From Wall Street to Main Street.

Eve Picker: [00:00:06] Hi there, thanks for joining me on Re-Think Real Estate. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad. Rich or poor. Beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone.

Eve: [00:00:40] Today, I’m talking to Daniel Dus, founder of Shared Estates. While Daniel has forged a career taking him to the top of the solar industry, his heart is someplace else, in the Berkshires. That’s where he grew up, and that’s where he’s building 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. They are purchasing, renovating and repositioning the great estates of Massachusetts for the sharing economy. I’m going to learn a lot from Daniel, and so will you. So listen in.

Eve: [00:01:37] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to Patreon.com/rethinkrealestate to learn about special opportunities for my friends and followers and subscribe if you can. Hello, Daniel, thanks for joining me today.

Daniel Dus: [00:02:06] Eve, thank you for having me.

Eve: [00:02:08] So you’re the president of a solar company, but now you’ve moved onto quite a different area as well. I want to hear about your plan for the historic great estates of Massachusetts.

Daniel: [00:02:21] Yes, and I’m still in solar. So the real estate business is nights and weekends and has been since at least 2014. My plan for the historic estates of the beautiful Berkshire Hills in western Massachusetts, and frankly nationally, is to take them often out of the hands of the .1 Percent and bring them to the middle class group travel markets and to make them investment vehicles that anyone can participate in rather than just the .1 percent.

Eve: [00:02:59] That’s a pretty big plan.

Daniel: [00:03:00] Yes, and it has been really, I would say it’s an honor to really shepherd these historic properties. Our first property in this category was built by George Westinghouse, who was actually the first place in the world ever powered by AC electricity. And so, to be the custodian of a property like that and to renovate it, rehabilitate it, that property was actually structurally failed, required hundreds of thousands of pounds of structural materials to preserve it. And it’s really an honor to be able to do that and help play a role in preserving what is, really, just a fascinating part of American history.

Eve: [00:03:38] That is exciting. So like in the Berkshires, you’re starting there. Like, how many great estates are there?

Daniel: [00:03:45] It happened during the Gilded Age, America’s Gilded Age post and pre-war. The wealthiest families, really in the world established what they called Berkshire Cottages in western Massachusetts. And I think Cottage is a bit of a misnomer. These were often 15 plus thousand square foot mansion houses on 40 to 200 plus acres. And these families included JP Morgan, the Chases, the Vanderbilts, of course, Westinghouse, and the list is long. And there were dozens and dozens of these properties. And then in addition to those, sort of, truly great estates, of course, the social circles of the time followed, and many other wealthy families built smaller but still very impressive. And now I would still consider historic properties in the late eighteen early nineteen-hundreds.

Eve: [00:04:44] So what led you to the idea to take them and renovate them, really, for the sharing economy?

Daniel: [00:04:51] Oh, it was just total mistake. It was just all a series of mistakes,Eve, is really, truly what happened. I had bought the George Westinghouse property to use personally for nights, and I was working in Manhattan, and I wanted to spend long weekends in the Berkshires. And so I undertook that renovation with that plan. Unfortunately, I took another role based outside of Philadelphia during renovation, and I just couldn’t use it. It was too far and too expensive for me to maintain. And so I put it into the vacation rental market VRBO, Airbnb, etc.. With the initial hope that it would book at an average of 300, 350 a night, and it would book maybe 20 percent of the time and cover its own mortgage. I thought that would be a huge win. Well, it booked so much in the first four or five days that I had to increase the price three or four times, and it ended up very quickly rising to number one on VRBO, the most booked and most reviewed and most highly reviewed property in Berkshire County out of over 600 properties and was subsequently featured on Netflix’s world’s most amazing vacation rentals. I think it was really a combination of sort of a high-end luxury finish with this amazing history to the property and a focus on small to midsize group travel groups of 10,15 often multigenerational family events. We have lots of 80th birthday parties and 50th wedding anniversaries where grandparents and children and grandchildren and sometimes great grandchildren can enjoy some time together. And so, really just completely fell into the market and then realized that it’s a really compelling market segment.

Eve: [00:06:38] So since then, how many of these estates have you renovated?

Daniel: [00:06:43] After we sold the George Westinghouse property, we acquired it for 340,000. We put roughly 500 K into it. We sold it for 1.3 million. It was cash flowing over 200,000 dollars per year. And when we exited that, I acquired what was originally developed by actor Christopher Reeve, a childhood icon of mine, had an estate in Williamstown, Massachusetts, that hadn’t really been touched since the 80s early 90s and just finished a total renovation of that property. I listed that on VRBO sixty five ish days ago now, and it booked over a quarter million dollars of fully prepaid no cancellation rentals and its first 60 days. So just another testament to the model. We also acquired what was previously senior executive at Mercedes-Benz Estate in the Berkshires, 11,300 square feet on 40 acres. We call that project the Freeman Berkshires, which we listed on Small Change and raised about 890,000 dollars across 141 investors from Wall Street to Main Street. And that property is currently wrapping up renovations, right now. We have deliveries in process to begin rentals here in the next 30 days, which we’re extremely excited about. And then we have under contract the Kemble, which was built for a U.S. Secretary of State in the 1880s and is just a phenomenal roughly 15,000 square foot estate in downtown Lenox, Mass, which is truly the heart of the Berkshires, walking distance to some of the Berkshires’ best arts and restaurant locations, so we’re absolutely excited about the project.

Eve: [00:08:31] So the Kemble Berkshires, tell me a little bit about that building. That’s your current one.

Daniel: [00:08:35] Yes, the Kemble, the current, the owner of the Kemble, he had some rough times in the early days of COVID. The property exceeded 960,000 dollars of revenue pre-COVID, 2019. He really poured his heart and soul into the renovation of two of the four floors of the Kemble to bring them back to just a phenomenal finish. Rooms, their individual rooms often book 350, I think 400 plus dollars per night, and we will focus our renovations on the third floor, which is unfinished. There are four more bedrooms there which would increase the finished room count by 40 percent, and we’ll focus on some upgrades to the basement and also the outside of the property, the grounds. There’s not much or anything in the way of outside amenities. We will add pickle ball court, a pool, pergola, grill area, large patios, sculpture garden, small vineyard, in order for guests to enjoy some of the best views that the Berkshires has to offer off the back patio of the Kemble property. So we’re really excited it’s a short term, I think, raise here, we’re moving pretty quickly, but we’re looking forward to closing and starting renovations and continue the success that the property’s had historically.

Eve: [00:09:57] So can you describe the look and feel of the property when you when you’ll be finished? Because, you know, when I think about great estates, I was thinking about kind of a cloying, dark, gloomy atmosphere which was, you know, popular in the 1800s. But, you know, we’re not there anymore. So what’s it going to look and feel like?

Daniel: [00:10:17] Yeah, absolutely. Great point. And we think that this is actually a key point of differentiation in our finishes. It is currently finished with some dark purples and dark wood stains, and we will dramatically change that. We’re going to do 100 percent interior and exterior paint, and we will significantly lighten up the interior with Scandinavian lime wash floors in public areas to brighten the spaces and really help center on the views through the windows on the back side of the property. And we will finish in a more modern, minimalist manner. We’ll take and really clean up spaces. We will hang very high-end fine art so that folks get a gallery feel while they stay in the property as well. Our other properties have hung artists, including John Lennon, signed by Yoko Ono, Maurice Sendak originals, Jared Pinkney, Caldecott winners, originals. And so we really do like to bring those name brand artists and a mix of local artists, leading artists such as Camille Peters and Amherst Mass, to do sculpture and art to hang as well. And so we definitely want our properties. One of the things we really want is for them to be very accessible. So, in the Freeman Berkshires renovation, we removed all of the very nice and very fancy chandeliers, crystal chandeliers, and we replaced those with hand-blown glass. And we actually toned down many of the finishes because the finishes were so high-end. In fact, some of the floors look like they were a plastic laminate, but they were just factory finished flooring. And so, by actually bringing the finish down, it actually makes them more comfortable and more accessible, I think, to more people. And it makes folks feel comfortable versus feeling intimidated by this sort of historic regal finish that a lot of these properties still have today. So we do aim to bring these to a broader market.

Eve: [00:12:27] When will this one be ready for use?

Daniel: [00:12:29] We will continue booking immediately after closing. The seller has already booked, I think, over $50,000 of rentals post-closing. What we will keep and honor those. I think he’s booked at an average of over 3,500 dollars a night or so, post-closing. And we will work around those scheduled and booked rentals and probably complete renovations in the slowest time of year, which is usually January, February and into March. Our objective will be to have them completed in advance of the summer season next year so that we can change that aesthetic, bring those additional amenities to the property for folks to enjoy in advance of the 2022 season in the Berkshires, which extends really from April all the way into October with the foliage and the change of leaves, etc. So we can’t wait to get it planned and started.

Eve: [00:13:25] Yes. Yeah. So, if I want to stay there, how much is it going to cost and how does it compare to a local hotel?

Daniel: [00:13:33] So that’s really another reason that we feel we’ve been so successful is because the small and medium sized groups that we target end up paying less for these high-end properties with leading amenities than they would for a standard holiday and hotel room in terms of cost per person per night. Because if you’re going to stay in a standard hotel, you for a large family of 15, you may have to book six or seven rooms. And so, we were regularly significantly less than a traditional hotel stay. So we think that it’s that macroeconomic advantage combined with the superiority of the product that results in our properties, regularly booking 250, 270 plus nights a year. So that’s really our focus is to make these properties accessible to investors that otherwise never would have had an opportunity to participate in real estate like this. Make them accessible for rental. And we have to do that by keeping our pricing quite modest.

Eve: [00:14:38] And what are the locals think in Lenox?

Daniel: [00:14:41] Lenox is a long-time hospitality town, and it is the home of Tanglewood, which is the home of the Boston Symphony Orchestra in the summer. It’s home to a number of other cultural centers. The largest yoga center in North America, Kripalu is there. Shakespeare and company, a variety of leading cultural institutions. And so the Berkshires, I think, has some three million visitors per year, roughly tourist visitors per year, and is, I believe, a majority second homeowners. And so it’s no stranger to the hospitality industry and business. The Kemble is a registered Great Estate Inn which is one of the things that really attracts us to it. And so it has the right to book these rooms and for this use specifically by right, and that’s very important to us. We aim always aim to be extraordinarily good neighbors, so, all of our current properties disallow outside amplified music. We have property managers on call accessible to the public if there are any issues, 24/7 and we have since 2014 had only one incident where someone had a band with amplified outside music against the terms of the lease agreement they’d signed, and we had to shut it down. And the neighbor was not extremely happy with that, but it was shut down within 30 minutes. And so we take it very seriously being a good neighbor and again, our groups, there’s a limit to 30 plus years old for renters. We spend a lot of time and effort targeting and aiming for family renters. And that’s, I think, a really important part of our being a good neighbor too.

Eve: [00:16:29] And what about community programming? Are you planning anything like that?

Daniel: [00:16:35] Yes, every one of our properties donates one percent of net income to a local charity. So, the Freeman Berkshires project will donate one percent to the Freeman Center, which fights to end the cycle of domestic violence and the Kemble Inn will provide one percent of net income to the Lenox Library system, in order to support its various community programs, which are among the best in Lenox. And so that’s also a big part of what we do. We, on our properties often install large gardens, fruits, vegetable gardens and provide a property to table ingredients for dining experience. Whatever is left over in terms of production is donated to local charities. So, we participate in the local community in a variety of ways. We also are developing a proprietary software application specifically to connect the local community to our renters, the local community, businesses, and service providers. So if our renters want to book a massage, they can go directly to the property app and find sort of hand-selected massage therapists to come to property. Photographers, wedding planners. There’s a whole laundry list of phenomenal services available in the Berkshires. Leadership, programming can all be done at our properties in order to have just a phenomenal experience base stay if that’s what guests are looking for and they often are. And that’s also really important to us to drive value to the local economy.

Eve: [00:18:11] Ok, well, now I’m going to get back to the actual project because I’ve seen a photo of this building and it is big and fancy. So how much do you expect this project to cost?

Daniel: [00:18:22] The renovation plan is just under a million dollars. We are acquiring this property out of a foreclosure process. And so the prior owner, I forget, I think he had about 4.5 million invested in this property in the extensive renovations he’s already conducted, so the bones of the property are phenomenal. The mechanical systems are phenomenal. Two of the four floors are beautifully finished and require only aesthetic updates. And then the third floor is where we’ll do some limited structural new bathrooms, tile, glass, and hardwood floors and refinish those floors. The majority of our renovation is in aesthetics and amenities, adding the pool, pergola, grill areas, et cetera. Delivering games, delivering a library, delivering other things that guests can experience while they’re there. Virtual reality headsets and gaming rooms so the renovation is just under a million dollars, is what we have planned right now. And again, really, we’re especially excited about this because that is really focused entirely almost entirely on aesthetic updates.

Eve: [00:19:38] But it has to be tough financing the whole project because, you know, this is not a very traditional project. So how do banks view it and how are you? I know a piece of this is crowdfunding, but how do you finance the rest of it?

Daniel: [00:19:52] That’s exactly right. And when I said that Shared Estates was based on a series of sort of happenstance and in some cases, mistakes. Our plan for our original project was to use traditional bank financing, which we then found was not available for this segment of vacation rentals, which is to be fair to traditional banks, quite a new segment. Airbnb, VRBO and similar platforms have taken around a third of the global hotel industry over the past just five to ten years. And so it’s still a new segment when you look at things in terms of a traditional bank. And so, we ended up turning to Small Change to help solve this problem and to raise a significant portion of the capital through equity crowdfunding. And then what we found happened on our first raise was that many of our historic renters invested because they really understood the value of these properties and what we were bringing to them. And we had a lot of investors then become renters and asked to book the property. We have some families who have requested to book properties year after year. We’ve had families stay with us for four or five plus years in a row, and we found that the equity crowdfunding process, it allowed us to expand on our mission to bring these estates to the middle class and in a new way for them to actually participate in our last project, the Freeman Berkshires, investors actually owned membership interest in the LLC, which fully owns the property. And you can imagine we’ve had the local town librarian invest. I think local truck drivers invest. We’ve had folks from Wall Street, major banks invest. It completely levels the playing field, and everyone’s investment is treated on the exact same terms. And so it’s now become very core to our plan DNA to really help finance these projects by acting through real estate syndication to acquire them and for the benefits of the cash flow from these properties to go to an investor base that is really a new option.

Eve: [00:22:13] So you’re democratizing the use of the building and you’re also democratizing the ownership.

Daniel: [00:22:19] Yes, exactly. Yep.

Eve: [00:22:21] Pretty fabulous. Yeah. Do you think you’ll have different investors this time around?

Daniel: [00:22:25] Yeah. Every property, I think, will speak differently to different folks. We already have, I think a different investor set teed up for the current offering. We will have some, quite a few larger check sizes in this raise. The total raised value is larger than our our past one and so lends itself well to larger family offices and some more institutional investors. But we do have multiple smaller investors as well. And so I think this property is going to speak to relatively wide range of folks. Folks that are interested in its history and preserving its history, folks who are interested purely for economic reasons and the cash flow potential. The passive past cash flow potential from real estate investing. And I think there are folks who are very compelled by the model, generally both Small Change’s model as well as Shared Estates’ model. And so I think it’s going to be a pretty diverse set. Certainly, we’ve had national, international investors invest in our projects. The broader the better, as far as we’re concerned and also a lot of local community folks, we’ve got a huge focus on telling the story of the local community, the folks who really drive the economic engine in the towns where we operate. We have a series on our website called In Their Own Words, where we interview local business leaders and professional service providers that really help our guests have extraordinary experiences in the Berkshires. This leading cultural destination, so it’s a key part now of what we do.

Eve: [00:24:12] So then shifting to the big picture, what are your goals for the company? Shared Estates, on the whole.

Daniel: [00:24:18] The initial goal was to establish one hundred bedrooms in the Berkshires in these historic properties in the vacation rental market. And as we’ve worked through that goal, there’s been an increasing amount of interest from the financing community, from our partners and from the public in expanding our offering. And so our thesis is and has always been that rural real estate was undervalued vis-a-vis urban real estate. And we launched remember pre-COVID, and we believed pre-COVID that the work from home revolution was real and that it would bring folks out of the cities into beautiful rural American locations and that those locations were underserved in terms of development, developer’s investment, et cetera. And so we have a real focus on any property that can be developed to provide extraordinary experiences within a two hour drive of a major metropolitan area. Because if you want to get a group of 15 or 20 folks together in downtown Manhattan, your only option is a hotel. Or if you can find a rental where you can all sleep, then it’s going to be, I don’t know, 10,000 plus dollars a night. It’s going to be economically prohibitive because those properties would be so expensive. On average, Manhattan real estate can easily be 2,000 plus dollars a square foot. In the Berkshires we acquired a luxury estate for 126, I think dollars per square foot, so the talking less than 10 percent. So we believe that the macroeconomic potential of that arbitrage will continue to drive a lot of vacationers to these properties. And now with COVID, everything just dramatically accelerated. And that’s why our vision has expanded is because COVID accelerated the work from home revolution. Real estate properties are up significantly. Our last property, the Freeman Berkshires, we acquired for 1.6 million. Zillow’s estimated value today without it being refinished, is 3 million dollars, I believe. So, just the market has already sort of risen…

Eve: [00:26:36] Changed a lot. Yeah, interesting.

Daniel: [00:26:37] We believe it continues. There’s very little inventory of sort of gorgeous rural. And when we say rural, we’re still in towns that to me, feel somewhat suburban ish. But are, you know, within rural communities, very bucolic.

Eve: [00:26:52] Yes, yeah. So, I’ve got to ask this question because I’ve gotten to know you and I know you don’t sit still for long, but do you have the next building in sight yet?

Daniel: [00:27:01] We certainly do. We have our hearts set on another historic property. And, you know, we can’t talk about it yet. We actually did have it under agreement briefly. And so we were very excited to sort of work through this process. And I think in addition to that, we do have offers prepared for land acquisition and to execute some new construction because what we find is that folks really enjoy massive open floor plans, with very wide open spaces and that there’s very little inventory like that in rural America. The Westinghouse property kind of felt sort of like a massive open barn, right? And people really loved it. So we’ll likely do some new construction with this market focus in mind as well here in the near term.

Eve: [00:27:55] Ok, so one more question I’d like to know what your big, hairy, audacious goal is?

Daniel: [00:28:01] Well, in solar. Right now, I’m president of a company with a utility focus that is number three in commercial and industrial solar and my goal and our goal here is to be number one in that space. In real estate? My goal is actually to be a phenomenal fiduciary for the investor base that we kind of curate through these processes. Being a fiduciary is also an honor, right? So, when you’re investing other people’s money and acting in that capacity, it’s a lot of responsibility, right?

Eve: [00:28:01] It is, yes.

Daniel: [00:28:49] My audacious goal is really to deliver returns that the market historically has never delivered, right? S&P 500, I forget if it’s seven or eight percent or something historic returns, or maybe even a little less. You know, we want to consistently deliver returns. Honestly, my personal goal is over 30 percent. You know, we often state goals lower than that and investing, you never know. Things happen. Issues arise. You know, we are doing a lot of construction and permitting and other things. But yeah, audacious goal is to smoke the S&P 500, year after year and deliver over 25 percent. Really, over 30 percent returns to our investors, which I think is just would be phenomenal from what I consider a low-risk asset class like real estate.

Eve: [00:29:38] Well, thank you very much, Daniel. It’s been a pleasure talking to you. I don’t have a big enough family here to come and rent one of your estates. I wish I did. I’m going to have to think about how to get 15 to 20 people together to enjoy one of them soon.

Daniel: [00:29:51] Oh, we have tons of friend groups too. We have knitting groups. We’ve had a lot of yoga groups. We’ve had all kinds of groups of friends, college friends, industry friends. So you can keep that in mind.

Eve: [00:30:08] I will, thank you so much. I’m looking forward to seeing more.

Daniel: [00:30:12] Thanks, Eve. Keep it up.

Eve: [00:30:20] That was Daniel Dus. He wants to take luxury estates out of the hands of the 0.1 percent and into the hands of, well, everyone. The luxury estates that he restores will still be luxurious, but carbon neutral and available for middle class families to enjoy. And Daniel is taking the democratization of these estates one step further by offering the community an opportunity to invest in them. These estates won’t just be owned by the wealthy any longer.

Eve: [00:31:06] You can find out more about this episode or others you might have missed on the show notes page at EvePicker.com or you can support us at Patreon.com/rethinkrealestate for the price of a cup of coffee. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.