SPEAKER_02: This is your daily real estate syndication show. I'm your host, Whitney Sewell. Today, we've packed a number of shows together to give you some highlights. I know you're going to enjoy the show. Thank you for being with us today.
Lance Pederson: This is your daily real estate syndication show. I'm your host, Lance Pederson co-founder and CEO of Passive Advantage, where we simplify the process of vetting passive real estate syndication deals for passive investors with our LP Deal Analyzer tool. I'm sitting in today for Whitney Sewell, founder of LifeBridge Capital. So our guest today is David Hansel. He's the managing member of Lucerne Capital Partners and the co-owner of Alpha Funding. So David got his start in real estate in the brokerage side of the business in 2002. In 2008, he co-founded Alpha Funding, which provides short-term bridge loans to investors on fix and flip and new construction projects. And in 2016, David and his partners launched Lucerne Capital Partners to acquire and operate multifamily and commercial real estate, primarily in New Jersey and the Carolinas. In today's episode, we're going to talk about the importance of building long-term, long-lasting relationships in commercial real estate, and how structuring deals properly can make or break the success of the deal, and how the supply and demand dynamics that exist today in industrial are very similar to the ones that existed in multifamily back in 2016. So enjoy the show. Okay. Hey, thanks, David, for joining us today.
David Hansel: You're welcome. Thank you for having me on. Good to see you.
Lance Pederson: Yeah, you as well. So, you know, one of the things that I know that you've really You put a lot of your own personal effort into the years, over the years, is just the ability to build long-term, long-lasting relationships. And it takes a team to really go out and acquire real estate and do deals in general, right? They're just, no one can be the master of all things. And I know that on your teams, you've always been the guy who's found a way to kind of build relationships with those capital partners and lenders and all the people that you need to bring together to make a transaction happen. you know, from your perspective, you know, what is sort of your overarching philosophy for that, you know, relationship building when you go into any net new relationship and how you nurture those relationships and build them because it obviously takes time and doesn't happen overnight.
David Hansel: Sure, great question. I will say that relationships transcend every business and industry, and real estate and investing is no different. I think that some of the things that people don't always think about when they think of relationships is about just patience and being an open ear, right? People want to talk, you want to get to know someone, and our days are so busy. Many times we're jumping to the next thing that we got to do rather than being open and listening to the person that you're sitting across from or you're on a phone with. And really through that, you build rapport with people. And I can't say enough how much that's helped from every aspect of our business, not just from, you know, capital raising to deal sourcing to solving problems that inevitably come up in your operation. So it's something that I am very passionate about and I make sure that I share that with our team and try to have them reflect that same behavior with all the interactions that they're having throughout the day.
Lance Pederson: Yeah, no, it is super vital to getting anything done. I mean, people do business with those that they know, like, and trust, right? And so if you don't approach it from that side of things, it's just going to be difficult to get things done. I mean, ultimately, people want to be spending time with people that they like and where the relationship exists. And I think that's where sometimes you just see a lot of people just a bit too transactional, a bit too hardcore in their dealings and not realizing you're trying to create those win-win scenarios.
David Hansel: Yeah. So important. And it's about getting to know another person, not just on a business level, like you said, but on a personal level, because that helps makes everything go smoother. And like I said, most people feel that it's a waste of time because they have so much on their plate, but I'd argue it's the reverse. Like you can't not spend the time doing that stuff. And I saw, you know, even before I started Alpha and Lucerne, just in terms of how I worked and handled myself in business, it was always about serving others first and making sure that I understood what their needs were. And so that's so important to success.
Lance Pederson: Yeah, that's right. I mean, and that's, you know, ultimately that, you know, the value add hypothesis, which I know you guys are big believers in. I mean, having, and I think, you know, there's a good segue just into, you know, I think what it sounds like Lucerne does a great job of is just that creativity and structuring transactions with your guys's background with Alpha kind of sitting, and it's similar to my own right of kind of sitting in a lender seat. And when you're underwriting transactions that you really have, you might have a first lien position on the loan, but ultimately you're not making the day-to-day decisions. You need to rely on your borrowers to execute their business plan. It gives you a different perspective and appreciation for risk, that's for sure.
David Hansel: And I think it is- And you learn about a lot of problems that you never knew actually could exist, right?
Lance Pederson: Yeah, exactly. The crazy things that borrowers can do that create interesting dynamics. So for you guys then kind of shifting, I mean, obviously having the lending business and then getting into the operator side as value add multifamily guys, and more recently making a shift kind of into the light industrial that's going on. So maybe you can speak to that as just to your guys' philosophy as to how you've you know, used all that experience when you are looking at transactions. Maybe give us an example of, you know, the creative structure that made a deal work that wasn't like creativity for creativity's sake, but really was the solution to unlocking value.
David Hansel: Yeah, I'll tell a really good story on that before I'll just mention. So on Alpha, the lending company, we've underwritten funded thousands of deals for borrowers. So we've we've had quite the experience over the years of, you know, working through all of these construction projects, managing draws, seeing value add type projects, being a party to that, obviously not as an operator. But it helped really kind of set us up in the right position when we launched Lucerne seven years ago. We also brought in or partnered up with another gentleman, Frank Forte, who's a friend of mine. He's our chief investment officer. And he had had more of an institutional background on the ownership and finance side for real estate. But I'd say, Opportunistic is a phrase that can have a negative connotation, but I look at it in a positive light. We're opportunistic and we try to find value where maybe others don't or find a way to approach an investment opportunity with a different outlook that can really change the outcome of that. I have this really incredible story on a broken condo deal that we did several years back in New Jersey, which is where we're based out of. Most of our investments nowadays are down in the Carolinas. but this was a broken condo project. It had been, it was, Cantor Fitzgerald was rolling up a fund. We'd been tracking the property for a year, both through Cantor and through the city. We eventually were able to buy it at a very, very steep discount. We bought 64 units out of 102 units at $55,000 a door when the one bedrooms were selling for $105,000 a door on the open market. Part of the reason why we were able to get it there was that we've been persistent following along, but it also is a very difficult deal to finance or put together because the HOA had some issues, although it was financially being shored up. Homeowners weren't able to get a regular mortgage. So we were originally buying this at such a steep discount to market We had gone to one of our local community banks and we walked them through the property twice and we finally get our term sheet. And, you know, we're looking at bringing 30% equity, which is understandable in general, but we were buying it such a steep discount that we said, you know, this is not the right fit. We could lever this up. We knew that there was so much value that we could lever it up further and then quickly stabilize. We came in and we wound up bringing an insurance company that we've worked with on the lending side. They came in and provided 90% of the acquisition. We actually ripped off nine of the properties and bundled them and sold them to another investor group that we marked up. That money covered our down payment. So theoretically, we got into this deal with no money down, which is very unusual in this space. And we haven't done that before, nor have we done it since. We got in with no money down. We were able to quickly start improving the units. We took over the board seats at the association because we own the majority of the shares. We got an HOA loan, fixed the HOA, got it approved for resume mortgages. We kept pushing the improvements higher and higher. We eventually sold the last pool of units for $250,000 a door, which, you know, for the county was a really low price for what it had to offer, but it had been kind of in the trenches with all these issues regarding the association. And we saw that opportunity, we followed the deal. for over a year before we won it. Then we got it and we were, we kind of pivoted on our financing that made a huge, huge difference. As a matter of fact, we were able to pay off all the mortgage And we had 27 units that we own free and clear. We were able to put a line of credit against that and use that to go fuel some other investments. So this is a creative story on steroids. I mean, we typically are looking at opportunities where there's mismanagement, maybe needs rebranding, maybe needs capex for interior exterior improvements. and then moving through that. But this is kind of a unique story. Hopefully we'll find another one or two of those as things move along. But it's exciting. It gets your juices flowing too when you're able to like kind of put something like that together.
Lance Pederson: Yeah, I agree. I mean, I think that's a big part of it is just that it's engineering and structuring the capital stack and any transaction can make or break it. I know that as well as anybody in cases where it broke it, right? The underlying assets can be great. Your strategy can be solid. But if the way you're capitalizing it isn't appropriate for the strategy or the specific deal, I mean, and a lot of guys are seeing this now just with, you know, the debt that they have on their multifamily projects, right, of, you know, no rate caps. And it just quickly, what could have been a great project with the right financing suddenly is no longer viable. In fact, you know, has potential to create the risk where investors lose their equity. You know, so I think that that's why obviously I'm a bit biased because I started in from the lending space as well. But I think that as lenders, it does seem that you kind of hone that ability to understand and appreciate the capital stack maybe a bit better than than guys who are because because it forces you to assess your downside risk because your upside's capped. And I know you guys are in the same position. you know, just with, with alpha. And I think that had found similar success that we did kind of then pivoting into the other side of the business, you know, where you're actually acquiring real estate yourself. Cause once you kind of learn it that way, it's hard to, yes, you appreciate the upside. That's why you get into it, but it's hard to, you can't ignore or avoid that, that downside.
David Hansel: I always say it's like a game of Tetris, right? So there are some people you give, if you gave a game console to someone to play a game of Tetris, and they never played it before, it's going to stack up really quickly. When you've been through so many repetitions, thousands of repetitions of structuring deals, so on and so forth, you just kind of find the spots and optimize what you have, right? And so I think that it's really important that it's a piece of the puzzle that I think a lot of operators that haven't you know, been on the lending side, or, you know, maybe they have done other things that make them think about, but a lot of people don't put as much emphasis on the capital structure as they should, and how much it can make a difference, just like you're talking about with multi right now, you know, without some, some investors have floating rate debt without a rate cap, You know, there's a lot of there's a lot of structural issues that are changing in the multi side, which make it a little less attractive and it'll make it a lot more challenging of a space to to make substantive returns. So that was a good point that you made and. And you got to think ahead and be prepared. And we still learn lessons every day. And we have one asset that's part of a fund that we're having some real challenges on. We have floating rate debt, but we had a rate cap. But our debt's coming due, and the cash flow isn't there. So you have to be thoughtful about those pieces. And even with the rate cap, we still have some challenges that we're dealing with. how you pivot and work with those situations is what can make a bad situation a little bit better or could make it worse.
Lance Pederson: So where can people learn more about you, David, and about Lucerne and what you guys are up to and if they want to reach out?
David Hansel: Oh, thanks, I appreciate it. You can visit our website, which is lucerne, L-U-C-E-R-N, capital.com, and that's C-A-P-I-T-A-L.com, lucernecapital.com. You could email info, at lucernecapital.com with any questions and happy to set up a call with anyone that they want to discuss or learn more about what we're doing. And yeah, feel free to visit, give a ring. And I appreciate you having me on today, Linz.
Lance Pederson: Thanks for joining us, Ben. It's a pleasure to have you on. Good to catch up with you. How are you doing?
Ben Reinberg: I'm fantastic. Thank you so much for having me on. What a privilege and it's great to be here. I look forward to adding some value and some knowledge to your audience.
Lance Pederson: Yeah, definitely. Yeah. So as we discussed, so we're, you know, we're going to be talking about a lot of stuff here today, but, you know, Ben's been in business a long time. It's been a journey like we all are on. Today, we're going to hit on some deeper stuff. Maybe this will be a bit more of the philosophical episode, but that's how I roll. That's how Ben rolls. We hope you enjoy it. We'll get into it. Ben, why don't you share a bit? your background and kind of, like you said, the journey that you've been on has really, there were some formational events in your childhood and just things that kind of were instilled in you from the beginning that kind of puts you on the trajectory you're on. So why don't you share a bit with the audience about that?
Ben Reinberg: Well, I come from a family, I'm from Chicago, as you know, Lance. And so for your audience, I'm from Chicago, I'm from the Midwest. And these Midwest values we have is you get a job, You do everything you can to get to college. You get a job. You get a salary. Maybe you live in Chicago. God willing, you live in the suburbs. You take the train downtown to work in a suit and tie in the cold with your trench coat and your rubber boots and hat. And you go to work, you grind, and then you come home and it's dark. And that's the life I learned. That's what I saw my parents, especially my father doing. And I was always someone that wanted to break free. I was a rebel. I never wanted to do anything normal. That's who I was born with. I had this entrepreneurial spirit, but when I was a kid, it really wasn't called entrepreneurialism. It was more like start your own business and take the risk and see what, and let it fly. And so I had to kind of break out of my family structure, watching my father go to work every day and know that there had to be a better way. And so it was interesting while I was eight years old. My first job is I learned that I wanted to make money. Um, everyone knows me. I love candy. Now I went to the dentist yesterday and she said, the candy that you're eating, Ben, is not really good for you. And I had a awakening yesterday with her. And so now I'm a little concerned cause I'm a Swedish fish junkie. And so she's like, we got to stop that. So she gave me a little bit of a lashing and I appreciate it. You're a great lady. And so, What I did when I was eight years old is I wanted to buy Slurpees and candies. There was a 7-Eleven down the street, and I grew up in a town called Holland Park, and I boarded a town called Highwood, Illinois. And Highwood, Illinois, when I was a kid, had the most bars per capita, or square feet, in the United States. And so they used to leave the bars open. As a kid, you could walk into the bars, and you'd see people drinking, and people smoked cigarettes. That was the big thing back then in the 70s. I was eight years old. But I had this mind, this mathematical mind, and this entrepreneurial mind of, I'm always the person to figure things out to get it done. And I will push the envelope and do whatever it takes to get something done, a task. That's who I am. And so I was eight years old, I walked in the bar, I saw people buying cigarettes from a cigarette machine. And at the time it might have been $1.25, $1.50 a pack and they'd pull the handle and there was all different types. But there was a general theme, and I just sat there watching. And the general theme was Marlboro Reds and Marlboro Lights. A lot of the men and the women smoked the Marlboro Lights. So I start seeing the pattern. At eight years old, I could see this. Well, I used to go and sometimes buy candy at a local pharmacy down the street. And, you know, they had Playboys and the magazines and pharmaceuticals. And so I saw they sold cigarettes behind the counter. And I found out how much because they assign of what they would sell a pack of Marlboro Reds for. And then I took my pencil and I was learning math at the time. And I realized how much was a pack of cigarettes compared to what they were selling in the bar. So I had some money. And I paid a guy outside. We had a large Mexican population in Highwood. And so I paid a guy some money, a couple bucks and said, would you buy me a pack of cigarettes to incentivize them? He said, no problem. That's what it was back in the seventies. Guy bought me a carton of marble reds. That's what I started with. went into one particular bar, sold all the packs of cigarettes for a discount compared to the machines. Now, was that dangerous as a kid? If these are mob-domed bars? Probably. It's probably not a good idea when you're eight years old. But I was eight years old and I was fearless. And there's a lesson behind all this. I want everyone to know what fearless really means. And when you are and you go for something, whatever business you're in, real estate or whatever, how powerful it is to be able to open your mind and just go for someone and not worry about the consequences or the fears, doing it legally and morally and ethically. And I'm not saying what I did was great at eight years old. However, I was on a strategy to buy Slurpees and candies. That was my desired outcome I wanted, Lance. And so what happened was I would go and I'd throw the cigarettes in a pillowcase, put it in my sweatshirt and sell. And I did it for about five months and worked out well. And I had a lot of cash and it got me to my goal. And that's what kind of people look back and like, well, what launched you? That moment, those moments of looking at the risk, figuring out how was I going to acquire the cigarettes? How was I going to make a profit? How can I figure out what kind of profit I would make? those skillset have carried with me today that, that those five months I was selling cigarettes. And so it's the little things I've done in life that have stacked upon each other to create success. And it's not for the faint of heart being an entrepreneur. I mean, you gotta work hard, you gotta show up, you gotta grind, you have to focus, you have to bring in great resources like we did with you and other people we work with. and it's constantly reinventing yourself and pushing forward and understanding, Lance, that it's okay to fail. It's okay. Everyone fails. And by the way, really successful people, you might not see all the details that we go through on a daily basis, but they exist. And so don't think differently that guys like Lance and I and other people, we're not failing. Or we make a decision, maybe it doesn't work out. Or we bring in a resource, Lance, and we're like, yeah, that didn't really work out well. But you know what, we pivot and we say, well, what did we learn? And the lesson for everyone to take away for everyone you meet out there, if you're a young entrepreneur, or even an existing seasoned entrepreneur, and I've learned this in spades, is every experience you have, especially the negative ones, there's a message of growth in there. Everyone I touch, I was at, the other day I was at Starbucks. And if you're kind to everyone, okay, and I learned this from someone, I started talking to this lady behind the counter and she taught me something that made me think about how to deal with something just through a conversation. Just met her. And so everything you go through, experiences, failures, even the benefits, the positives, the successes, there's always little hidden messages of growth for you to learn, to understand, okay, how do I keep improving as a person? And for me, that's what I always look at. I am a growth minded person and that's allowed me to always consistently push forward and to be able to accept failure, but also be able to enjoy the wins as well. And that's something important is everyone out there, you're going to have some wins. Okay. And they might be a few in between the failures and everything, But really take a step back and enjoy them and appreciate them because I think a lot of them, we expect it and we kind of just shovel it off and pass by like, well, that's what should have happened. Well, yeah, it may be we feel that way, but really enjoy that. And you'll see a lot of benefits in your life if you start enjoying the wins.
Lance Pederson: Yeah, I totally agree. Like that's always been my struggle too, is just, you know, when you're ambitious, you just keep going, going, going, and then you don't stop and celebrate the wins. I mean, it's almost like you don't even, you don't even acknowledge them. Like you said, it's just, hey, you expected that to happen, but you lose a lot more than you win. And I think that's the thing is just, you know, and if you're a grinder, which is what it takes to be an entrepreneur, I mean, you have to keep getting up off the mat, but you know, I completely agree. It's all mindset and, And I think it is, it's just life requires a lot of courage. You know, courage is step one. You have to muster courage and then you have to go like the eight year old Ben, right? Like you muster the courage and then you go for it, right? You ask the guy outside the store to buy you a carton of smokes. But, you know, and I think there is something to learn from just, you know, as children. I mean, we don't, you know, it sounds, you know, we hear that now, but I mean, it's like, I mean, I was no different. Like I would go door to door and sell stuff to people. And I had no, like, I didn't care if they rejected me. Right. I was a great, you know, I was a good telemarketer when I was like 15, my first job, same thing. Like, I didn't care that like 40 people in a row just told me to buzz off. I just kept going and then you look at the leaderboard and I'm beating them. But as you get older, it's like you start to lose that. And I think it is because the world beats you down. It's trying to tell you that you're not good enough. And I think it is that mindset. It's just the mindset of like, it don't matter. I got to keep going. I just got to keep going. You win, celebrate, enjoy it. I mean, life is all mindset. It's all mindset.
Ben Reinberg: It's interesting. everyone cares what other people think. And that's our biggest hang up is that, and especially as you get older, you know, you start worrying about what other people think. And so when you're a kid, it's like when I was eight years old, it's like, I don't care what anyone thinks. I'm just worried about getting a slurpee and eating some candy. Right. And how simple is that? The other thing I've, I've learned that I could share with your audience is We're always rushing as entrepreneurs. Gotta get this, gotta get this email out, you know, back in the day, gotta send out this fax. I gotta get this out by FedEx. I have to get this because it has a domino effect on three other things. And I get that, I get the domino effect there, especially doing a lot of deals and whether leases or acquisitions or dispositions or negotiating, you name it. You know, urgency and timing is everything, right? Times kills deals, as we say. However, taking a step back and as I've aged, I've learned this from a lot of people and learning for myself is slow things down. And when you can slow things down, it accelerates everything. So when you're doing deals or you're dealing with an employee or a resource, slow it down a little bit, you know, slow down your schedule. You know, one thing I do, I give people advice on my schedule is, I block, my assistant blocks out sections of my calendar. So for example, I'll be on this podcast with you. And then my next Zoom call, I might have 15, 20, half hour, even an hour between to give myself space to just be able to collect my thoughts, prepare for the next meeting, take care of work. And I found that I'm more efficient. My communication's better. I'm more relaxed on the phone or a Zoom call. And that goes a long way. People say, well, why do that? What ends up happening with that is you're more present with the person. And being present is so important in life that I've learned. And because when you're present with someone, like I'm present with you now on this podcast, It allows us to go deeper in our relationship. It allows me to listen better. It allows me to respond. It allows me to help you. And so it's these little things, it's these little tricks where people are like, what creates the success? Listening, being present, and really focused on the person you're with. It's a respect factor as well. It's to me, the little things we can get into, like how to structure a deal and how to underwrite and all that stuff. And that stuff you learn over time in business. However, it's those ancillary things that go along with understanding business that are so important that I've learned over the years. And I hope everyone gets something from that to kind of reflect back on them and say, am I slowing down? Am I giving myself enough space? And so for me, one thing I've done over the years is I block out times in the day just to think, just to sit by myself and think. And when I do that, I'm dangerous because all of a sudden I'm like, you know what, I want Lance to do this, this, and this. This would be great for him and for us. Where I'm saying, you know what, we should open another asset class that we really like because there's going to be opportunities. And so what does that do? It allows me to be the futurist I am to be able to think. And so giving yourself time to think is really important. First of all, it's good for your health. It's also good for your business and the people around you to know that you're really taking the time to implement some ideas that really have an impact.
Lance Pederson: Hey, great conversation as always. So Ben, where can people find you if they want to learn more about Alliance and the medical properties and all that you're up to?
Ben Reinberg: If we're located at AllianceCGC.com, it's AllianceCGC.com. We're the leaders investing in medical office, veterinary office around the United States.
SPEAKER_02: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.