Adam Sharif 0:00
We’ve identified what we call an early warning signal. That simply means that when the lender receives a request for loan payoff from the borrower, and most loan docs will require that that notice gets to the lender 30 to 45 days in advance of the actual payoff date. That’s an early warning signal. So when a lender receives that signal, if they’re partnering with us automatically from our platform, an email with a link to a questionnaire goes out to that borrower trying to figure out what that ball was going to do next, the email that goes to the borrower is branded with the lenders logo, and the message is from the lender. So as a borrower who’s now had a relationship with this lender for, you know, 710 years it’s, it’s a welcoming email, because here’s the lender who they’ve been paying mortgage payments and so in sending rent rolls and all sorts of financial information for lender for the past 10 years is now saying, hey, look, we want to help you find your next opportunity, assuming that’s what you want to do.
Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.
J Darrin Gross 1:26
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
Today’s interview is sponsored by Building Insurance and Risk. When you invest in real estate it pays to work with a real estate investor protection specialist to protect yourself and your investment from catastrophic loss. The experts at building insurance and risk focus on real estate investor protection. They provide you with multiple insurance coverage offers and a side by side coverage comparison. To learn more, go to Building Insurance Risk.com.
Today my guest is Adam Sharif. Adam is the founder at nxt CRE an open bank FinTech supporting the CRE market. nxt CRE partners with lenders to enable them to keep a line of sight on their borrowers activities, who are paying off a loan and seeking to enter a 1031 exchange. And in just a minute, we’re going to speak with Adam about how FinTech can help you find 1031 buyers for your property.
But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, please subscribe. With that I want to welcome my guest Adam Sharif, welcome to CRE PN Radio.
Adam Sharif 3:17
Thank you so much, Darrin, I appreciate you having me on.
J Darrin Gross 3:21
I’m looking forward to our conversation. Before we get started, if you could take just a minute and share with the listeners a little bit about your background.
Adam Sharif 3:31
Yes, my background is in commercial real estate finance as one that was transaction proof with Jimmy see commercial mortgage. Remember the company’s senior management team. And but before that a lot, I don’t consider it my background before that I was at an investment sales broker went on to become a developer develop the three different states Illinois, Florida and Texas. Most of our developments were in Florida. The first acquisition of Florida was a George Soros REIT that contained the 517 unit waterfront property Miami Beach, we all did very well on that develop 1000 unit townhouse developments in Palm Beach Gardens that sort of stuff. So that’s that’s the background that that has allowed me to launch next era experience came from each one of those steps is really was it was instrumental in everything we’ve done it as far as next year is concerned.
J Darrin Gross 4:38
Got it. So let’s talk about next care and did a little bit of preparation for this interview. But how would you describe what next care is for the listeners?
Adam Sharif 4:54
I think you did a great job and you’re entered option we buy commercial estate lenders line of sight into the on borrowers we invest in reinvestment and debt funding needs, their equity reinvestment needs. The biggest problem lenders have, aside from of course, economy, that’s our biggest problem lenders have, as far as operating their business is replenishing loans that are paid off every year 20% of all loans are paid off every year. But only 25% of those 20% are refinanced and lenders do a real good job of identifying those folks that are going to refinance and, and getting them to refinance with them. What lenders do not have is a digital line of sight to those who are paying off the loan by selling the property not refinancing. And when that happens, lender no longer has a digital line of sight as to what that borrower will do. Once they’ve they’ve sold their property once they have. And if they were interested in reinvesting the proceeds to buy another property, it starts all over again, seems like the process starts at that point again. And but we don’t see that when we see it as a circular you know, who is a seller today, it will be a buyer tomorrow, that sort of stuff. So our goal was to identify them when they were transitioning from one to another. And when I was a GMAC, one of the things we discovered that although 75% of loans were being paid off, by due to a sale, two thirds of those borrowers were reinvesting the cash to buy another property. And that was, that’s a very powerful data point. Because these, these represent billions of dollars of equity investments, they represent 70,000 transactions a year. And these people invest 400, they acquire $400 billion of property. So it’s a giant market. And in and unfortunately, even since the tax law was enacted back in 1920s, everyone’s been trying to figure out how to identify these, these borrowers who will, in turn become buyers after they paid off the loan. And, and it’s been very challenging to do so they are normally just a blip on the radar for a very short period of time. And then they disappear. You don’t know when they’re going to be coming on board, when they’re going to be coming on that radar and when they’re going to be leaving that radar, but it’s very quick to identify them, as we have, we knew we had a partner with lenders, commercial real estate lenders.
J Darrin Gross 7:33
On it, so I’m curious, just in the identification process, is it from the the lender perspective, that’s that’s where you start then as you partner with the lenders and look at their portfolio to determine kind of what what the where they are in the the loan repayment schedule, or what’s kind of
Adam Sharif 7:53
No, it’s actually a lot simpler than in that we’ve identified what we call an early warning signal. That simply means that when the lender receives a request for loan payoff from the borrower, and most loan docs will require that that notice gets to the lender 30 to 45 days in advance of the actual payoff date. That’s an early warning signal. So when the lender receives that signal, if they’re partnering with us, automatically from our platform, an email with a link to a questionnaire goes out to that ball, we’re trying to figure out what that ball was going to do next, the email that goes to the borrower is branded with a lenders logo, and the message is from the lender. So as a borrower who’s now had a relationship with this lender for, you know, 7 10 years. It’s, it’s a welcoming email, because here’s the lender who they have been paying mortgage payments and sent in sending rent rolls and all sorts of financial information to the lender for the past 10 years is now saying, hey, look, we want to help you find your next opportunity, assuming that’s what you want to do. And and once the borrower receives that email, it opens the link and completes a questionnaire which basically asks for a question that is what do you want to buy? Where do you want to buy your price range and amount of equity you have, and when the when the borrower response and submits that information, it gets on our platform and the lender gets a dashboard where they can see that same information. We’re not a listing sites that you don’t go on outside finding this a must buy investors or list of properties for sale. But if you’re a property seller, wanting to get access to a must buy investor or 1031 Exchange buy if you will, all you have to do is upload your property information and very much like a dating site you will be matched with multiple must buy investors that are interested in your type of property at your location and your price range. Now the most by investors information is anonymous though anything property seller will see is a number of days from the selection deadline and amount of equity they have to invest to make sure that those two things are in line. If a property if a must buy invest only has 10 days or less to select their replacement property, chances are, they don’t have enough time to look at your deal. On the other hand, if you find a good match with a must buy investor that has a 4560 75 days selection deadline, well, now you’ve got plenty of time to not only submit your deal to them, have them review it, do the early due diligence, issue a letter of intent, sign a contract before the actual cut up before the selection deadline, which is really the goal. Because you don’t want to just identify what you want to buy, you also have to you also want to control what what you want to buy. Because if you don’t control it, and then circumstances change, and that field is no longer available for variety reasons, you’ve just blown through your 1031 exchange. So it’s critical to not only identify what you want to buy, but also to control it.
J Darrin Gross 11:01
So the listing that so so the the the questionnaire, the email goes out as a questionnaire, the bank, borrower, the property owner of fills that out, the responses go back, then did I understand are they then provided an access to the platform or is that the bank then introduces them to the farmer, how’s that?
Adam Sharif 11:25
Well, they don’t have to do anything, once they once they have completed the questionnaire, they are on our platform, and they have their own dashboard. And you know, you have to register and all that sort of stuff. So anytime they want to go see the activity on the dashboard, they can just do that by just logging in. So they don’t have to go to our platform or anything. As soon as it’s submitted. As soon as they complete the questionnaire, boom, they’re buying profile is on our path of like a dating site. You know, when you fill out your profile, I don’t know how familiar you are with the dating sites. But I’ve done a lot of research, and like a dating site, soon as you give your your acquisition is, so as you fill out the questionnaire, that’s your profile on our on our site, but again, it’s it’s, you’re anonymous, nobody gets to see you. But if there are properties that match your needs, those will be matched with you and you’ll be sent notice saying, hey, you’ve got you’ve got a match, you got five matches, you got all that sort of stuff going on your dashboard and check them out and see which one you want which ones you don’t want which ones you want to respond to which ones you don’t want to respond to.
J Darrin Gross 12:34
Got it so that the listing or the profile will automatically show them properties that qualify per their answers on the questionnaire. Curious, does? Does it work in reverse as well? Is there a chance that their property would be listed on there? Or how is it just a we’re not
Adam Sharif 12:55
we’re not a listing site, okay, but if you but if you are a property seller and you want access, must by investor, which every property seller wants, they’re probably maybe not universally, but generally speaking, that’s who you want, as your buyer, they’ve got cash in hand, they’ve got a very short time. So you know, you’re not gonna get strung out. And they use their investing capital that otherwise have cashed. Otherwise, we’ll go to taxing authorities. So deliverability of a property is much more important to them than making the deal of a century. So if your property solid, that’s where you want to sell it, right, you want to sell to someone that’s as motivated as you and buying it. And these people have a big they ever big farm if they don’t complete a tender in exchange. In a state like California, for instance, if you own the property for 10 years, chances are 50% of the cash you’re getting from the sale will go to the state and federal taxing authorities unless you take that 10 million invested in a new property. And that’s a big incentive for people to do that. Again, two thirds of all people who pay off their loans due to a sale will be reinvesting their cash to buy another property pension funds will not because they don’t pay taxes, but that’s not an issue but but most everyone else will will attempt to reinvest
J Darrin Gross 14:16
the proceeds. Got it? So, what how is the next cre been received with lenders and in do you work with brokers at all? Or is it strictly just the the lenders that you that you
Adam Sharif 14:33
work with? Our primary customer is our commercial estate lenders where there are partners and they’re also the source of our of our product, right? Without them we don’t have access to the product which is which is providing access to most by investors for property sellers and those seeking equity. So those are our customers are broken. We just yesterday was announced. We’ve learned I should take That CCI M has accepted us into their I think it’s called Advantage Program members Advantage program which allows us in actually it, what it does is it basically, we are now next area now are now promoted by CCI M as a preferred sort of vendor. And that’s a big deal for us. Here we got some 30,000 members throughout the nation. And these are highly skilled commercial estate brokers, most of them 99%, probably. And they’re considered just a little higher level in terms of professionals. And then most other commercial estate investment brokers, we’re excited about that we a partnership with other listing sites that have over 100,000 properties on their site, using an API, all those properties are now uploaded onto our platform. Again, we’re not listing sites, you don’t go there find listings, but those properties get uploaded on our platform, and they get matched with most by investors. And when that happens, our system notifies the broker say hey, you’ve got to match get on next year EEG get on your on your dashboard and see all the spy investors that you’ve been matched with.
J Darrin Gross 16:19
No, I love the mass buyer, the mast cell, those are the people you want to do business with, they’re not going to waste any time they’ve got to make a deal. That makes a lot of sense. Has there been any reluctance from from you know, the users or to do it? Or were there any questions or, or, you know, hurdles you had to work through from your initial launch?
Adam Sharif 16:43
Well, the biggest challenge, of course, was getting lenders to become partners. This no one’s ever done anything like this before. So when you’re, if you’re going to be the first one, or if we are the first one we contact in fact, this was this really did happen. We reached out to a lender and they said, Okay, this makes great sense. I’m making I have an opportunity to originate direct acquisition loans, which is very attractive to me and my borrower I have and then there’s revenue sharing, if the transaction closes on your platform to sell you’re going to put money in my pocket. So you putting money in my pocket and you’re lowering my borrowers borrowing costs, this almost sounds too good to be true. And so I’m going to hold off on on make doing anything because I don’t have the time to figure out what part of it isn’t true. You know, just I don’t want to have to spend a lot of time figuring out the negative if you want right because so go get another lender sign up another lender then come back to me okay, that’s we got a lot of that. If it wasn’t for guys like Ken Greg’s who was was been my partner from the longest, I should say, we probably may not be might not have signed any lenders. But now we’ve got partnerships with lenders across the nation from from kind of, from, from LA to Miami, New York, Chicago, Detroit, Texas, all and a few other places in between. So that in our most recent lender partners lumen, which is an aurochs company, or access $85 billion in assets under management, and lumen has $50 billion in loans with 7000 borrowers. So that’s a big gap for us and we’re going to use that to leverage we’re going to leverage that to get other lenders to sign with us as well. So yeah, getting lenders to trust what we were saying and trust that we won’t do anything that would put them in jeopardy was probably the biggest hurdle but for each lender we signed makes the next one a little easier because they can go back and say look, you know, if aluminum was an optics company of the day, they went through all their due diligence and everything else and and they’re comfortable with this and they signed your agreement and then let me take let me take a closer look at it and that’s really what’s going on.
J Darrin Gross 19:08
Yeah, no, I can imagine the getting the first one’s probably the most difficult. So how long has next year you’ve been in business?
Adam Sharif 19:18
Well, next year he is next year is only been around since end of 2021. But we started this using another name for the company that we that everyone told us they hated but almost three years ago so it took about three years to get us to where we are today.
J Darrin Gross 19:40
Alright, and to date. I guess I’m trying to think a numbers how you got multiple lenders across the the states. Can you give any kind of an idea of the number of transactions that have occurred based on your your your portfolio being Part of that or?
Adam Sharif 20:01
That’s a great question, we didn’t really start using our platform, I was, we didn’t start getting our lenders to use our platform till this year, we want to make sure we had a critical mass, we want to make sure we had access to properties, signing partnerships with all these other listing sites and all that. So it took a long time. And of course, we wanted to make sure we had sufficient MBAs on our platform. And that’s why we needed lenders. So we didn’t start doing it until this year. And I can tell you right now, this is a great story. On February 10, lumen producer sent the link to one of the borrowers. Same thing, the borrower completed questionnaire, it’s really simple take you 20 seconds to do so. And within 24 hours, that same ball was was matched with multiple opportunities and, and ultimately made offers on two of those properties. And what what and of course, lumen producer already gave him several quotes on the deals he’s looking at. So he knows exactly what its financing is gonna look like. That’s an actual, that’s an actual story that’s going on right now, the deal hasn’t closed yet, but we expected expected to close shortly. And what would make that such an inquiry, what makes that story so important is that that same borrower, if they had not received the link to the questionnaire would not know of next year, he would not have been matched with those properties on our platform, and would have been forced to go on various different sites and try to find properties on their own. And it’s a very time consuming process, I can tell you that it doesn’t work very well. Some of those listings are data, some of them are dead, in terms of, you know, property had already been sold, and that sort of stuff. But brokers keep those listings on the on sites to use as, as a load to get bought buyers and for another property they may have. So So these almost by investors would have wasted a lot of time. The other thing that’s really important for, for luminess, there are several commercial sales brokerage firms out there that also have a mortgage origination. And well, if you buy a property from them, if you make an offer on one of their properties, one of the things they were going to ask you to do is to use them to originate a new loan, that loan producer would have never known about what properties were going to be acquired by the borrower, and may not have had even an opportunity to provide the the loan quote for the new acquisition. So So now, with next era, the through the competitive threat to loom and from a broker who also has a lending platform, it goes away, because now they’re they’re way before they’re in the process way before he broke it can get in to sell them on, hey, you know, you’re buying this property from us. We’re the listing broker, but we also know it very well. And you think we think you should hire us as, as your mortgage banker as well, some, some lenders, and I’ve been hearing more and more about this, which blows my mind, actually, some of these brokerage firms will say you cannot buy my listing unless you use me as your loan originator. And that’s not me making it up, that’s becoming a bigger and bigger problem. In fact, lumen was going to buy their own brokerage simply because they thought that they were being that, that they were being uncompetitive and they were having a hard time they were losing deals to these other mortgage platforms. Well, now that threat goes away right now. The the lumen producers sees the activities of the boys on the platform and the properties are coming through us. And the broker doesn’t have an opportunity to go to that must buy investor and say, Hey, why don’t you if you want my property, you’re gonna have to also hire me to do your reservation, there’s no chance to do that. And lumen now has the only line of sight to what that ball was going to be doing as it pertains to providing financing. I hope that makes sense. I was wrong with rambling therefore,
J Darrin Gross 24:21
no, hey, that makes complete sense. I mean, that, you know, the competition if they’ve got a lending arm trying to muscle in on the business and kind of ACE out, you know, the prior lender or just try and tie that up. I mean, you see that kind of the vertical integration sometimes between different you know, groups and and, you know, I get it from their perspective, but obviously, if if you’ve got a relationship and want to maintain that, you know, I see what you’re doing is kind of you are getting in front of that and you’re you’re able to You know, rekindle the relationship, because I think a lot of times lenders, you know that a lot of the activity is upfront, maybe you have to produce the annual financials and that kind of thing. But the, but the, as long as you’re making your payments and your loans not coming up for renewal or, or anything like that, there’s not really a lot of communication between the lender and the borrower, it’s more a matter of, you know, making your payments on time. So to be able to kind of get in front and reestablish that relationship, I think, would be a huge value to the lender.
Adam Sharif 25:32
And the relationship between a borrower and a lender is usually between the ball and lenders servicing desk, right? Right, that’s where all the communication is going on. And some of the producers that actually originated that loan eight 910 years ago may not even be with the firm anymore, right? So there’s no relationship there either. And although every every lender with their with origination team would want to have every one of their producers stay on top of every one of the lenders and all that sort of stuff all the time. We LTC just does not happen, if people focused on what they have in front of them, right for them hands sort of thing. And so, but even if they did, even if they did have a really great relationship with a borrower where they knew everything was what the borrower was still like, they still would have to wait for the borrower to send them the deals that the borrower was looking at. That takes time. And that allows other people to come in and compete with that lender. Because of next year, because partnering next year, sorry, that threat goes away, all that goes away. Simply because now lender has a clear line of sight as to what their customer is going to be doing. They don’t have to guess they don’t have to ask them to send them information about what they’re going to be looking at, you know, which takes time on both sides. And it’s so for a lender, this is, this is a fantastic opportunity, it doesn’t cost them anything to partner with us doesn’t cost the ball or anything to, to provide the information get matched and close deals on our platform. So from that, from from that standpoint, it’s a win win for the lender, it’s a win win for the borrower, and it’s obviously a win for us.
J Darrin Gross 27:17
Yeah, no, I could see the the beauty of it is the efficiency and that you’re you’re right in the sequence of when the lending is needed, as opposed to, you know, you know, some sort of marketing system where you’re constantly dripping, you know, butter information to the, to the borrower to where you become almost ignored, because it’s just, they know that you’re going to be sending them something. Whereas right in the heat of the moment, when they’re, they’re focused on selling their one property, and they’re going to need funding for the next property. You you now are, you know, top of mind and able to, you know, help them secure the financing for their next purchase. I mean, it makes makes complete sense.
Adam Sharif 28:06
I’m sorry, the thing the thing is that they don’t have to do anything other than they don’t have to go out there for actively going through multiple sites trying to find the deal they want to buy, this comes to them, it gets laid at their, at their lap, and it matches everything that they’ve said they want, you know, location, price range, type of property, that sort of stuff. So so instead of having everyone nonstop looking everywhere, and missing each other in the process, we we shed the light on the entire process. Now they get everyone gets to see where everyone is and what they’re wearing and what they look like and all that sort of stuff. Without having to guess.
J Darrin Gross 28:58
No, I you had also mentioned earlier about the the buildup trying to get nationwide coverage. I’m curious, was there a target as far as the number of lenders to be engaged with before you launched? Was there a number that you realize you needed or a number of markets you needed to be in? We knew
Adam Sharif 29:18
we didn’t have a number, we just knew we needed a critical mass and lumen was probably the lender that sort of provided that critical mass for us. Them and along with everyone else, they’re the ones that sort of completed that’s they’re the ones that told us that we’re now we’re ready to go. And so we didn’t have a specific number in mind, but we do know we want every lender in the nation to become an et Cie partner. We put money in their pockets. We lower the borrower’s borrowing costs what could be better,
J Darrin Gross 29:50
but I was gonna ask you about that lenders. I mean, obviously the lumens of national recognized firm, does it work or do you We work with regional banks as well, or smaller commercial banks
Adam Sharif 30:05
want to partner with every bank community, regional, super regional, international banks that are out there, we want to partner with, with credit unions we want to partner with. With every live company, we want to partner with every agency lender, human as an agency lender, and we want to partner with every BPCE investor, because they’re the ones that control the CMBS market. And there’s only one thing that top five control 70% of the entire CMBS market and is there’s only I think about 10 to 12 of them total.
J Darrin Gross 30:39
Now, it’s great. Hey, Adam, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker. And as such, I work with my clients to assess risk and determine what to do with the risk. And there’s three strategies we typically consider, we first looked to see if we can avoid the risk. And when that’s done an option, then we’ll see if we can minimize the risk, we cannot minimize nor avoid the risk, then we look to see if we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And as such, I like to ask my guests, if they can look at their own situation, could be their clients, investors, tenants, the political environment, stock market, or however, however you would like to identify or what you consider to be the biggest risk? And explain what what is the biggest risk? And again, for clarification, while I’m I’m an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, and I’m sure what is the biggest risk
Adam Sharif 31:48
for us is the biggest risk for anyone else. And that is uncertainties. Okay, no one no uncertainties. It’s the opposite of having a line of sight, right? There’s no one, no one can sit there and tell you exactly what’s going to happen. Everyone can guess. So that’s one of them. But I liked it recently. One, this question was asked of Warren Buffett. And and I love his answer. Basically, he said political risks international political risks, like wars, and Ukraine, and such, and, and maybe the next pandemic, those are what he worries about the most, those are the things that he can’t control. Those are things that that could create even greater uncertainty all over the place. So I’m gonna go with that answer. I like, personally, anyway. And when he when he gave that answer, I thought it was fantastic. We can we can talk about the micro, the, you know, the interest rates, and, and, you know, all kinds of stuff, inflation and deflation, we can do all that sort of stuff, but answers got to be things you can’t see, you know, things you can’t do anything about, those of those are the biggest risks and, and they’re not always very, they’re not transferable. Those are nervous, you can transfer to other people, those are the ones that you’re going to have to, you know, handle yourself. And which makes business very exciting. And also, you know, stressful.
J Darrin Gross 33:22
Yeah, no doubt, definitely the, the uncertainty is definitely what, you know, makes the world go round or keeps it keeps it buzzin. But I think the other thing, the other side of that I’ve kind of come to recognize that it’s in that uncertainty is where the opportunities are found. And, you know, it’s, I think it’s natural for people to just naturally want things to continue at a steady pace and a steady rate kind of thing. But what I’ve come to recognize more and more, I think one of the things that makes makes the the whole thing work is that dynamics of it is the up and the down. And, you know, whether it be the the, you know, in the pandemic, what were the opportunities, you know, there are certainly a lot a lot of businesses loss, but there were a lot of businesses that one big and so it’s it is kind of an interesting, an interesting situation to to, to look at, and I’m sure it keeps you and everybody else on their toes, trying to figure that out. So say Adam, where can listeners go if they’d like to learn more or connect with you?
Adam Sharif 34:29
Well, our website is nxtCRE.com. And if you want to send an email to info@nxtCRE.com someone will absolutely respond to you. And if you need to speak with me directly, my email addresses Adam@nxtCRE.com.
J Darrin Gross 34:52
Got it? Well, Adam Sheriff, I cannot say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot All right, and I look forward to doing it again soon.
Adam Sharif 35:03
Thank you so very much. Appreciate your time and I appreciate you having me on. All right.
J Darrin Gross 35:08
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