Insider Secrets Podcast Episode #73

Featuring Guest: Beth Mercante

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Guest Bio:

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Beth has worked in various commercial real estate roles since 1990 after graduating from the University of Washington with a Bachelor of Science in Building Construction. Prior to joining StackSource as Senior VP, Ms. Mercante worked in New York City for the Quantum Fund (George Soros and Paul Reichmann fund) in acquisitions and asset management. Ms. Mercante also worked in AIG Global Real Estate Investment Corp. in their mortgage finance and asset management divisions managing multi-family, office and retail properties. After leaving AIG, Ms. Mercante worked as an investment sales broker in Manhattan and won the Most Ingenious Deal of the Year award from REBNY in 2001. After a successful sales career, Ms. Mercante moved into real estate consulting with Gemini Realty Advisors and then to her own firm where she most recently sourced senior housing and self-storage projects for a partnership including Columbia Pacific Advisors, Wegman Companies and Rembold Companies.

Shownotes:

Standout Quotes:

“There have been some instances like that where I’ve had to kind of placate everyone” – [Beth]

“I do feel that in the next six months or so, agency lending is going to be a little freer” – [Beth]

“You have to really have professionals that understand underwriting and then be able to negotiate with the lenders” – [Beth]

“Don’t go to the internet to find your first deal. Get in the car, drive around, figure out what property you like, property type and locations” – [Beth]

“Really do your due diligence and don’t move too quickly just because you’re excited that you’re going to buy your first deal” – [Beth]

Key Takeaways:

  • Beth describes herself with one word “Competitive”
  • Beth graduated from the University of Washington, stayed in Seattle and worked for a local developer there, after which she decided to move to New York.
  • In the world of commercial real estate tech, there’s LoopNet, there’s Crexi, there’s other big sites out there for buying and selling real estate.
  • So we have done, I think 200 deals. We’ve arranged 200 financings, which is really great in basically three years.
  • I’m supposed to have a closing in two weeks that is 70 million. So we’re definitely moving into the larger realm.
  • I’m quoting currently a guy who wants to buy a 200 unit in Texas and he wants a bridge to agency.
  • My job as a broker is to make sure everyone’s doing what they’re supposed to be doing.
 

Episode Timeline:

[01:47] I’m joined today by Beth Mercante.

[03:16] Beth describes herself with one word “Competitive”.

[04:18] Beth shares her backstory.

[06:34] I went in and interviewed with Peat Marwick and they gave me the job in real estate consulting.

[12:19] So tell us about StackSource and what StackSource is and who they are and how they came to be?

[14:23] My pipeline, I would say average is around the 20 to $50 million range.

[15:57] Insider Secrets, we focus mostly on the multifamily sector. So how does that work?

[18:17] So are all of your lender sources are you doing agency debt or is it traditional funding?

[19:53] A lot of bridge lenders will lend you 80% of your purchase price, then they’ll also fund a hundred percent of your cap ex meaning your capital improvement costs.

[27:52] What about institutional financing? Do you guys get involved in that at all with any insurance companies or funds?

[33:36] Any pitfalls you see out there today that people should watch for?

[36:52] First question is your favorite tourist attraction?

How to Contact Beth

Email: b.mercante@stacksource.com

Call: (646) 341-2030

Transcript:

[00:00:00] Kristen: Welcome to this week’s edition of Insider Secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Morawski has more than 30 years of multifamily, real estate investing and property management experience.

Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.

Mike: Hey, welcome back everybody. Good afternoon. It is Mike, your host of Insider Secrets. And Insider Secrets is brought to you by My Core Intentions. And the thing that I always like to ask people is, Hey, what’s your intention? What are you thinking about today right now? What do you want to get out of this podcast [00:01:00] that we’re going to share? And even in your business, where are you at right now? You know, I often say that we either can step forward or we can step backwards, it’s a choice that we make. And how we look at things, what our intention is, what our intention for education or training is, all dictates where we’re going to be as an individual.

My whole commitment at My Core Intentions is to help empower you to execute on some sound real estate investing and property management principles. What I want to do is I want to work with you to help develop a strong foundation of practical principles that are going to help drive your business forward, but not only that, but are going to help you grow personally. So let’s dig in here this afternoon. I’m excited today about today’s guest. I’m joined today by Beth Mercante. She’s a senior VP of business development with StackSource. Beth, you want to say hi to everybody really quick?

Beth: Hi, everybody. Nice to meet you [00:02:00] virtually.

Mike: Glad you’re here. I am excited about today’s event that’s for sure. But let me introduce Beth a little bit. Beth has been in commercial real estate since 1990. She’s graduated from the University of Washington with a BA of science in building construction prior to joining StackSource. Beth has also worked for George Soros and Paul Reichman the fund that they had doing acquisitions and asset management. She also worked at AIG global, the real estate investor side and their mortgage finance and asset management division, managing multifamily office and retail properties. Welcome. I’m glad that you’re here. And I’m going to give you an opportunity Beth, to fill in the gaps for people around that. Cause there is a lot there and there’s a lot of history there. George Soros and AIG, and so I’m interested to dig in more than that. But the first thing that I always ask my guests is tell the listeners in one word, what best describes [00:03:00] you and your investment style, your business style.

Beth: That’s a tough one. And thank you, Mike so much for having me on. I appreciate it. And I’ve enjoyed our past conversations. I think that the one word throughout my entire life that has described me in business and personally is “Competitive”.

Mike: It’s interesting. I do these podcasts and I have people in all the time. And that’s one question that I always ask and I have a couple of questions that I like to ask, but that’s one that I always ask and, I don’t know that anybody’s ever said Competitive.

Beth: Really?

Mike: Which is interesting because I’m like that too. I’m competitive, right? I want to get out there and I know before the show, we were having a little bit of conversation about your tennis playing and it sounded like now that you mentioned competitive, it sounds like maybe you might even be a little bit of competitive on the tennis court.

Beth: Oh, yes. On the golf course, on the basketball floor and playing games and getting loans done [00:04:00] faster, better, bigger than everybody else. Yes. That’s sweet.

Mike: I like the point that you said in getting loans done, so that’s going to be good. So listen, why don’t you fill in some of the gaps for us? Tell us your backstory, your history, how you wound up, where you’re at today and what you’re doing today?

Beth: Okay, that’d be great. I grew up in Portland, Oregon. I’m the middle child of three daughters. And my father is a real estate developer and we spent many Sundays driving around, looking at properties. I worked in his office through high school when I wasn’t playing a sports and in the summers. And then I interned at Coldwell banker in their commercial real estate division, try to find deals for the brokers that were in the office to lease out or sell. And then after I graduated from the University of Washington, I stayed in Seattle and I worked for a local developer there, and we were sourcing sites for a small paint company. When I was also doing some bidding for him cause he was a general contractor and estimating which was [00:05:00] exciting. Because bid day, if anyone’s ever been in a contractor’s office during bid day, it’s very fast and exciting.

You got to move all, to get the bids in quickly and then adjust them to win. And after that I decided that now was the time to move to New York. If I was ever going to move to New York. My uncle lived in Syosset, New York, so we’d come out and visit quite frequently and I just love New York. And again, that kind of goes to my competitiveness that I don’t think there are many cities more competitive than New York. Like you gotta get the taxi first. You got to get in the line first. You got to get the tickets first. You got to do everything first and everyone’s wanting to be first in New York. So I said, okay mom and dad, I want to move to New York. And they said you don’t have a job. And it was in the early nineties when commercial real estate was completely done, like dead, people were handing keys back to the banks. The tax laws in the late eighties just killed everything.

So I said, I’m going to still get a job. And this was before cell phones. I think I made three trips and I [00:06:00] packed a huge suitcase, which I would glug around New York. They didn’t really have wheels on suitcases too much then. And go to payphones and hotels that I had stayed in before and call developers and call developers and call developers and knock on their doors and go in. And they were so nice to meet me. And they said, we’re so sorry. There’s just no jobs right now. We would love to hire you, but there are no jobs. A business friend of mine said, listen, the best place right now is KPMG Peat Marwick. So it was my last trip. My dad said, if you don’t get a job this time, we’re not paying you to fly to New York again to look for a job, you’re going to get a job here.

And I went in and interviewed with Peat Marwick and they gave me the job in real estate consulting. And I was there for about two and a half years and it really was a very great experience for me because I was exposed to a ton of different cities, property types, analytics, doing economic impact studies even, and writing that code. It was amazing. So then after that I did go to George Soros and Paul Reichman’s quantum fund. I was in their acquisitions group working till two in the morning, trying to see if they [00:07:00] should buy the million square foot building in Memphis, Tennessee, or not Memphis. I guess it is Memphis, Tennessee.

And then I moved into asset management and had a portfolio of multifamily, office, retail and self storage that I managed for them. And then I went to work for AIG in the mortgage finance group for a few years, and then their asset management group. Then after that I met my husband there, so I left, he stayed and I became an investment sales broker in Manhattan. And talk about competitive woowee. That was crazy. I had a business partner and we were doing crazy big deals, beaten down the doors of all these big developers. We won award for real estate board of New York for the most ingenious deal of the year award. It was a deal I’ve put together.

It was an assemblage and the development. So that was super experience. And then I was consulting for quite a while. And then in senior housing, real estate development with my family. They own and build multi-family and senior housing currently, both my [00:08:00] sisters run my dad’s company and I still collaborate them on a lot of deals and we’re looking for New York sites for them. And then about three years ago, I love tech. I’m very techie above everyone in my family comes to me to set anything up. And I wanted to find something that was a game changer in commercial real estate. So I was looking and looking and there’s an angel investment site that I invest in and I found StackSource and I’ve loved it ever since. And I see myself being here with them a very long time and I’m senior VP of business development, which means not only do I do arrange debt financing or clients, I really promote the company like this, like doing webinars and writing articles and blogs.

Mike: Interesting. That’s a heck of a litany of of experience, right? I’ve been in the real estate space for 30 years. And here’s the thing that you said that really caught my attention was that in the early nineties, it was dead. But early nineties was when I went into real [00:09:00] estate and I went in on the residential side. And I remember the comment. I asked the guy in the office, it was 1991. And I said, Hey, what’s the market like right now? He goes, right now, signs are still vibrating and there’s contracts on houses. And that was the year that I went into business in nine months, I sold 78 houses in 9 months. My first nine months in the business, I didn’t know anybody. And so I know that the commercial markets were dead at that point. And the residential markets were just like flying.

Beth: Yeah.

Mike: It’s interesting the ups and downs, that we see in the business over the years, and then the disparity. Even if you look at the 2008 debacle. And what happened in 2008 and commercial kind of boomed, and then all of a sudden in 2010, tapered out again. So it’s interesting the cycles.

Beth: Yeah. In the nineties you’re right. Like commercial was way different than the residential, in 2008 was the residential. [00:10:00] You know the constant, but in 2000, and then early nineties, it was the commercial that caused almost the collapse because what happened was all these and when I was at Peat Mawrick, KPMG, we would go in and audit insurance companies. And I would sit in front of a loan officer, a lender and say you met this guy $3 million on a piece of property on a land, nothing on it. That was worth about a million and a half, just because we thought he was going to build something. That’s what was happening too, is that they, it was all cronyism to, you go into your bank and you say, alright, I need $10 million for this property, it’s worth it. And then they would do it. And it was really an eye opener to me.

Mike: Yeah it’s interesting, but you’re right. And when you think about 2008, that’s what fueled the problem on the residential side was they were giving you money. I bought thousands of units in between 2006 and 2010, and the banks were throwing money at us at rates that were like crazy. I [00:11:00] was way over leveraged, but anyhow, that’s a story for another podcast. You had said something early on that I wanted to get some I wanted to ask you about, you said that when you first went in the business, you were a real estate not a consultant, but what did you call when you first went to work for?

Beth: That the developer in Seattle?

Mike: Yeah, you were a Consultant?

Beth: No, I worked for him. So I did two things for him really. I was on site selection for a client that we were supposed to find sites to build their paint stores and then lease it to them. So it was like a merchant build. We would own the property, but, they would sign the lease.

And that a lot of people who would build for even like a Starbucks or franchises, find sites for them and then go to that retailer, a Walgreens, Rite Aid and say, okay, I found the site for you. Will you sign a pre-lease? And then they go that’s not their business. So this guy had this business for a paint store.

Mike: Those are triple net deals, right?

Beth: Yeah.

Mike: Okay.

Beth: And then there was [00:12:00] also so estimating. So when there big contracts out, they put it out to bid and contractors bid on jobs. And so on bid day, like maybe I was in charge of plumbing, had to make sure that I calculated all the pipes and made sure I was getting the best price from the subs on for the supplies and materials and labor.

Mike: So tell us about StackSource and what StackSource is and who they are and how they came to be?

Beth: In the world of commercial real estate tech, there’s LoopNet, there’s Crexi, there’s other big sites out there for buying and selling real estate. And then in the residential side, there’s rocket mortgage, you can put in your information, you qualify for a mortgage and you get a mortgage. There’s nothing like that. There was nothing like that for commercial real estate financing. And StackSource is one of the first ones, there have been a few other companies that are trying to do what we’re doing. But it’s complicated because you can’t.

The founders of StackSource both worked at Google and Facebook. They have very strong [00:13:00] tech backgrounds, but they also grew up in real estate families. So they came up with this idea that they were going to develop a platform that houses all the underwriting information. And then they have a lender database that uses a matching algorithm to match to the deals and boom, you get quotes. Or what they realized very quickly is that commercial real estate, you can’t fully automate because it’s too complicated. There’s too many nuances with the borrowers, with the tenant types. You have to really have professionals that understand underwriting and then be able to negotiate with the lenders. There’s personalities involved. It’s not a house, that has a value. And then that’s the loan.

So when I joined, I think there were five capital advisors around the country. And since that time we’ve grown to 17 and we have a head of capital markets. We have hired three more developers, tech developers, and also another head of capital advisors, which looks at the mortgage progress.[00:14:00] So we have done, I think 200 deals. We’ve arranged 200 financings, which is really great in basically three years. And our biggest deal to date I think is 40 million. And I’m supposed to have a closing in two weeks that is 70 million. So we’re definitely moving into the larger realm. My pipeline, I would say average is around the 20 to $50 million range.

I have a few hundreds, but not a lot. And so StackSource has been very committed to improving the platform and the tech constantly. Hiring good people, being very transparent. What I love about StacksSource is that I see any deal that comes in through our platform, no matter what capital advisor, and if I know a lender that may be good, even though they’re in our database, but I know maybe them personally, I reach out to them. It’s very collaborative. It’s very different then say, when I was at Grubb and Ellis as an investment sales [00:15:00] broker. If you saw an address lying around and it was yours, you had to snap that page up and hope no one else saw it. But that’s not the way StackSource works. We’re very collaborative and I partner with a capital advisor on most deals just because I want to service my clients better and keep bringing in the deals.

Mike: Yeah. So here’s thing that got me. When you and I originally talked, going back a couple of months ago, we met on LinkedIn and where I typically meet everybody today. Or then because of the pandemic, but it’s nice now that the world’s opening up again and there’s live networking events. But you and I met at LinkedIn. And here’s the thing that got me that you said we have a platform that gives you access to 1200 different lenders. And that’s the comment that I went, wow. There’s a huge opportunity there for somebody who’s buying multi-family deals or any type of commercial deals today. But Insider Secrets, we focus mostly on [00:16:00] the multifamily sector. So how does that work?

Beth: Good question. So it is unique, so I don’t know. But I’ll describe how a traditional mortgage broker would work. They would talk to the client and they would get all the underwriting information and then they’d put together a PowerPoint probably, and then convert it to a PDF and all the information in there and then email it to their lenders, in their database. Like everyone has a lender database but they would sort it and pick out and then individually email. StackSource works differently. My clients will either email me the underwriting information or they put it in themselves and they note that they’re working with me somewhere in the platform. And there’s about 13 very short, very easy to fill out screens that you fill out. First is the address, then the next screen asks property type. The next screen asks size. Then loan to value and then some other information. And then we ask for some photos and attachments and boom. Your loan request is submitted.

And then what happens is a capital advisor will go in and review it and make sure it reads well [00:17:00] and make sure all the attachments are their rent rolls, performance, financials on the sponsor and on the property. And then on the lender tab, which I can see, and also the client can see the type of lender. It uses a matching algorithm. And actually now we’re at 1500 unique lending programs from before we’re adding them all the time. And it takes 90, it matches from 90 lending data points of criteria so that our database is huge. And each lender has 90 columns that we know if they’re lending in multi-family, self storage, industrial, office, retail. What part of the country? What’s their minimum loan size? What’s their maximum loan size? What’s their LTV? What’s their LTC? What are their interest rates? What are their loan terms? Will they do 1, 2, 3, 4, 5 ten-year terms? And then we also note if there are private firm, debt fund in life insurance company, bank, credit union, there are a lot of different types of lenders and we’re really trying to distill all the [00:18:00] information from them and they match to the loan request. So I’m not going to my database and being like, okay, who’s lending on hotels in Texas, which I do a lot of. And they’re just matched right for me. And I send them an invitation to the deal and they can review it.

Mike: Interesting. So are all of your lender sources are you doing agency debt or is it traditional funding?

Beth: We do both. We do bridge to agency, straight agency or banks and credit unions and life insurance company.

Mike: Okay. So you do cover the gamut you’re across the board. Okay, good.

Beth: We can do HUD, Fannie, Freddie. All of that. I’m quoting currently a guy who wants to buy a 200 unit in Texas and he wants a bridge to agency. We have three that’ll do the bridge loan very close to the agency rates. So it could be a three and a half percent bridge loan. And then it goes to agency when it stabilized after the value add period.

Mike: So let’s talk about that because a lot of my listeners are [00:19:00] newer, right? So they might not understand the term bridge to agency. And so why would somebody want to do a bridge to agency? And what does that really mean in the lending world for an investor?

Beth: Bridge to agencies lend on in places. So if you’re buying a property that you want to renovate and increase the revenue and get stabilized maybe the current owner hasn’t been maintaining the property well enough. And you think you can value it’s called value add. So it may take you a couple of years to be able to vacate those units that you want to renovate. Increase the rents, get a new tenants, maybe do some capital improvements to the overall property in the common areas. And then when you’re stabilized, you can put on an agency loan at the highest loan amount then that you’ve created value. So you can get a bridge for that very similar loan amount.

A lot of bridge lenders will lend you 80% of your purchase price, then they’ll also fund a [00:20:00] hundred percent of your cap ex meaning your capital improvement costs. And they usually a two year term with a one-year extension option. And then what they say is, and most of my bridge lenders will then be the conduit for agency anyway. So you don’t have to go find another lender, which is really nice for fees. And then they roll you right into an agency loan.

Mike: That’s interesting. I liked what you said about the bridge lenders will do a hundred percent of the cap backs. And how does that work? Will they hold like the money in escrow and you draw against it as repairs get done, and then you submit waivers?

Beth: Yeah. It’s not really an escrow cause they’ll just fund from their debt fund account. Yeah, because a lot of the bridge to agency are debt funds too. So they would just fund from their account, but yes it’s a draw schedule.

Mike: So typical bridge loan today, how long can you keep that in place?

Beth: I have one client who is buying a $2.2 million property. And then the CapEx is a million eight, a lot of lenders, don’t like such a [00:21:00] high percentage of CapEx to purchase price. And the other thing with that is that a lot of the bridge to agency lenders want a $5 million minimum. To answer your question, she wants a three plus one. And I’m finding most are saying two plus one. And she’s very conservative. She wants enough time to obviously renovate the whole property. It’s complicated vacating certain elderly tenants and repositioning the whole property.

So it’s a little bit complicated, but she could do it in two and one. But that’s really you should look at any property you’re looking to buy. Can I renovate this in two years possible one year extension and then put agency. If it’s a really long-term renovation play say four to five years, and then you’re really increasing value. It’s probably not a bridge to agency deal. It’s probably a local bank. I have to say that banks and credit unions have been beating agency for few in rates. Because coming out of COVID, credit unions had so much money. And [00:22:00] so did banks that was just sitting there and they’re like we have to lend this out. So I’ve had numerous little multi-family deals. And especially in the Northwest where a bank came in and they were like, 2.95%, I was like, that’s almost free money.

Mike: It’s interesting what you said that banks and credit unions are beating agents. It almost seems like it used to be easier to get agency debt than it is today. It seems like there’s more hoops you have to jump through today to get agency debt. And I think there’s an old fallacy out there. You and I have been around a while, right? A minute, anyhow.

Beth: Yeah.

Mike: I think there’s that old fallacy out there that agency’s easier to get. I don’t think that’s necessarily so true today.

Beth: Yeah. I have to say, so it was during the last year and a half, agency’s been a little bit more difficult because they’ve also been requiring almost in some cases, a year interest reserve. So that’s tough for a lot of borrowers that you have to escrow a whole year. Then they [00:23:00] reduced it to six months, and now they’re releasing them. They just started releasing them two weeks ago and they’re starting to open up a little more. So I do feel that in the next six months or so, agency lending is going to be a little freer. But everyone learned their lessons from crises before and lenders aren’t so apt to just lend out money without a lot of due diligence and underwriting. I’ve had $3 million triple net lease furniture store in upstate New York and the amount of paperwork that I had to have my clients submit was insane for this furniture store. And it’s triple net lease and its lease for another 10 years.

Mike: Yeah. It’s what would one more signed document really accomplish?

Beth: On the K1s, like these people in a lot of real estate. So they have 50K ones and they wanted them all. I don’t know who’s reviewing them, but they wanted them.

Mike: Hey, I’m going to ask a question that you may say, Hey, [00:24:00] let’s not go down that road and that’s okay if you do, but what do you have opinion or perspective or do StackSource have an opinion or perspective about the agencies being owned by the federal government today versus it used to be, they used to be privately owned. And now there’s this big debate going on about, is it right, is it wrong? Should we not? How do we handle it? Any opinions?

Beth: We haven’t talked about it a whole lot within the company, although, there’s been a lot of postings on our slack channel about it and slack discussions. When it’s a private enterprise, it’s obviously more nimble. And I think better debt But at the end of the day, it’s a government agency. And I feel that the rates are still going to be lower and there aren’t going to be, I know this is probably wrong to say, but so much shenanigans, maybe or cronyism, but it has slowed it down. I have to say, Mike, you know how it used to be a little more of an option. [00:25:00] Now, I don’t even know how these HUD lenders do it. I get HUD quotes all the time and I’m like, my gosh, that’s great. It’s 2.875% it’s construction loan to perm. And it’s amazing debt, but it’s gonna take a year to get.

Mike: So sub three on a perm loan, or is that on a construction?

Beth: Both. It’s the same rate. If you can wait for HUD, it is the way to go. But you have to also hold the property for almost the life of the loan, because you have prepayment penalties and defeasance that you’ll have to pay.

Mike: So let’s talk through that for a minute. If I was going to go do a hundred unit apartment deal today and it was going to cost me $15 million, rough numbers. How long is it going to take me to get a HUD deal done?

Beth: For construction to perm? Oh, just to buy it?

Mike: Permanent loan.

Beth: Just a permanent loan. Six to seven months.

Mike: Wow.

Beth: Yeah.

Mike: And interest rates could change by the time you get that loan approved.

Beth: A lot could change by the time you get that loan.

Mike: We could [00:26:00] be in a cold war again.

Beth: Oh my gosh. Yeah. And so I always bring it up to my clients and they’re like no. And the other thing is for construction, you have to pay prevailing wages. So I have a lot of clients who are contractors too. And they’re like, eh, no, I’m not paying prevailing wages. I’m paying my guys what I usually pay him. And how do you can’t do that? You have to see construction cost go up.

Mike: Yeah, interesting.

Beth: It could go high loan to cost. They’ll go 80, sometimes 85.

Mike: So if I go get a traditional bank loan or a agency debt, can I go back and apply for a HUD loan and then go through that process to get that lower interest rate?

Beth: You can, but agencies also often have prepayment penalties. And with a bank, some will have prepayment penalties, some won’t and then you’re paying double fees and HUD loans are a little bit expensive in terms of underwriting our closing costs and financing costs. Because they charge you a lot of review fees [00:27:00] and the attorney’s fees. But at the end of the day, it’s the best. It’s a great option because it’s such cheap debt. But it’s a little bit brain damaged. And it’s more expensive. So you probably wouldn’t want to, unless you got a bridge, you can do bridge to HUD. There are lenders that do that as well. So we have a couple lenders. Yes. And one actually is in New York near me. I’ve met him for coffee. He has his group, we’ll do bridge to the HUD.

Mike: So a bridge to Hud though, if your bridge that is probably going to be six or 7% less?

Beth: His bridge guys do it in the 3s.

Mike: Really?

Beth: Yeah.

Mike: Wow. So if you got a bridge deal for 3% and then put perm on it for sub three, that makes your cash on cash look a lot better on your return.

Beth: And your internal rate of returns is way up on leverage.

Mike: We may have to talk about a couple of things offline here. So let me ask you this. What about institutional financing? Do you guys get involved in that at all with any insurance companies or funds? [00:28:00]

Beth: Oh yeah, we have a lot of insurance companies we work with. And my Alma mater, AIG the head of real estate, he’s still there from when I was there. And he looks at a lot of my deals. We have nationwide, we have farmers, and then we also have, so a lot of insurance companies won’t do direct. I financed a private school, triple net lease private school in Bellevue Washington a couple of years ago. And it was with an insurance company based out of Seattle, but I couldn’t go direct to them. They use people called correspondence because they don’t have loan officers really themselves. And a company like Walker Dunlop, in north bags and Simpson and they’re correspondents. So they’re the ones that I ended up working with. And they’re like brokers, but they’re not because they’re really beholden to the insurance company to be their underwriter.

Mike: It’s interesting. Boy, there’s a lot of moving parts today isn’t there?. So tell me this, Beth how do you make high stakes decisions in the craziness of everything that goes on in a real estate transaction, especially when you’ve got a [00:29:00] seller wanting to close, a buyer wanting to close, brokers, everybody trying to come together at one point, how do you mitigate that in your own mind?

Beth: Yeah. So when it gets closer to closing, sometimes people go all nuts. And I usually really try to play the play cater because it just happened in March to me. My client, this guy, this chief underwriter, it was a bleep, and I can’t deal with them anymore. And then I would call the chief underwriter for the bank and I was like, I know you need this stuff for your file, but it’s getting a little out of control. Are there any things we can wave for this client? Because the K ones of his kid’s tax returns don’t really impact this deal. And I was able to keep everyone moving in the same direction and get it closed. There have been some instances like that where I’ve had to kind of placate everyone. Then there, I have a deal that the big deal I’m supposed to be closing as a private placement. 

And they’re selling the bonds now. It was priced a couple of weeks ago and the [00:30:00] bank was moving so slowly that I had to get everyone on the phone and just be like, guys why can’t we get this deal done faster? You know what’s the deal here, what’s taking so long? And often it’s just bringing it to attention. My job as a broker is to make sure everyone’s doing what they’re supposed to be doing. And the flow of information needs to keep happening. If I don’t hear from somebody, a bank or a client for a day or so, I gotta check-in. I gotta call him, gotta figure out what’s going on because they may think that someone else is doing what they’re supposed to be doing and they’re not. So that’s really a lot of it. And sometimes when I get quite a few quotes and client’s making a big decision about who to go with. 

And I have to say this lender is known for closing. We’ve closed with them and they have a really good closing process. The rates are a little higher. Maybe their fees are a little higher, but I really think you’ll be happy with them in the end. Or if they’re just focused on pricing, I can say these guys are the cheapest, but I have to warn you that we may get down to the end and they [00:31:00] may not close and they may pull it for whatever reason. I always have to be very upfront because I’ve had deals canceled. And I did warn the client. They’re still mad, but they made that decision to go with them. So in high stakes you just have to lay it all out there and make the best decision and try to make it happen.

Mike: Yeah. It can often be confusing and decisive at times. Technology wise, what are your favorite technology systems today?

Beth: Well of course our platform, it’s amazing. I love it. And we use slack all the time, so we’re 17 of us around the country. So we’re virtual or remote, and I was slacking 20 times already this morning with my colleague in Denver and with my other colleague in California. My other one in Arizona, we’re talking all the time. So I feel very connected that way. 

And then the other system that we use, which is really cool is something called Pipe Drive. It literally takes [00:32:00] everything we have and organizes it into one platform where I can see my whole pipeline. I can see what stage everything is in. My contacts are in there. My emails are in there. It’s great. And then I can click on anyone else’s too. This goes to back to StackSource’s transparency. I can go into pipe drive and see anyone’s pipeline, anyone’s in the entire company. There’s no hiding anything, which is great because then they can help. I can help them.

Mike: Makes it easier to operate or function in today’s world because there’s so much noise and so many things that can grab our attention and confuse us. I’m in the coaching business and I work with people all the time and they’re like, they have this shiny object syndrome. I think you’ve really got to focus in on things. So this show is Insider Secrets. And if you were consulting a new investor today, or somebody coming in, looking for money, funding, what advice would you be giving them today?

Beth: A New investor, I would say, don’t go to the internet to find your first deal. [00:33:00] Get in the car, drive around, figure out what property you like, property type and and locations, and then find a property that you probably would want to buy and then find the owner and ask him if he’d sell it. And do that until you find a deal that seller’s willing to sell. And then seek very good advice of the price and tour it, make sure that inside and out that you’re not going to buy and it’s going to crumble. Really do your due diligence and don’t move too quickly just because you’re excited that you’re going to buy your first deal. Make sure it’s the right one.

Mike: Yeah, good advice. Very good advice. Any pitfalls you see out there today that people should watch for?

Beth: Different product types have different pitfalls. Obviously, I mentioned hospitality which has had a really rough year and a half. You never know what’s coming down the pipe, so always have a contingency plan. And the darlings of the industry right now really are industrial, and self storage, those property types you can finance all day long. And they’re really solid [00:34:00] performers. And multifamily. I got family too.

Mike: I was going to say that’s gotta be the big one, is family right now. But you have self storage and industrial though, that’s interesting. Hey, and this is just a crazy question, there’s a lot of office vacancy right now.

Beth: Yeah.

Mike: Retail right? You see anybody doing any special retrofits for any thing coming up?

Beth: Not yet. The office retrofit business hasn’t really exploded like we all thought it was. I think that it’s coming, especially the suburban office buildings. I think they’re naturally fitted for conversion because..

Mike: For what?

Beth: There’s three to four to conversion, to multi-family.

Mike: Or to multifamily conversions?

Beth: Yeah, because they’re three to four story, lots of the suburban, they have tons of parking. They’re in New York markets, they’re very near livable areas in neighborhoods. And they usually have good boats.

Mike: So here, so when you say multifamily, A [00:35:00] class B class or senior housing type stuff?

Beth: Yeah, that’s funny because my family and I we’ve looked at borrowing office buildings to convert to senior housing especially ones with big atriums and nice. And that would be A class, but Midsize smaller, older office buildings could be B class apartments E definitely. I wouldn’t call it really workforce housing, but certainly you can retrofit it enough. The hallways are usually big, you can really just cut out the office space and add. There’s usually some plumbing in there and you put your bathrooms and kitchens, your HVAC units, systems, you just retrofit the whole thing. But as lot of the multi-family projects now have the Vtech, in the corners, it’s so easy to stick your HVAC units in the corner of a room now. You don’t need the big window units or having it central.

Mike: Yeah. Interesting. I’ve wondered, as soon as multifamily cools off and everybody realizes, oh, there’s this opportunity over here in office. And now, [00:36:00] cause I think that there’s going to be a shift here somewhere, sometime. I’ve wondered where that stuff’s going to go and if there’s opportunity to be looking for today.

Beth: Yeah. Oh, I see what you’re saying that there’s going to be better deals maybe multifamily, because people are going to go start buying office. Cause it’s so undervalued.

Mike: Yeah.

Beth: Yeah. It’s a real crapshoot of where office is going to go. And we’ve had a lot of discussions about this. Whether it’s coming back because people are going to go back in the office or if it’s going to have to scale down because people aren’t really getting to go in the office. So I have a lot of friends who are going back into Manhattan a lot now, but they only two to three days a week. And the office space, I know office leasing brokers are struggling a bit.

Mike: Yeah, no, they are. So that’s interesting. All right let’s lighten it up a little bit. I always like to ask those bonus round questions.

First question is your favorite tourist attraction?

Beth: My favorite tourist attraction, [00:37:00] that’s a good one. I’ve always loved. I really liked the Memorial downtown for 9/11 Memorial. It is meaningful. It’s beautiful. And it really makes you think. And I was in Manhattan during 9/11. So maybe that’s it makes me feel more, but and the Oculus that they did is really cool. Very cool.

Mike: I haven’t been there since it’s been completed and I really should go. I was there after 9/11, the big hole in the ground.

Beth: The big hole in the ground now is a huge like waterfall. And you’re like, oh my gosh, that’s where the tower stood. It’s they did a good job.

Mike: Yeah. Interesting. How about restaurant?

Beth: There’s so many good ones in Manhattan, Logrunwe is a really good one that has meaning to me because my husband and I used to go there all the time when he was courting me. But around my neighborhood now.

Mike: He should still be courting you.

Beth: Oh yeah, he’s here. We’ve been married a very long time. But we still like to [00:38:00] play tennis and golf together, so that’s good.

Mike: Yeah.

Beth: I like usually off the wall places that have a very culinary experience. There’s this place in my town that you can barely get into, it’s open and the chefs cooking right there and it’s all small plates and every bite is just mhmmm.

Mike: Yeah. Nice. Sounds great.

Beth: Yeah, it’s really good.

Mike: Considering it’s lunchtime too. And then best book you’ve ever read?

Beth: Best book, because I’m in real estate and it had a lot of different elements to it. I really liked “White City” about the world’s fair, how they built it in Chicago. And there was an element of how they erected these buildings so quickly and got ready, but there was a murderer in minutes. And I think it’s true story. But that was one of my favorite books. I could say Ann Rand and go onto the classics, but that book really stood out to me. And my daughter is studying architecture and in school and I went to go find the book and I couldn’t find it. So I’m going [00:39:00] to have to download it on her Kindle.

Mike: Interesting. That’s cool. So there was a murder that went on. You said?

Beth: Yeah. So there was a serial murderer during the world’s fair and these young women were disappearing. And back then, forensics wasn’t obviously what it is now. So it was really interesting how you would just grab people and it would be described in these beautiful white halls that they erected just for the world’s fair. And they put it up, put them up in a very short amount of time. And I always thought that they probably gonna fall down on people because they made it so quickly, but it didn’t.

Mike: Okay Beth. Listen, it’s been great. I appreciate all your knowledge and my head is spinning from today’s episode. I’m sure some of my listeners is as well.

Beth: I am Sorry.

Mike: No, that’s good though. It’s good. It’s made me think about a lot of different things and how we maybe should look at things a little bit differently today. And I think you’ve given some options and some other opportunities that might be out there. So if somebody comes to [00:40:00] StackSource, can they deal directly with you or do they get a loan officer or somebody else, or how does that process?

Beth: There are a couple of different ways. If they have a deal that they need financing for, they can just go to our platform, stacksource.com and enter it. To work with me in one of the areas where you can write some type something. I think one of the last screens is, here is an area where you can really describe the project. They can put in or they can just email me directly and we can work together to get in the platform. And then I add them as the sponsor, which is sponsored by. When I first went to StackSource, I was used to call people borrowers, but now they call them sponsors. And then, so what happens as a sponsor borrower, you actually see everything about your property on our platform real time. Lenders, if they viewed it, you see when they quote it and you get notifications of the quotes.

Mike: Okay. Interesting. All right, good. And if people do want to contact you directly, how do they get ahold of you?

Beth: My email is b.mercante@stacksource.com [00:41:00] which is spelled mercante@stacksource.com. Or you can give me a call at (646) 341-2030.

Mike: Great. And we’ll have all that in the show notes too.

Beth: Great.

Mike: And if you’re like me, you can find Beth on LinkedIn.

Beth: Yes, please. Connect with me there.

Mike: Use LinkedIn. I think it’s one of the best tools out there today. Beth, thanks for being here. We’ll be in touch and I appreciate all the information that you brought today. So thank you.

And everybody, all the listeners, thanks for being here this afternoon. Hope that today brought you some value and some things you can really think about. Always remember that you can go and say Alexa play the most recent episode of Insider Secrets and we’ll come right up. So I look forward to talking to you. If you need me, you can find me on social media, go like us, love us and follow us. And I will look forward to talking to you soon. Thanks.

Kristen: Thank you, Mike, and thank you for joining us for [00:42:00] another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing in property management. We’re looking forward to having you back again next week for more Insider Secrets.