Everything old is new again.

Eve Picker: [00:00:11] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Daniel Dus. While Daniel has forged a career taking him to the top of the solar industry class, his heart is someplace else, in the Berkshires. That’s where he grew up and that’s where he’s planning his next act. The Berkshires, Massachusetts, is rich with travel destinations and has an amazing inventory of luxury estates dating back to the 1800s. As industry collapsed, so did the use of these estates. Many of them stand dramatically underutilized today. And that’s where Daniel and his team come in. You’ll want to hear how Daniel is planning to reposition these estates for the sharing economy. Be sure to go to EvePicker.com, to find out more about Daniel on the show notes page for this episode. And be sure to sign up for my newsletter, so you can access information about impact real estate investing, and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:42] Hello, Daniel. Thanks so much for joining me today.

Daniel Dus: [00:01:44] Thank you, Eve. Great to be here.

Eve: [00:01:46] So, your career has been in the solar industry, and I would love to start by just hearing what you’ve accomplished in your career.

Daniel: [00:01:56] Yes. 15 years in solar now. I’ve had the pleasure of helping create and build some of the largest solar companies and projects in the solar space, in the United States, over the last 15 years. Currently, with a company, when I joined, had just completed its first solar project, and it’s recently ranked the largest solar company in the world with 15.4 Gigawatts of operating and contracted projects.

Eve: [00:02:25] Oh, wow.

Daniel: [00:02:26] So, seeing growth like that in the space, which is really focused on carbon, SOx and NOx, emissions reductions, is really, really been exciting – to see the industry go from almost nothing 15 years ago, to now solar is number one in energy in terms of new, installed capacity year over year. So, just that transition, rapid transition, has been exciting to be a part of.

Eve: [00:02:52] Yeah, I’ll say. So, what’s your background? How did you get into the solar industry?

Daniel: [00:02:58] Actually came into solar out of a focus on real estate. I spent a few years developing real estate along the East Coast U.S., and that’s where I was exposed to the trades, financially structuring projects, and ended up selling those assets, but it, this was right in the middle of the financial crisis. Nothing really made sense. Went back to get an MBA and launched my first solar company out of the Drexel business incubator, so … and the rest, as they say, is history.

Eve: [00:03:30] Oh, very good. So, that brings us back to where you are today. Because I’ve gotten to know you for an entirely different reason. And that’s your new company that you’re starting up, called Shared Estates. So, why the name Shared Estates? Tell me a little bit about that.

Daniel: [00:03:45] We fell upon it as an exemplification of our primary objective, or one of our primary objectives, which is to bring these beautiful, historic, storied estates that in the past have primarily been in the hands of the wealthiest U.S. families, and bring those into the reach of the middle class. In many cases, our properties will cost less per person than a standard hotel room would, but with significantly different benefits and amenities. So, we really want the community to enjoy these spaces, use these spaces. One of the really fun things about the business is seeing families and friends create memories in these spaces. So, it’s a major driver for us.

Eve: [00:04:30] Basically, buying and repurposing enormous luxury estates, and sharing them in the shared economy.

Daniel: [00:04:39] Yeah, that’s exactly right. And our geographic focus offers quite a few of these properties. The Berkshires of western Massachusetts, also known as inland Newport, often, was developed in the 1800-1900s. Many of the wealthiest families built these estates there. They called them ‘country cottages,’ but these are often multi-100 acre, often over 10,000 square foot properties. And there’s not as much of a market for these properties as single family, second or third homes today as there was then. And they often end up being very underutilized. I mean, talk about an underutilized asset. Often, they may be used a couple of weeks a year, a few weeks a year, by these families. And so, we’re taking those estates and we’re putting them into the shared economy where they can be much, much more accessible both to the local community, as well as to the tourist economy there.

Eve: [00:05:35] That’s really interesting. How did you come up, upon this idea? Like, it’s an unusual take on a real estate company.

Daniel: [00:05:41] It’s a good question. I wish that I could say that I analyzed the market, that I did a bunch of market data research and saw that large group, short-term rentals was a rapidly growing subset of the short-term vacation rental market, and the broader tourism market. But that’s not the case. I fell into it entirely. I was living in Manhattan and purchased a property in the Berkshires, which is where I was born and raised, and originally was going to use it for weekends, myself, and went through a deep rehabilitation process, and ended up taking a job in Philadelphia, so moved a little too far away to really use it for myself. And I put it on HomeAway VRBO, originally at, I think, $350 per night. And I figured if it rented 20, 25 percent of the time that it would cover its own mortgage and that would be a win. Well, it booked so much in the first 72 hours that I had to raise the price multiple times, and it now books for well over a $1000 dollars a night, and books 65, 70 percent occupancy. So, it’s just such a phenomenal project that it really opened my eyes through the process of developing and listing the property to this underserved market, right? There are very few, if any, large-format, short-term rentals in urban areas, because if they existed they’d be exceedingly expensive. But, in rural America, there are a lot of these properties that are beautiful and really underutilized today. So, it, really fell into it.

Eve: [00:07:18] Was that first property the Playhouse?

Daniel: [00:07:20] Yeah, that’s right. So, the Playhouse is a great example. It was originally built by George Westinghouse in the late 1800s. It was the first place in the world ever powered by AC electricity. He built an AC microgrid there to test what was really the theory of Tesla and the products being developed by Westinghouse and Stanley. So, we know that President McKinley, Tesla, Stanley, Lord Kelvin all visited the property. Westinghouse in the late 1800s had an electric boat; he had an electric car he drove around the property. It was really a leading point of innovation at the time. And this particular structure was called the Playhouse because he built it as a gymnasium, basically, for his children. 7000 square feet. He had a bowling alley in the building …

Eve: [00:08:13] Wow.

Daniel: [00:08:13] … and he later converted it into a theater space, for when his kids were getting older, and entertained there. So, it’s a beautiful open floor plan building …

Eve: [00:08:25] Yeh, I’ve seen photos of it. It’s stunning. It’s beautiful.

Daniel: [00:08:27] Yeah. And it was, when we took it, our architect told us that it was structurally failed. It was literally ready to fall over, and required a lot of structural work to maintain the open floor plan and to make it structurally sound. But in the process, we created a space that has really resonated with folks, where they can bring groups of families, family and friends, and enjoy each other and celebrate each other – weddings, anniversaries, birthday parties and other small gatherings like that.

Eve: [00:08:56] I think you told me that it was ranked number one, or is ranked number one place to stay.

Daniel: [00:09:03] That’s right. Yep. It, on YVRBO, it quickly shot up to the most-booked, most-reviewed property out of over 500 properties listed in the county on VRBO.

Eve: [00:09:13] That’s amazing. That’s a great story.

Daniel: [00:09:16] It was. It was. You know, I love the space. I love the property. It means a lot to me and I love that folks get to make memories there.

Eve: [00:09:26] So, how does this fit in with your solar background?

Daniel: [00:09:32] Yeah, it’s a, it’s a good question and one I get often. Solar development, financing and construction is very similar to real estate development, financing and structuring. You’re talking about zoning approvals, you’re talking about geotechnical studies. If you’re doing any ground work, you’re talking about structuring projects for financing, financial modeling. You’re talking about construction and ownership and operation and optimization of assets. It’s all exactly the same in both industries. It just is that the asset itself is slightly different, but a lot of overlap there. I’m a Stanford-certified project manager, Villanova-certified Six Sigma, and that’s because developing processes for execution of these projects is really at the core of these businesses. So, I think there’s just a ton of overlap.

Eve: [00:10:24] Yeah, but I suppose I’m also wondering, what of your love for the energy industry are you going to bring to these properties, because they weren’t built that way?

Daniel: [00:10:34] Yup. That’s exactly right. And Shared Estates is also, to a large extent, a conduit for investment in a carbon neutral and sustainable asset. That’s, all of our properties will be carbon neutral, offset by either on-site or off-site renewable energy projects, which we’re very excited about. And so, we will bring that attribute to all of our properties.

Eve: [00:11:02] And I think probably some other features that I’ve heard about, but we’ll go into that later. So, In the Berkshires, which you seem to be focusing on, how many underutilized estates are there?

Daniel: [00:11:14] There are a surprising number of them. Again, it was over the span of over 100 years of this economy developing and building, but also had an industrial heyday, itself. General Electric had a major presence there, thousands of jobs. So, there are dozens and dozens and dozens of these estates, in varying states. Some of them are really in rough shape, frankly. These historic properties really need dramatic investment to help bring them up into today’s standards, with IT infrastructure, you know, sometimes structural upgrades, definitely bringing back their former glory and beauty. So, everything from landscaping to paint, new fixtures, etc, is all really critical for these properties. And we try to do that and maintain historic elements of them, as well. So, at the Playhouse, for example, we retained the original Westinghouse lighting fixtures from the 1890s.

Eve: [00:12:14] Oh, lovely.

Daniel: [00:12:14] And so, we do our best to keep the historic elements of the properties. But there are a remarkable number of these in the Berkshires. And frankly, nationally, there are a lot of large, rural farmhouses that are not in their heyday today that could use deep renovations, and other properties that really are, I think, historic to America and deserve to be rehabilitated and brought into the shared economy, which in my opinion, is one of the best possible uses for them.

Eve: [00:12:45] If I want to rent one of your estates how will it compare to holding a gathering in a traditional local venue like a hotel, just price-wise.

Daniel: [00:12:55] In my opinion, this is the core to our ultimate success. The macroeconomics of our properties versus the alternative. There’s kind of no comparison in my mind. Our properties will often be less per person than a standard hotel room would be, but our properties will have … in the next project we’re doing, we’ll have 40 acres of private space, it’ll have a dedicated pond, docks. It’ll have a five-acre vineyard, greenhouses, multiple living spaces, multiple dining rooms, multiple quiet spaces, an office, library. All for your own private use with yourself, your friends and your family. You just have to get a group of family and friends to travel with you. But, in terms of the amenities, there’s just no comparison. These are the most luxurious possible properties. And with the right group of friends and family, on a per person basis, they could be less than a holiday.

Eve: [00:13:52] That’s amazing.

Daniel: [00:13:54] Yes.

Eve: [00:13:54] So, this is really the shared economy in a very different way.

Daniel: [00:13:58] That’s right.

Eve: [00:13:59] So, you have the Playhouse under your belt. You said, you mentioned the next property. You want to tell us a little bit about that one?

Daniel: [00:14:06] Sure. Yeah. We are calling it the Freeman Berkshires. So the Freeman is currently an 11,300 square foot brick mansion on about 40 acres, with a private pond, tennis court. We are going to deeply renovate, rehabilitate this property, new fixtures, new paint, add some square footage, hopefully.  We’re going to install a 500 square foot English-style greenhouse and extensive gardens, five acres of vineyard, and in-ground pool, and really bring this into 2020. Modern IT infrastructure. Games rooms and a virtual gaming room, so that there’s something for all generations. The name, the Freeman Berkshires comes from a local woman, Elizabeth Freeman. She was the first African-American slave to sue and win her freedom under the Massachusetts constitution. And she was abused at the hands of her, quote unquote, Master’s wife. And so, the property will be a tribute to her. We’ll be installing a sculpture garden by local artists in tribute to Elizabeth and her story. And we’ll be donating a percent of profits to the Elizabeth Freeman Center, a local nonprofit that’s been operating since the 1970s, serving battered and abused victims of assault and sexual assault. And so, we’re very excited, and that local nonprofit engagement is part of every property that we’ve done and will do. The Playhouse contributed to St. Jude’s, Sierra Club and the local Humane Society on a recurring basis. So, we’re very excited about the Freeman Center contract and we’ll be closing imminently here in the next weeks. And so, we can’t wait to get started on it.

Eve: [00:15:54] So, tell me a little bit about financing. I mean, I have been hearing over the last few months the difficulty that people are having financing anything unusual in the real estate market. And this is definitely unusual.

Daniel: [00:16:08] Yeah. And in fact, our biggest challenge, Eve, is that these are rural projects. They’re all in rural America. And what I didn’t realize before going to the market the first time, a couple of years ago, for commercial financing in rural America is that many banks will simply not finance projects in rural United States. They’re very focused on urban areas, suburban areas. Commercial lenders like to invest in New York, Manhattan, Philadelphia. They basically red-line rural America, and in places like the Berkshires that really need economic development, that’s a real problem.

Eve: [00:16:47] Did they just come out and say we don’t lend in rural America.

Daniel: [00:16:52] Yeah. I have had dozen of lenders simply say, you know, we do not invest in rural properties. Which …

Eve: [00:17:00] Wow.

Daniel: [00:17:00] It’s kind of like red-lining. Right? I mean, I can’t think of any other …

Eve: [00:17:06] Yes.

Daniel: [00:17:06] … comparison. So, it was pretty shocking, frankly. The local banks are fantastic and supportive, but they often have relatively modest caps on the amount of capital that they can contribute. And so, the value of Small Change really shines here in its ability to help bring capital into places like this, and frankly, to offer the ability of the local community to invest. As you know, traditionally, only accredited investors can invest in GP/LP-type structures like ours, and that’s highly limiting, you know. The local community is not, on average, worth a million or more dollars, but they’re the ones that, they deal with the tourist economy every day, they often work in the tourist economy, and so, they should be able to benefit from that economic activity.

Eve: [00:17:53] So how are you financing this project if you don’t have the bank? How do you do it?

Daniel: [00:17:57] Yeah, this project is particularly unique. We’ve obtained seller financing for a large portion of the acquisition cost, actually 95 percent of the acquisition cost, allowing us to focus our equity on the rehabilitation and upgrade of the property and aesthetic improvements. And we will be conducting a Small Change raise. So, we’re excited.

Eve: [00:18:20] Yes, we’re excited, too. So, but how long did it take you to negotiate the seller financing? That’s not an easy thing to accomplish.

Daniel: [00:18:28] It was almost a year, Eve.

Eve: [00:18:29] Wow.

Daniel: [00:18:29] Of what it was about 11 months of back and forth, and educating the seller on us, what we’ve done, what we plan to do …

Eve: [00:18:38] Wow.

Daniel: [00:18:38] … and ultimately reached a deal that we’re really happy with and I think they’re happy with, too.

Eve: [00:18:43] So, tenacious must be your middle name.

Daniel: [00:18:47] You have to keep that deals, right …

Eve: [00:18:49] Yeh, yeh, yeh.

Daniel: [00:18:49] … that’s the nature of development.

Eve: [00:18:51] So, final question for you. What’s your big, hairy, audacious goal? Where are you going with all of this?

Daniel: [00:18:58] For Shared Estates, specifically, I’m born and raised in the Berkshires. I love the Berkshires. I drove by these properties when I was a kid and fell in love with them. And the Berkshires is a really special place. The Boston Symphony Orchestra summers there at Tanglewood, has the oldest and longest performing dance center in the country, Jacob’s Pillow. It has one of the largest standing Shakespearean companies in the world, frankly. And these beautiful bucolic views. It’s just a phenomenal and special place. And I really want Shared Estates to contribute to the local economy, through taxes, through the nonprofit contributions we’ll be making, hopefully through investments by the local community in the business. I want the business to be ‘by and for’ the local community. And I want it to contribute, honestly, millions and millions of dollars of benefit, both direct and indirect, to local businesses. Every one of our properties supports local businesses. We champion and celebrate local businesses. We have local gift baskets and literature, and we really try to get folks who sometimes travel … they used to travel from Europe, now generally in New York and Boston, as those families are traveling more domestically. And we’ve seen a dramatic uptick, frankly, in our activity in rentals.

Eve: [00:20:19] Oh, that’s interesting, yeh.

Daniel: [00:20:19] But we really want this to be a massive engine of growth for the local economy, and to be a benefit to the local organizations there. I mean, that’s, that’s really our goal.

Eve: [00:20:30] That’s a pretty fabulous goal. And I hope you’re incredibly successful. So, thank you very much for joining me today.

Daniel: [00:20:37] Thank you, Eve. It’s been a pleasure.

Eve: [00:20:38] I hope I get to visit sometime.

Daniel: [00:20:40] Absolutely. Us, too.

Eve: [00:20:41] Ok, bye.

Daniel: [00:20:55] Bye.

Eve: [00:20:55] That was Daniel Dus. He’s planning a comeback for the many underutilized luxury estates in the Berkshires. Daniel and his team plan to reposition them for the sharing economy. Not only will they be available for middle class families to enjoy, they’ll be carbon neutral renovations, making them the ultimate recycling projects. And he’s taking the democratization of these estates one step further by offering the opportunity to invest to anyone over the age of 18. These estates won’t just be owned by the wealthy any longer.Eve: [00:21:42] You can find out more about impact real estate investing and access the show notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate, while building better cities. Thank you so much for spending your time with me today. And thank you, Daniel, for sharing your thoughts. We’ll talk again soon. But for now, this is Eve Picker, signing off to go make some change