? How do you find those opportunities? Is it creating this network?

Toby Banta 13:35

I think we have great partners that we rely on. And probably 75% of our deals, we have operating partners, not just someone who's not a check writer, but someone who's going to be an ad value, help you carry the water up the hill. And we do a really good job and put a lot of thought into how we divide and divide the labor roles and responsibilities and make sure we're aligned for success. They're again not all perfect, but so we do leverage partnerships. And I also think we acknowledge we're really expert of nothing. We're a generalist investor. We have knowledge on all these asset classes, but by no means are expert. And that we leverage our networks. I was not necessarily a multifamily guy going back six years. I had done more office, more life science, but started to see an opportunity in multifamily. And there was a flight to the suburbs post-COVID and used our networks, used our friends. Hey, you know, what do you think about this? How do you, what's the level of finish? And ask a lot of questions. And I think that's what makes us good. And again, I come back to being well connected locally here in the greater Boston, New England geography that you know, you can ask those questions of your friends, contemporaries, and guide your thinking and put yourself in a good position for success.

Rens Hayes IV 14:41

A term I use a lot to describe leaders, or I would say a term I look for, a quality I look for in leaders is confident humility. It's it's the confidence to achieve a result, but the humility to understand that you don't have all the answers today and being resourceful to go achieve that result despite the inexperience that stands out there. The other thing that really connected as you walked me through that investments thesis is it connected it back to that concept before by being busy doesn't mean you're being successful. And so looking at that deal change as the economic environment changed from 2020 to today, doing 12 deals in 2020 to two deals over a two-year span shows that type of patience. And I think I I see a lot of businesses that get scared when they feel like they're losing work or their revenue is going down or they're not as busy. And they will make decisions to get busy again today by taking things at a lower price that actually just book their team up with unprofitable work for the years to come. It's like you book a big deal today, that's not like great revenue for the next quarter, the next two-quarter when you're actually having a pain. That's solving a problem. But when you make those decisions because you're impatient or you lack data, you make decisions that actually have negative long-term effects because of that fear and a fear of being unbusy.

Toby Banta 15:55

Yeah, no, exactly. The opportunity cost of that is huge. And I think the other thing is when you extend your real estate, it's not like uh buying a stock, right? You make a bet on it, you're gonna be in a development deal, or if these are long-term assets, living, breathing organisms, and you can't just like shoot it, right? You can't sell the stock and move on with your life. Like you're in it, you gotta work out in in a lot of the deals that go bad, they take a lot more time than the good ones. And you're working for preserved capital or worse. And and so for us to stay disciplined during that period, like it was hard for sure. Morale was down, as I said, not a lot of high fives. But I think as we look back now, sitting here, like we're very thankful that we did that. I think a lot of that discipline comes from Dan, Brian, and others that's instilled across the organization here. We're in a much better position for that today.

Rens Hayes IV 16:41

There's a legendary deal from the early days of Eastern Real Estate, something around the former Wang corporate headquarters. Could you talk to us about that? Could you share a story there?

Toby Banta 16:50

I mean, that long predates me. And I would say the allure of that deal and versus reality and some of the stories that have we got to let the legend grow. Yeah, legends grow, right? So, but I think that's how Dan and Brian really got their start on the investment side. And they saw an opportunity there. I think the story is just to get to it, is they they bought million square foot suburban, essentially vacant office tower in Lowl Mass, the Wang corporate headquarters for Wang at auction for $525,000. And a series of events happened, and four year, four years later, they sell it for over $100 million. And says young investors, first-time investors really in the business, like incredible windfall, but they put themselves in a position for success. And I think that there were some things that they knew in that deal that they'd done the diligence, they had valued land, how they could cover themselves, cover the basis, put some of the operating expenses back on Wang, who was still maybe occupying a portion of it, and they went for it. I think they were successful and they rolled that into a series of successful investments that they're after and made a career out of it. Yeah, it's an incredible deal. Those are hard to replicate. I also think today's day and age, information is much more available, markets are more transparent. There was a lot of uncertainty. It was easier to find a competitive edge back then, I think. Not to say you can't do it now, but those opportunities are certainly few and far between.

Rens Hayes IV 18:10

I think being disciplined, like going back to that lesson of being disciplined, being patient, being calculated, it's like when you don't fill your plate with busy work and you're disciplined and you have like your investment thesis, it allows you to have a clear mind to hopefully see those opportunities. It's very easy to sit here today and be like, oh, times were different, they just hit a home run out of the park. That's extremely lucky. But they also created their own luck, right? And that's not to say there isn't some other opportunity. I think being contrarian, if you do the same thing that everybody else is gonna do and you fail, everyone's gonna be like, yeah, that's a tough bet. Like multifamily was a hot market. But it's like to find this type of opportunity with I would say outsize return. Like you have to be contrarian in your thinking. That's in business, that's in real estate, that's investment, but it doesn't come without risk.

Toby Banta 18:58

Sure. And I think for us, it's how you manage that risk along the way. Like you can't mitigate everything, you can't de-risk everything. But you know it's really this is one of the biggest changes for me coming from my prior career, which is more institutional, being at funds, is when you're investing your own money, and Dan and Brian have done that for a long time. Like, think about risk differently, right? You're gonna go hard, you're gonna stroke that check on the deposit, or close, or convince your friends and family that it's a great idea to come along with you. Like, that's a big responsibility. And it's something that we, I think, do a really good job at here at Eastern, and that just slows through the ethos of our organization.

Rens Hayes IV 19:33

Investing your own money is really a fast track to learning what matters in a deal. Here I am as a service provider and structure running a structural engineering firm to the real estate community. And at one point I realized I don't really understand how the real estate commercial real estate world works. And so I had to study to start learning like what a pro forma is and all the terms and what goes into creating a deal. Fast forward a few years and I'm starting to look to invest in real estate, but it's after the high interest rates, the interest rate change in 2022. And I'm sitting there looking to put in money into a 300 unit multifamily deal, and I'm going through the pro forma and before understanding what's going on in a pro forma, but then all of a sudden I'm like, how am I supposed to know what the exit cap rate is? What happens if that moves from a five to a six? I don't know if it's gonna be above a six. How would I ever know that? And I started to understand that I didn't have the judgment on what that exit cap could be or how far that could move in a given market, and it's putting your money where your mouth, it like really forces you to think more deeply about those things because they impact your pocket. So it's not necessarily how much, as long as it's a meaningful amount to you.

Toby Banta 20:38

Yeah, for sure. Yeah. No, and I think for us making like non-binary debts, right? So if your only chance of success is building it and selling it for a five cap at some point in time, like that's not a recipe for success because, like you said, we don't know what that cap rate's gonna be in four years when it's built, leased up, and stabilized. But understanding, okay, historically, like there's if we're have this much debt on it, if in a worst case we can refinance it out, or if this happens, we can go that. Like having multiple paths for success is the way we think about good outcomes, right? Like those are the deals we want to do, certainly on the development side where you're taking on a decent amount of risk.

Rens Hayes IV 21:15

Wise words, Toby. Absolutely love that. I know in business, I am thinking similarly. I try to take actions and build strategies that have multiple ways to win, right? I want a high risk adjusted return. Like tails, I don't lose much. My life doesn't change, my business doesn't change, heads, I win healthily. And I just try to compound those bets over the long haul. I'm not trying to win the year of 2026. I'm trying to build an ever-growing business for the decades to come, right? You have to make those binary decisions, going back to that, the risk. When you make binary decisions where you like win or lose, and one thing has to happen, I think that's a recipe for disaster. Quick break from the show. Thanks for tuning in to design development. We're trying to help as many people as possible. So if you could subscribe and leave a review on today's episode on whatever platform you're listening, it would be a great help. It's the only way we're going to reach more people. Let's get back to the show. What drew you to a career in real estate?

Toby Banta 22:14

To be honest, I never really considered anything else. I uh so my mom's only 12. I have eight uncles on her side, and seven of them are in the real estate business, whether it be leasing.

Rens Hayes IV 22:25

Imagine hosting that family. Do you guys all fit in one house?

Toby Banta 22:28

No, we don't. Like we Thanksgiving got to be like over a hundred people, and then we had to break it up and do our own things. But it was just what people talked about, whether it was leasing or capital markets or development. And then my dad is an engineer, my brother, an older brother who's a carpenter, and I just grew up like building stuff. My dad, great with his hands. He built our house, he built everything. He's into cars. And as a kid, I just liked to figure out how things came together, like taking scrap wood, nailing it together, and just making something that made no sense, but just putting pieces together. And as I said, I didn't really consider anything else. And so I grew up in the Boston area and grew up in Melrose. I went to Belmont Hill for high school, then went to Holy Cross and Worcester, had a great experience at all those places. But like, listen, I've been in the greater Boston area my whole life. So I know I want to be in real estate and I want to be in New York City. I want to expand my aperture here. I want to like see people and also it's a good place to be young and have fun. I graduated in 2008 and went down to New York City and figured out a job. As I said, like I've it was all I ever considered. Sometimes I'm like, was that the right call? Should I have been a doctor? But no, I love what I do now. And I've had a bunch of different stops along the way here that I think have put me in a position now. And uh it's a great business. It's a hard business. It's competitive, but I love what I do. And as I said, like you get to use sort of both sides of your brain, right? There's the math side of it, but there's also just like physical structure. How does a place come together? What makes something cool? Why do you want to sit in that room as opposed to just walk by it? Right. And I love that sort of physical nature of this, the stuff we deal with.

Rens Hayes IV 23:57

It's cool to hear how submersed you were in the real estate world, even as a kid growing up. Like I, for one, had no exposure to commercial real estate or investing. It wasn't something like my world was around construction, but a lot of small businesses and some contracting businesses and then like residential real estate. But it was like only as I continued to learn did I see that opportunity, which I think like your experience changes your perspective and the opportunity for share. Do you look back on that decision to leave Boston? Clearly, you have a big family here. So to leave for that time of your life, do you look back on the insights that you gained in that experience as a strength now that you've come back to Boston?

Toby Banta 24:38

Yeah. Yeah. And I actually did New York, Boston, New York, Boston a couple different times.

Rens Hayes IV 24:42

You drove back and forth.

Toby Banta 24:43

I couldn't make up my mind for years. But yeah, I encourage all young people, especially Austin's a very parochial place. I encourage all young people to go and explore, whether it's New York or San Francisco or Europe, whatever. It's just it opens your eyes to what's out there, the art of the possible, right? When you think about architecture, sizes and shapes, buildings, like meeting interesting people that are just more diverse than inherently we have here. So I went to New York and got my teeth kicked in as a leasing broker for a bunch of years. And but it was an incredible experience. Learn to sell, learn to talk to people, learn to take a blossom.

Rens Hayes IV 25:15

And what you mean by getting your teeth kicked in? Looked like a lot of nodes back then.

Toby Banta 25:19

I don't know's, yeah. And trying to sell myself as a service, effectively. And then I realized I didn't want to do that and said, hey, I want to be on the analytical side, I want to own real estate someday and operate it. And so I jumped to capital markets. I came here back to Boston in 2014, 2012, 2014. I worked at HFF, now JLL, on the capital markets side. And that was really drinking from a fire hose at being an analyst, underwriting, understanding the returns, the math, what goes into it. Then decided, listen, I didn't want to do that either. I wanted to go back to New York and go work in real estate private equity. Did that for a few years. Then I went as a developer for a period of time. And so I jumped around and I was happy in all the places. Like I enjoyed what I did. I enjoyed working with people, being part of a team. That's a big thing for me, is like the team culture, being an athlete most of my life. But ultimately, I wanted to do something more entrepreneurial and be able to run a business here, which I have the opportunity to do at Eastern, direct our investment strategy of like where I think we are can be competitive, where I think we have an edge. But all those stops along the way, I think put me in a position to be able to at least opine or have some thoughts or have some objectivity on those components of the of a real estate transaction, right? Which like leasing, capital markets, development, right, asset management, all that goes into a successful real estate deal. And I may not today be in the weeds on any one of those components or all of those, but having some relative experience, I think allows me to opine on that and know where some of the risks are and some of the opportunities are as well.

Rens Hayes IV 26:46

I can see how valuable that experience is. When I sit here in a different part of the industry trying to run a business, at first I stepped into engineering thinking, I have to be an expert engineer, and then I can go head on to run an engineering business. And then as I got a few years into my career, I started asking more questions and I got this perspective that 80% of businesses are the same, 20% is unique. And then I was like, what does that mean? It's engineering is the 20% of what it takes to run a business. The other ones like are replicated across all industries: strategic planning, leadership, sales, marketing, people, operations, finance, and legal. And I'm like, oh my God, there's like way more to learn about running a business. And it would be silly for me to sit here and think I could just study engineering. And so I went on this, I still do it today, like daily learning habit to try to get exposure to all these other perspectives and businesses and departments. And like you said, I don't sit in every department today, but that breadth of like deep dives at different parts throughout my career give me, I feel like it elevates my judgment. And judgment is such an important thing when you're in a position of leverage, which real estate is a high position of leverage.

Toby Banta 27:54

Yeah, no, absolutely.

Rens Hayes IV 27:55

That judgment, it's like impossible. Let's say you didn't have that experience, right? It's like you've never underwritten a deal, you've never been on the leasing side, you hadn't developed, but you're trying to allocate capital to real estate. It's like there are gaps or blind spots in your understanding of all the things that impact the deal that make it hard to have good judgment. And you can have blind confidence. Do you look back on say your leasing days, like in an area that like helped you bring a deal to life?

Toby Banta 28:22

I think what I take away from leasing was the level of just like being competitive, right? And um being part of a team, which is something I really value, and understanding how to sell and what to listen, right? When you're talking, I think a lot of people get into a room, they talk, but they don't actually listen. And when you sit back and you listen after your pitch, whatever it is, like you learn a lot. And so I think that's something I took to my next stop, which was the capital markets. And being an analyst was great. But once you get into you get through the underwriting, you understand the deals, then it's out actually talking to people, talking to lenders, talking to equity investors. And to be able for me to pick up a phone and be comfortable talking to those individuals, people or organizations, because I was used to being in front of people, like that was invaluable. I think that put me in a position for success there and ultimately parlayed that as I went down the line. But yeah, it was a great way to learn and encourage a lot of young people. I talked to a lot of young people coming out of college, and I think it's a great way to get your foot into the business, get your foot in the door and learn it, but it's not for everyone. And I said after, I don't know, two or three years in the business, I was like, all right, it's time to move on with the capital markets, it's time to move on again, up gone again. And like ultimately, as I look back, I think I always wanted to own and operate real estate, and I wanted to be able to control my own destiny, be successful if our deals, if the decisions we made, the bets we made are successful, then I and the team here collectively are successful. So ended up in the right spot after a bunch of different stops along the way.

Rens Hayes IV 29:43

You've mentioned the importance of team and the impact of athletics on your career. You played D1 lacrosse at Holy Cross, lacrosse, so hard to say. I'm sure that was a pain back in the day. What's your greatest memory from that time?

Toby Banta 29:55

My greatest memory is I would say just being part of an organization that's bigger than you. It's not a stellar lacrosse program. We play in the Patriot League, we took our elixir. So I guess learning how to lose, learning how to lose might be the right answer here. But just knowing like the rest for me, it was the responsibility as an 18-year-old kid. You go to college, you're a freshman, you get exposed to so much stuff. So much is thrown at you academically, socially, and being able to for me, it was like it taught me how to be like professional, frankly, where it's like, I forget your commitment was 40 hours a week. I had to be practice or gym or whatever it was, film. And and you're still like, we're still not winning games. You're but like, all right, this is what I signed up for. This I have 30 people that are with me, 40 people that are part of this team, and we're all in it together. And I gotta get my work done. I still want to go out and be social and have fun. It is college after all. And that I think ultimately taught like when I did get to be a professional, balance of time, how to like manage all the things going on in my life, a lot gets thrown at all of us and to be able to departmentalize, push through what you need to, and then move on to the next thing. So it was an incredible experience for me. I have great friends, great memories from it. As I said, we didn't win as much games that we would have, as many games as we would have liked to, but really great experience.

Rens Hayes IV 31:17

There's a bond you build when you go through that type of team building and that kind of effort, right? Doing 40 hours of work week after week, dealing with all the all the challenges that come along with it. There's a bond that you build that like you never lose in life. You studied economics. Did rent control ever come up as a topic? I don't think so. But there wasn't a course on the benefits of rent control.

Toby Banta 31:39

No, no. It's actually a double major in in I was economics and Spanish. And so I was spread myself a little thin. I can't say I was the best student ever. And I probably remember more about the Spanish than I do economics, but it was a great, great education at Holy Cross. I think, especially in today's world, the critical thinking, liberal arts education, I think is more valuable than ever, right? So we have so many tools available to us, AI, technology, et cetera. But the ability to like think critically about what the output of whatever AI tool you're using is saying. Is that right? What do I do with this? How do I give an input to something? So I learned a lot about really like how to learn, I would say, more than I took away about you know, supply and demand or speaking Spanish. It was really about how to learn, which again, I had an incredible experience.

Rens Hayes IV 32:24

I agree with that. I actually think the same for coming out of engineering school as it's a foundation, no pun intended, and which you can build the rest of your job knowledge on. It teaches you how to learn and how to grow. And that comes back to that the sports experience too. That sports experience teaches you what hard work looks like, right? You like never lose that as a person once you've gone through it. And so at those moments, especially throughout life, like it, you know what you're capable of and that you can put in the work and be disciplined to get the habits. I think one of the biggest oversights that I think is all too common in society is that once we're done with college, it's like we can stop learning. And so when you step into your job, if you're not an independent thinker and an independent learner, you're really only learning the things that your manager or your boss or your company wants you to learn. You're not learning for yourself, which I think is like a terrifying thing to me. And it's one of the things that led me down this lifelong daily learning journey. I wanted to expose myself to all these other things to continue to learn new perspectives so I could be an objective thinker. You had the opportunity to launch DLJ office in Boston. How did that opportunity come to be?

Toby Banta 33:30

Yeah, I was at O'Connor Capital at the time and was learning a lot, made some great investments there, but wanted to get back to Boston, which I think for me was where I felt my I had a competitive edge, where my network was, the connectivity that I had. So I joined DLJ, based in New York, longtime fund operator, manager, great business. And they had a couple bets here in the Boston market, some Class B office, and they had control of a three-acre land site in Somerville. I quickly realized after getting involved that being in Boston physically, this bet in Somerville was the real deal, and that we wanted to dedicate a lot of resources to it. So moved up here, I guess that was like 2018, and we opened an office just in one in an office, 18 Tremont Street, that we owned at the time. And a lot of our focus was on Somerville. And it was an emerging market, the growth of the life science, feverish growth of life science back in that time frame, which seems wild in hindsight today. I'm sure it'll be back. But in Somerville was a little bit pioneering frontier in the kind of Union Square Boynton Yards area, but we thought we had the tiger by the tail. We ended up taking three acres, putting together another parcel, put about seven and a half acres together and put together a master plan, a master plan, got it permitted, brought in some good partners to help us get it off the ground, and really the first class A life science building in Somerville.

Rens Hayes IV 34:49

That's something to be proud of. What did you is there any lessons learned or challenges you didn't expect when you launched your uh new office there?

Toby Banta 34:58

Again, I'm like predisposed to be entrepreneurial, just it was myself and two other individuals, like very small.

Rens Hayes IV 35:03

You get you better wear a lot of hats there.

Toby Banta 35:05

Wear a lot of hats. You gotta be pretty humble in terms of what you're willing to do, and someone's got to stop the fridge and get the water refilled. I think we fundamentally had good real estate, right? And that's what it comes down to in our business is like you have good real estate, you have you can be successful, and relying on people that knew a lot more than me to figure out our path to success is what we did. And so it's like, does this thing want to be multifamily? Does it want to be office? Does it want to be industrial? Does it want to be life science? And so my first task when I came to Boston was like talking to as many people as I could and learning from that, just being a sponge and absorbing and saying, what's like the best debt here? How are we going to be successful? It's gonna take a lot of capital to get this thing off the ground, a lot of a lot of permitting effort here, and how do we position this thing for success over the long period of time? Markets move, right? Things change. We built uh built a life science building, a 290,000 square foot class A building, leased it up, very successful exit, and now life science is in different worlds. I think that in retrospect was an incredible learning opportunity for me of like how one success, so much of this is timing and putting yours putting yourself in a position for that, but not being too committed or not having like too much of a binary bet on something and allowing yourself the ability, the flexibility to to move and pivot when markets move because they will.

Rens Hayes IV 36:21

Yeah. I whether you win or lose, you lost from that experience because you got to see how the life science market changed. And it doesn't seem like anyone really saw that coming. That's a hard thing to envision back then. Yeah. Tell us about your day-to-day or your top priorities as executive managing director.

Toby Banta 36:37

I'm inherently a deal guy. Like in my DNA, what gets me out of bed is being competitive, finding the next deal, putting it together, raising the capital, de-risking, and then putting it in our team's hands to be successful. I want to find good real estate, I want to be competitive and I want to win. And but what I do is not just that, right? So I bet I'd like to dedicate a third of my day to that, being out there, being in front of people, putting ourselves in a position to have someone call and say, Hey, I got a good idea for you. Here's a deal that you should think about, and we noodle on it. I think thinking about our portfolio and where we're at, like what we need to be doing to create value throughout the portfolio, running the business from a day-to-day standpoint. It's not a not with 14 people, it's not a huge business, but it's also not a small business. We have 22 assets under management here, different levels of stabilization, where they're at in their life cycle. I think being in front of capital is another important thing for me, understanding, as I said, all of our deals are individual SPEs. We sort of bespoke investment opportunities where we match the right capital for the right deal profile. And if it's an opportunistic bet on an industrial deal, that may be different than a ground up multifamily development deal. So being in front of capital partners, be it lenders and equity partners for the next deal that may come is a big part of what I do on a day-to-day basis. And then just like listening and learning. I sit in a lot of meetings with our team. We're very talented. And I think when you're not in the weeds on some of the day-to-day tasks, it allows you to be a lot more objective and a critical thinker and make decisions at a higher level. So I do a lot of listening as well. And as I said, we have a very talented team that pushes the ball forward, that executes, and uh just make sure the machine is going in the right direction. That's honestly it. I think a lot of our training is like trial by fire. The people that come in generally are we're not hiring people green out of school. They have some reps, some experience. I think the training is more of like how we at Eastern think about deals, about risk, about managing our assets, speaking to our investors, accounting, reporting, all that sort of thing. I don't so I'm not necessarily, I think some of the team does a really good job of training them, not training themselves, but like working together. We're very inclusive organization. Like everyone sits in a room for our pipeline meeting when we go through our deals, talk pretty openly. There's not a lot of closed door conversations that happen. And I think uh over time people just work together to understand best practices, whether whatever, whether it's legal accounting, investments, asset management. And a lot of the stuff comes from our connectivity outside of Eastern, right? There's with only so many people, there's only so much throughput we have here. So learning from our consultants, our engineers, our contemporaries in the business is a huge piece of the training for us.

Rens Hayes IV 39:20

I like that you said open door. And I feel like I've heard you say transparency a few times today. Like transparency builds trust, right? And when you're willing to be transparent, you're actually going to get objective feedback back, right? It allows that open conversation to happen. Did delegation come easy to you?

Toby Banta 39:35

No, honestly not. I'm uh I'm a little of I wouldn't say control freak, but like I I uh I can tend to hold on to things more longer than I should. And I think Dan's done a good job of slapping me on the head a few times, being like, hey, push this thing along. We got a really talented team here. You don't need to be the one turning the LOI. I'm a little obsessive about things, and I care a lot about our business and our team and our success here for ourselves, our investors. And so I think delegation is something I have to work on a lot, still today. Honestly, it's a it is a hard thing for me.

Rens Hayes IV 40:06

It's definitely delegation. I think a good frame is delegation is a learned skill. It's not something you are or not. It requires thoughtful effort in learning how to do it. And I would say, like you, I also have to learn to delegate. I feel like I learned to delegate in certain things in certain areas, and then other things I hold on to too long. It's like that's an ever-growing responsibility and like continuous learning. What are you excited about today? What are we gonna see from Eastern Real Estate over the next few years?

Toby Banta 40:34

I'm excited that we've put ourselves in a position for success. As I said, it was painful as the last three years were where we weren't doing a high volume of deals, we were methodically working along, putting permits together. We have a big multifamily project in Portsmouth, New Hampshire. Very excited about that one. It's a 360-unit ground up deal. And uh spent two years permitting that and pulled that together. And New Hampshire, yeah, thank you, thank you. So this is going back two years now in a pre-rent control era, but uh, New Hampshire was not on the institutional radar at all. And we thought we had a really good opportunity. It was a it's actually a 26-acre site in it's in Portsmouth proper, but on the outskirts of town. It was a former bed bath and beyond a Christmas tree shop. So we got control of that with some friends up there, the Canes, John and Michael Kane. Uh we looked at it a bunch of different ways, said, hey, it's an 80,000 square foot existing retail box. Is there a retail to retail play? Could we convert this to industrial or could we make this multifamily? There was a an antiquated multifamily zoning, non-binary opportunity. Non-binary, right? So there was some antiquated zoning that allowed us to do 100% market rate, stick-built, surface park, garden style product. So we educated ourselves a lot on the risks, the merits, and pulled the permits together. Andrew Hayes, who leads development for us, did a stellar job of working with the city of Portsmouth. Portsmouth, as a is an incredible market, really strong economic engine, great lifestyle, great restaurant, amenity base there. Seacoast region is just absolutely ripping. And uh, but really it was most of the institutions. It was a $140 million deal. It was a large one of the largest multifamily deals ever in the state of New Hampshire. But a lot of the institutions wouldn't go there, right? As no institutional exits, we can't go there. And we worked really hard to pull the capital together, to pull the permits together, to de-risk the opportunity. And so in October of last year, we broke ground on that project. We'll be delivering our first set of buildings in January of 27, and we'd be wrapping up end of 27. So that's a great project for us. And the entire organization, yeah, the entire organization here at Eastern touched that deal. Legal, accounting, development, design, and so I and it was a big bet on a sort of a secondary market, if that. And obviously, now as we look back here with rent control in the state of Massachusetts and looking like a great bet today. New Hampshire is looking a lot better than it did. And so we love the South Coast, the Seacoast, we love Southern New Hampshire. You'll see more from us in Southern New Hampshire for sure. And I think the other thing is the rotation back to Boston. We have a pretty high cost of capital. We're not buying the market, we're looking for pretty high octane returns. And for the last five plus years, as long as I've been here, like we haven't been able to touch assets in Boston, right? The what we're willing to pay, just not there. And then the value others have been willing to pay more. And I think in today's world with the interest rate climate changing, values changing for the city of Boston and interlying communities around there, we're rotating back in. So you'll we bought a big project in Revere Beach right on right on the Wonderland T station at the beginning of this year. You'll see us do an office deal, I think, which is something we in Boston, which is something we've been working on for a long time. We're excited about the ability to come back home here after poking around Vermont and southern New Hampshire and Connecticut for a bunch of years.

Rens Hayes IV 43:48

So that's I love to hear that you see opportunity in greater Boston. And it maybe that is contrarian thinking, rent control, but what I also see is a choking of supply, which means demand's gonna grow exceedingly more than supply over the next few years if some of this stuff plays out. So like finding a way to have a risk adjusted return and acquire assets, I'd feel really good about owning multifamily over the next five days. Absolutely. And the story of new your New Hampshire deal, right? Something and I'm still ever learning is from the people that service the commercial real estate industry, whether that be say even property managers, whether that be the design professionals, whether that be construction professional subcontractors, very few actually understand how commercial real estate works or the challenges that people face. So in this example, a wooden walkout like stick belt slab on grade with surface park feels like a really good deal. But then you don't hear, you don't necessarily have the insight to know that oh institutional capital doesn't have an example of an exit in southern New Hampshire. So therefore your capital opportunities are significantly less than otherwise in a tier one market, which is you wouldn't have that insight if you weren't in the business. But I think those touch points allow us to learn a little bit more. And that's really what this podcast is all about.

Toby Banta 45:04

Yeah honestly the first time we looked at the plan from our civil engineers this is what you can do. Yeah why isn't this one big building we build five over twos right look at all the roofs look at all this that the other and then you start to peel it apart and say all right like rents are rents are over four dollars here there's no new supply coming where are people going to live okay well what's wrong with this product like rather than just throwing it out saying like how can we fix it? How can we get okay so let's figure out is there a way oh let's mix in a four story elevator building with some three story walk-ups let's figure out a plan like what how can we make this a a community with vibrant communal space open area and I think we did it it was a I don't want to tell you how much we spent on the A and E side of it it's but we put together with a really good team a really good plan. And I think I've as I said I sit here now still have a lot of wood to chop on that but I think we we feel like we made a really good bet up there.

Rens Hayes IV 45:58

Yeah it's exciting development and you just reminded me of a lesson I've got from Charlie Munger who's somebody I bring up all the time the one he shares that aligned interest. It's you show me the incentive and I'll show you the outcome. You got to align incentives to go far in a partnership. The other one is I'm losing the term but how he frames thinking of evaluating the risk in a deal is like if I were to make this fail, like what would I do? And it's like all right, no obviously we don't do that and you set up process and mitigate that risk. And it's once you've tried you you've made it hard to fail now you create risk asymmetry for the opportunity.

Toby Banta 46:32

Yep. No, we do a lot of math on okay how bad does it have to get before we get our money back. If that's what you're just trying to make sure is you get your money back and things happen, right? Markets move and we think that in all these deals that there's like a if we have multiple paths to that like it's a pretty good Toby what's a book or podcast you'd recommend to the audience? Oof so I'm old school and I I like I go to podcasts as like way to escape. And I listen I leave read the news and all that sort of stuff but I think I grew up watching and again I'm in the real estate business we build stuff I grew up watching this old house like with my dad. And so there's still this old house radio I think it's called and it's just about fixing stuff around the house just like I I'm a projects guy. Like again if I had a I got three kids now so I'm pretty busy on weekends but if I had two days to myself I would tinker and fix and do things around the house for fun. Like that sort of improving my own home or fixing something is just gets me going frankly that's why I can't work from home because I I am home and I see something that's I see something that's broken and then like 30 minutes later I realized I missed a call. So I do a lot of that terms of a book again I'll go old school here. One of my favorite books of all time is which I read every couple of years is The Outsiders which was obviously written a long time ago. I think you read it in school when you're in like seventh or eighth grade and as a boy it's really going through a lot in that moment in your life I had just gone to an all-boys school I think probably in seventh grade and it teaches you a lot about life. Obviously there's like the the greasers and the socias right and it's about class and all that sort of but ultimately it really is just like coming to age book that has a lot of lessons beyond the fight or the challenge where it's just it's like growing up trying to figure out who you are in this world whether you're a greaser or a society I just think it applies to so much in our lives of just trying to figure out like who you are whether personally socially in business it's one of my favorites of all time.

Rens Hayes IV 48:27

That's a great book recommendation. I always reinforce the idea of lead with curiosity seek to understand rather than assume and cast judgment right in a better place. Toby thank you so much for taking time out of your day to to join us here on design development really enjoyed getting to know you and share those stories and lessons learned throughout your career wish you and the team at East Journey knows but the best awesome thanks so much really appreciate you having everyone thanks for tuning into design development real quick before you leave our goal is to help as many people as possible we're a growing community and you're a big part of it so just click that send button send this episode to a friend to let them get the same insights that you got today. We appreciate you see you next time