A lot of fourth-generation family companies struggle because the families remember old grudges.

[07:08]

"You know, I started off just doing real estate deals in the Bronx and I would not for the first 10 to 15 years, and I kid you not, I would not do a deal outside of the Bronx."

[16:35]

"what we find is in our space, especially in the a space and the Selena California area, it's all family-owned businesses, right, and what we started to identify is the families. A lot of them did not forget who took the toy away in the sandbox in the third grade, so they had a lot of ego."

[13:23]

"And you we'll say, hey, our average ticket is 10 million and we don't want to be more than 10% of a fund, so you got to be at least 100 million."

Full transcript

Quick minute, minute and a half on kind of who they are, where they're, from, what your investment perspective is absolutely pleasure to be here. Uh, my name is. I lead Healthcare investing strategy for our single family office, uh, our family office called, based in Southern California. We also have an office in New York. Uh, we invest primarily across three strategies: real estate, public equities and what we call Venture and growth.

Within Venture and growth, we focus on two sectors: Healthcare and fintech. Uh and I lead the healthcare strategy for us um manage about 2.9 billion in AUM in invested assets today mostly invest directly into companies, uh, not so much managers. Great, thank you should be on good morning or good afternoon. I should say: uh, my name is pleasure to be here my second time to attend this conference.

Um, uh, I'm from Seattle. I work at doing debt and structured Finance um, so our team financed about 3 billion assets, I mean three billion, for our commercial, institutional, commercial real estate investors nationwide in the last uh few years. Uh, so, outside CB, I'm also in the process of um um setting up a setting up an family office um based in Seattle. So our future strategy would be, uh, I would say 60 to 70% for focused on Commercial Real Estate, because that's what I'm very, very familiar with, and the rest of the allocation would be inventure capital or private Equity.

Um. Heth care would be a uh focus in AI Technologies. Great, thank you. Good afternoon. My name is. I'm the founder and CEO.

We have our investment office in greenage, California, office in Scottdale, Arizona, and our major operating companies is in Selenas, California, which is referred to as a salid bow of the world. See the hesitation there. You like salad? Yeah, salad B the world. 80% of all the salad that you eat comes from Selena, California and we have 13 different companies under our umbrella at the moment.

Awesome, thank you for being here. Hi, my name is uh. I'm the founder of uh. Our firm focuses on sourcing and conducting due diligence on differentiated, high quality alternative investment managers and GP Le co-invest predominantly to uh family offices. Uh, prior to em, I spent 20 years at a multi-billion dollar family office as a director. During my tenure there I probably allocated to an excess of 200 alternative investment managers.

Um, my expertise is really a generalist. I've looked at all strategies but a little bit more of a focus towards the liquid side. Um, hedge funds, private credit. Um done a lot of allocating over my years and look forward to sharing my thoughts. Great, thank you. Hi, I am a co-founder of management.

We are a national Real Estate Investment Trust specializing in private credit. We have one strategy. It's simply just real estate, private credit. Great, thank you for being here. So a few of you mentioned an interest in, you know, healthc care or venture capital, or maybe hedge funds, Etc. Um.

But do a couple of you want to share something that's super specific, like some really small Niche within Healthcare or venture capital or Alternatives that maybe someone here in the room is exactly what you're looking for in that small Niche? Sure I can get us started uh specifically doing a lot of work right now on all things Healthcare and biological data. So if you have a company that is um has some access to a net, new data set, or uh, has some new way of aggregating, cleaning up, standardizing the messy world of healthcare data. Come talk to me.

Great, thank you. Anyone else want to add something really specific? I want to add, um. The focus that we have is on food waste and we're investing in U EG infrastructure and what's that mean? Cod storage facilities and all the supply chain to make sure that all fresh produce maintains its temperature from field to table. Great, thank you.

Um. So, oh, yeah, want to add something? Yeah, I can add a few um. So within the commercial Rel field, um, our strategy right now is to focus on the existing asss multif family sector, because there are a lot of opportunities you can buy at discount without doing development. Um. So in the health care industry, I've been looking at a few companies recently.

Uh, one is like retina Imaging, um technology enhanced by Ai and U. Also in the food sector, allergens for baby. So, okay, just a few examples, sure, sure, um. So you're really connected in the real estate space where we are with interest rates and inflation and real estate valuations. Um, do you lose sleep being in the real estate space?

I know you guys manage over a billion dollars, so just kind of curious in your perspective. Yeah, it's a good question. I don't lose sleep. I make other people lose sleep. And I say that because, as a lender, there's a reason why I'm in private credit. It's because I don't want to take the risk that Equity players take.

And we're in the debt space for a very specific reason: I I always want to be where I'm in control of the entire Capital stack, and being in control of the capital stack, that's what allows me to sleep very peacefully at night. Right, right, I have a follow-up question on that. I know you've spent over 30 years building fair you backed by oak tree Capital, Howard Marx is a billionaire, well-known investor, head of oak tree, and, um, over three decades, you, we, we talk about investment structures here in the club and going deep on investment structures, and when you spoke at our Mastermind, it struck me that you've spent over three decades, probably thousand plus transactions, negotiating, customizing your own proprietary or preference for structures, and that's come up a few times at the event. Can you comment on like the importance of that?

Because when I hear Warren Buffett say like hey, over 50 years I'm competing against CEOs and conglomerates, they trade out every four to 10 years like no one else does this for 50 years and that must give you like such a sharp edge on structures. Being an attorney as your background, can you comment a little bit on that? Yeah, happy to like you said it. It's definitely an evolution of over 30 years.

When I first started in the real estate business, I never in a million years imagined I'd be running a multi-billion dollar fund. And how did I get there? You know, I started off just doing real estate deals in the Bronx and I would not for the first 10 to 15 years, and I kid you not, I would not do a deal outside of the Bronx. That's what I knew, that's where I was comfortable and that was it.

And the way I did those deals was I would use my own capital and then I would, I would participate out the rest of of the stack, so to speak, to get that deal fully funded. So just to keep the numbers easy, if I was doing $100,000 deal, maybe I'll come up with $20,000 and then would participate another $80,000 to get that deal done. And when I started, that was the amount of deal flow that I was doing, it was maybe1 $250,000 deal. So to Richard's point, you know that lasted a good 10 to 15 years until I started growing and said, all right, maybe I'll do a deal in Brooklyn and for all I know, a lot of you are not from New York, but for those of you who are doing a deal from Bronx to Brooklyn, you may as well be in a different country.

I mean, that's how different values are court system borrowers, very different borrow to borrow to borrow. So it took that amount of time to really figure out how lot of the borrows work. But just to get back to the structure, I realized that, all right, participating on each specific deal and even if I was using some Financial engineering and leveraging on the back end of a deal. It really wasn't conducive to creating any Enterprise Value, to creating any sort of fund structure where I could go out and actually get a leverage facility across my entire fund, which eventually led me to then go and get a fund structure.

And I did the typical fund structure, set it up as an LC with a, with a pref return and the waterfalls and an 820, like all just what you see in a typical fund structure. Fast forward, evolved one more time because we've noticed that a lot of our investors wanted, did, also because we're a debt fund. It wasn't that tax advantageous. So how do we make it more tax advantageous?

So we evolved one more time where we restructured the fund to become a Reit Real Estate Investment Trust. And if that wasn't enough, just in the whole basis of evolution, I'm sorry if I'm going wor here, but in the basis of evolution, then then we also realize that, all right, even a read is not that tax advantageous for all of our offshore foreign investors. So then we had to go to Luxembourg and Cayman Islands and start setting up blockers and feeder funds just to make it more tax advantageous for everyone, and it literally took 30 years to come up with the proper structure where we're now a national Reit with a Cayman Island blocker fund and it's very tax advantageous to everyone involved. Awesome, appreciate you sharing that.

Thank you, um, if somebody is trying to approach a billion dollar plus family office, whether it's single family office or multif family office, and a lot of people try to do so, um, what is something you could suggest to them that might cut the time down in half, if you really understand, understanding what they're trying to communicate, or really to clearly stand out from all the other stuff coming into your inbox, um, how do they get the attention of someone like yourselves that are representing Billion Dollar Plus families? Yeah, I think for us it's actually easier than most because we're quite public about it. I post pretty actively and I speak at things and I talk about what themes I'm interested in. So if you've done, let's say, even an hour of research looking me up, then you kind of know what I'm interested in investing in right, um, and if you send me something that's completely out of that wheelhouse, then obviously you haven't done any research, right?

So for us it's actually easier. A lot of the family offices don't are not that public about it, so it might be a little bit more difficult. Um, but I think just a strong first email with like a blur about exactly what you're doing. I cannot tell you how many times I'm on a pitch meeting and 45 minutes into the meeting I still don't know what this company does.

Um, so that's that the debt on arrival, right? So just very clear blur up about exactly what the company is doing and attach your deck in a PDF please, because the more number of times we have to go back and forth to ask you for a preliminary information just creates friction. You lose a lot of time, people miss emails, everybody is busy, so just give them what they need to see for. To make that initial pass of whether this is in my wheelhouse and I want to take a meeting or not, awesome.

Yeah, you've, uh, you're so evolved as a single family office compared to others and getting the deals you actually want, because there's someone on your team open to speaking publicly, commenting publicly on social media what you're wanting, being clear that you're interested in healthcare data, Healthcare in general, uh, and that's miles Beyond most family offices. They feel like they do anything public. Then people are going to find out the family name. But they could create a brand around the family office and hire professionals and they don't do those things.

And some families, I try to tell them them, if you want to get better deal flow, especially in a niche, go out there and say you're focused on that, Niche, and they'll say, well, we don't only do that, Niche. I'm like, yeah, I know that, but you never going to see deals first if you don't have any Focus, right? Yeah, I think this is generally true in life. Most people operate under the fear of missing out.

Uh, if I scope it too narrowly, I miss out on all the other stuff. But in my experience, life Works actually the other way around. When you set an intention and you are committed to that intention and you're vocal about that intention, you attract people and opportunities that further that intention. Right, yeah for sure, awesome. And, by the way, if any questions come up, uh, my team can alert me and we'll bring a microphone over to you.

Uh, what about? What about yourself? In your experience, you've allocated over 200 different investment managers. Uh, some of which might be here in the room or offering a very similar strategies. What would you suggest for uh getting the attention of Billion Dollar Plus family offices? A uh connection to the person you're reaching out obviously is a big one.

You know, LinkedIn would be a great way to see if you share anyone in common and say, hey, I know this person. Um, usually, if you get a call, you're not going to pick up the phone and you probably won't even um call them back just cuz you just get so many inflow calls. It's just impossible to uh to keep up. Um, you know, it's always great to reach out to that family and say: what do you focus on?

And you we'll say, hey, our average ticket is 10 million and we don't want to be more than 10% of a fund, so you got to be at least 100 million. You got to have a three-year track record and, um, we don't do anything with liquidity, worse than quarterly um, so, immediately, you, you know, you, you know what they are and if you can fit. And then if you do an email, I think you know it was already kind of really nailed, but you just want to do three points, you know. One is what do you do, um, your Edge and your What Makes You Different.

And then two is your performance, and that's, I don't want to say everything, cuz you know, but it's pretty, it's pretty close. Um, you know, have you performed well and ideally over different markets? And then the last one would just be your, your experience, um, and then you attach your one pager, you tax your presentation, but very short email, straight to the point, and that's at least going to get a quick read, um, and most likely a response is your best probability for a response. Awesome, so, if anyone missed that um say very concisely what you do, uh, what is unique about it, what's the edge and what your performance is.

And I'm sure if you could say that in three bullet points, two sentences, to cut to the Chase, and maybe suggested, maybe, um have a drop links link or some sort of PDF to be able to open up materials real quick, if that email is super short, that' probably be better than 90% of emails that get sent to investors. I would guess, uh, based on what you just said, were you going to add anything to that? Uh, before I move on, no, okay, no, that's perfect. You want to say something?

Yeah, I want to add a little bit. Um, I found that like one pager sometimes is helpful. Uh, I receive like 49 pages that I dive very deep into the. You know the terminologies, the biological terminologies can be very hard to digest, but if you can summarize your thing in one page, uh, you know, be concise. What's your, what's a problem that you're toggling, and then what's your solution, what makes you what differentiate yourself and how large is a market.

I think that would be very helpful. Right, sure, yeah, I know one of our investors took, uh, like a 50 page pitch deck and just put in chat GPT and said: summarize this thing for me in like seven bullet points, you know, cuz I don't have time to look through this, you know it has become so so much easier now with that and I I think if you can't even do that, then that saves a lot. Um, I, I spoke, I have a talk on YouTube about how to create your pitch deck. Um, and, uh, I talk about it shouldn't be more than 10 to 15 slides, so, for someone who's working on it, if it's more intended for companies, not for funds, but awesome, yeah, we always say, uh, 12 to 19 slides, so super similar compared to the average 44 page deck.

You see there, uh, we haven't heard from you enough. So you own 13 companies in this area. Can you talk about how, maybe the niche Focus, uh, or what strategy led to you having successful negotiations to buy those companies and what led you to be successful in raising the capital needed to acquire them? Yes, why didn't I buy them?

I'm still trying to enter that question. A lot of these, a lot of these companies that we looked at, are typically fourth generation family companies, and what we find is in our space, especially in the a space and the Selena California area, it's all family-owned businesses, right, and what we started to identify is the families. A lot of them did not forget who took the toy away in the sandbox in the third grade, so they had a lot of ego. So.

So the companies started to take distributions, take all the money out of the company, so we recognize we could come in, offer a fair valuation. Do the blocking and tackling, I think we all know what we mean by that, do the hard work and started adding value. Start having consistent returns in iidot mhm, get your management team in place and then you can go out and start telling your story: what problem are you looking to solve, how you going to solve it, and don't take all day to tell me how you're going to get there right. So just be straight, be concise, as I'm not being right at the moment.

Be be very, very, very straight. So then, you've got to put real accountability in place to hold all of your management team accountable to The Matrix, to the overused word, the kpis, and you got to continue to educate. We are a strong, strong, strong company and education, 97% of our employees are Hispanic. We offer every employee an opportunity.

If they do not have a high school education, we will pay for it. If you want to go to college, we will pay for it. People are getting very concerned about the overused word Ai, and I've been in this business over 53 years and my AI was a slide R and I thought I was really high technology which a HP calculator. So we have got to remove the fear of the employees they're going to lose their job.

So hopefully, that right some insight. Thank you appreciate that. And you talked about acquiring multif Family Properties at a discount. Is there any Niche area you're focused on, like student housing, multif family or Workforce or anything like that? Uh, conventional multif family? So, for example, we were raising uh Equity, like 400 million equity for institutional client based in Seattle.

So they already have three billion assets across the US. So they have been F purely focused on Multi Family Assets. They own 10,000 units. So their most recent transaction was in Arizona, Scottdale, 117 million uh purchase price. When the seller bought it three years ago they bought it for 143 million, so it's a huge discount and it was brand new.

It was built in 2021. Uh, the reason for the discount was the seller put a three-year Bridge financing back in 20121, so it's matured this may. So, with d Bank, 84 million balance right. So we Finance the debt for 64 million fixed rate um with Freddy Mach um. So there's a Delta of 20 million. So you either sell or you need to cash in refinance.

Come up with the 20 million Delta. So that that's why there are a lot of you know opportunities come from this situation. Yeah, makes sense. I read a report that in 2022, five times as much capital is raised for Real Estate than 2024 so far. So if anyone's having trouble raising some capit, you know. Uh, there's others out there as well.

The other thing that makes it more challenging, even though if you're in the business you have to plant seeds and gain new relationships right now for later, is just that some families are used to seeing, and some investors are used to seeing, like a rescue Capital deal coming in to rec capitalize a platform or distressed asset or hard money lending and and the returns are pretty good and, like John, maybe you're sleeping at night because you're the you're on the debt side of the balance sheet. Um, when you have a traditional deal, sometimes you know it can be a little bit harder right now, at this moment in time, because of the families are used to seeing these kind of rescue Capital type deals come by, as been my, my experience. Um, you have any questions out there in the audience for any of our panelists that um that you're curious about and like to get their opinion on? Um, we had a couple questions planned for the panel, but I want to make sure and go down the line to provide like a million-dollar Insight they'd love to share at the room, or answerers.

One of the questions we didn't get to. For example, is there something out of favor right now that you think is coming back soon, or something so unpopular that nobody really talks about it and that might mean it's a good time to go in? Um, actually, like Howard marks from OT Tre Capital, he's famous for saying that, like, when something is is unpopular and other people people think you're not smart to go into, it is when you can get a good deal, and when they think that it's pure toxic, then sometimes it's the best deal of a generation or of a decade um, because it's so discounted and unpopular right now. So we could answer one of those questions or just provide you number one Insight.

You want to leave the room with today that you think could you know at least as someone in the room, add $100,000 or a million dollars of value to um. You usually have an answer for just about everything. You want to start us out and work your way down the line? Yeah, I'm happy to. I just kind of piggybacking off of what you started with respect to where we see opportunity.

And again, I'm I'm a real estate investment trust. I man, I'm a fund manager for a re, so it's obviously very industry specific and I don't know how many of you out there are in the real estate world. But what we're seeing right now is a maturity wall where a lot of the debt that real estate owners had are now entering maturity, and this is creating a tremendous opportunity. Right, I mean for, again, not to give you a real estate lesson, but there's two ways to make money in real estate.

It's either net operating income or your Market discount rate, and they're both directly linked to interest rates. So think about it: your debt remains exactly the same right now, your rents are the same, your operating expenses are the same, but as interest rates rise, your cap rates also rise, which devalue your real estate. So now you have a maturity wall. You're going to refinance.

You are lucky if you're getting 50% of what your debt is today. That is going to create and we're seeing it. We're seeing it in the industry. It's creating tremendous Opportunities For Real Estate Investors because now they're able to go in and either Infuse Equity, because the only way to refinance without getting a new mortgage is to just pay down the loan, obviously, or they're just selling the properties outright.

So we see a lot of opportunity there, right? I think it's really important that. One impact of what just said is that right now, the last N9 months, more than the last seven years combined, we've seen investment managers stop distributions, lower distributions, have to recap projects. In some cases, investors get wiped out on projects and some investors, rightfully so, get upset when their money stops producing income for them that they relied upon, or get upset when some money is lost or there's a reduction in value.

But the whole industry is being impacted by this. Unless you had long-term fixed, you know 2.9% debt, then that was smart of you to lock that in. But just know that even some of the most honest, hardworking, high integrity managers out there have to do some of these things that John was just talking about. Um, it doesn't mean that they misled you or misled you on purpose, Etc, as one of the risk, as one of the natural fluctuations in the real estate market.

It's what, what happened, right? So, uh, any last comments you'd like to share? Yeah, I mean continuing on the the theme of maybe what's out of favor and on the real estate sector. Um, you know, I don't think it's quite 0809 opportunity, but within the distressed cnbs space, these bonds have traded off pretty substantially and, um, there's people out there with specific expertise to really go after that fulm security and cram down the equity and the junior debt.

Um, and these bonds come along with special servicing rights so you can go to the special servicers and get an extension on the old debt that was issued, you know, 34 years ago at 3%, um, so you know, I know that a lot of these uh stuff has been thrown out baby with the bath water, but there is single name, cnbs, where the underlying asset of the cnbs is just one particular property. So you can really do your digging on that and you're not just looking at a portfolio of 20 different properties within the securitization um, you, you know, just another big area that I'm a big believer in is just finding Niche, uncorrelated managers. You know just good old fashion portfolio. You know construction, you know you're going to have, you know, some things that sell off.

You want to have other parts of the portfolio that aren't correlated. So things like appraisal rights, litigation, Finance, um, California carbon credits, that's a niche beta um factoring, you know just to. You know, being able to kind of diversify your book portfolio when uncorrelated Investments, um, I think just creates a more powerful and high quality return. Great, awesome.

Yeah, I think a lot of investors who see a lot of deal flow and, like you, have selected a lot of allocations. After a while, if you don't do a good job of what said um and what you said earlier about the, your Unique Edge, everything kind of starts to look the same. Like a lot of people email you. It's like I feel like I've read this email like 900 times before.

Um, so it's so critical to appeal to people like yourselves that see a lot of deal flow to be super clear and that Unique Edge right, awesome, uh. Any last comments youd like to share with the room? Any big insights in our industry in Selenas, and I think I heard a stat earlier with one of the other moderators about how many people were turning 65 years of age, uh, 10,000 a day. What we're seeing in our industry, all family-owned businesses, that is occurring.

They're not prepared for an estate. As surprising as that may be, they're not surpris, they're. They're not prepared to pass own their companies. So then you go to the real estate side from the code storage, Industrial Average AG in Selenas is 45 years of age. There has been no upgrades in technology, the debts coming due, as you said.

So we see opportunities there to move in from an educational standpoint. Say, we can help solve your problem by working with your debt. We can help solve your problem by doing some capital investment and bringing some management expertise to our particular area. That we know well, right, right makes a lot of sense to your point. On the debt side and it being harder to find.

The last uh couple years we acquired about 5 million in real estate. That just did all seller financing um, and our LTV is like 23% um, and all the seller financing runs off after 3 to 5 years and we got some of those deals done at the height of the real estate market. Now people are much more negotiable on getting seller financing done because may need that liquidity for another asset uh, and it's the only way they can get the deal done sometimes. So appreciate you bringing that up.

It's a, it's a time of opportunities, as long as, like Warren Buffett says, uh, when there's a flood, you want to be selling life preservers, not begging somebody one, because Banks don't want to lend money when people need it the most. They want to lend money to the people who are so well positioned. They barely even need the money, and Warren says that himself. He say he doesn't use high debt, very low debt, and then maybe once every 10, 20, 30 years he'll put on a moderate amount of debt.

But that's like an emergency action, it's like a cash Reserve. Uh, and the last uh comments, insights You' like to share with your room? Uh, maybe two aspects. One is stay focused. Um, using the same example I just mentioned earlier, client has three decades experience, focus on the same area. That's why, when opportunity present, they can take SE opportunity and they did that successfully in OA.

For the 5 years between OA and 13 they achieved a 53% IR. That's why they're so confident to use the same strategy right now, even though lower expectation, maybe 20% IR, but still similar pattern, right. So you mentioned the stress in commercial real estate. Of course there are stress but, like I mentioned, the crisis for some could be opportunity for the others, and that's number one.

And number two I would say it's life, lifelong learning. That's to De develop yourself, like I myself am learning doing my MBA program at Wharton University, watch, Pennsylvania. Um, so just to further broaden my sure, my view, sure, yeah, it makes a lot of sense. Uh, one challenge of running this event with the 100 plus people on stage is that any one of these people has enough experience to do a two-hour Workshop, over a breakfast, or a full day workshop of everything they've learned, and they're only up here for like a few minutes, but the point is just for you to know who they are, where they're from, what they're focused on, and then we can network with them during lunch and Cocktails here in a couple minutes, and then the favorite speakers from the audience: um, we'll have back for some of our Mastermind, our investor masterminds, and do like a little bit longer fireside chat to dig deeper into you know how sources deals, or something of that nature.

But you want to finish us up with the last, uh, insight for the audience? Yeah, sure, um, I would say um, to build off what Regina said. Um, opportunity hides in plain sight. If you don't like waiting for a cab, build an Uber. If you had to drive 2 miles to go pick a piece of gum, build an Amazon.

Uh, you had to go wait in the ER for 3 hours with a broken hand. Build a Healthcare company and then come pitch it to me, um, so, yeah, opportunity is everywhere. Just think about your life, your experiences, and reflect on them to derive insights that can change and meaningfully improve those experiences, not only for you but also for others around you, and then have the fortitude to go build something awesome. Appreciate that, thank you, uh, thank you to to everyone here on the panel for sharing their thoughts and ideas.

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