Lance Pederson 0:00
It’s been great because we’ve been on a historic Bull Run. So everyone looks like a genius. But at some point, some point that stops, right? It’s these these markets, real estate is cyclical, and it will cycle and they’ll, you know, I just don’t want to see a situation where a bunch of people raised a bunch of money did a bunch of deals based on you know, fabricating sort of their claim. So we allow sponsors to pay us to verify their track record, right. So my whole thing is, listen, pay us once we’re an independent third party and just keep paying us to verify the things you do, you now have a living track record. So when you make the claim that you’ve acquired half a billion dollars worth of real estate, you can literally say, well, don’t trust me, just go look on my profile on Verivest and you can see that you know that that they’ve already checked it.
Unknown Speaker 0:46
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 1:05
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the 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, my guest is Lance Pederson. Lance is the Founder and Managing Partner of Verivest, and the host of the Real Estate Risk Report Podcast.
And in just a minute, we’re gonna speak with Lance about Verivest, verification and monitoring. And but first, if you would like we would love your your help, there’s 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’d like to see how handsome our guests are, you can check out our YouTube channel. And 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, Lance, welcome to CRE PN Radio.
Lance Pederson 2:17
Yeah, thanks for having me, Darrin. Appreciate it.
J Darrin Gross 2:20
You bet. Well, I’m looking forward to our conversation today. But before we get started, if you could take just a minute and share with the listeners a little bit about your background. Sure.
Lance Pederson 2:29
Yeah, I think you know, for me, my background is I’m an entrepreneur at heart. So you know, went to college for a brief time realized that wasn’t for me, had not to, you know, too much fine. I think I you know, realize that more of the entrepreneurial pursuits are my thing. And so I started my first company I was 20 years old, it was an IT services company. So built that from nothing to about 5 million in revenue and 35 employees and sold that and then I ended up getting into the real estate game via commercial hard money lending through a mutual acquaintance of ours, Darrin, Matt Burk. He was in my EO Entrepreneurs Organization forum group who became good buddies and I joined forces with him in 2008. And then we pivoted the business in 2011, to really moving more from private lending strategy exclusively to more of a capital allocation strategy. You know, private equity, real estate investing. And and that led to sort of the accidental business that we now refer to as veribest. We learned quickly with our capital allocation strategy of investing in deal sponsors around the country that the back end back office reporting is a was a big problem and was creating issues for us to report to our investors. And so we started offering it as a service. And given my sort of outsourcing type of background and I headed that up. And it really took off and and now if we’re, what do we have nine years later, it’s a, it’s a, it’s a great business. And we’ve got about two almost pushing 2.3 billion in assets under administration and serving a big need. And along the way, we’ve sort of, you know, uncovered as entrepreneurs do other other issues or friction in this little corner of the world, that is sort of sub sub institutional, real estate investing and, and have tried to eliminate or remove as much of it as we can to, to help all the participants, you know, limited partners, or investors and general partners and deal sponsors.
J Darrin Gross 4:41
I love the path. You know, even from college, recognizing that wasn’t the thing to, you know, following your entrepreneurial spirit and then sounds like you’ve, you have kind of an awareness of a problem and when there’s a problem, kind of find a solution. If there’s not one, I’m assuming And it sounds like it’s worked out pretty well for you. So let’s talk a little bit about Verivest Can you describe just what is Verivest?
Lance Pederson 5:14
Yeah, I mean I think at the core of what Verivest is, is we’re really a middle and back office administration platform, you know, for the like what I call the sub institutional real estate space you know, and it’s really with the proliferation of syndication since the passage of the jobs act right you’ve got a lot more high net worth investors and you know, smaller family offices that are investing into you know, funds or one offs or syndicated deals you know, 50 100 150 200 grand at a time and so you know, there’s there’s a lot of moving parts that come along with that and so it veribest really what we’re trying to do I think now you know, as the years go by the clarity becomes greater is that it’s really trying to help match interested investors you know, match and you know, educate and match limited partners or passive investors with you know, general partners or, you know, deal sponsors in the space. Because, you know, I think the commonality between the deal sponsors is that these aren’t household names we’re not talking Blackstone or KKR. So you don’t have no you have no brand recognition. If you’re really good, it means you probably have a really solid acquisition strategy whether you’re originating loans or you’re buying houses or multifamily buildings, you know, if the better you become at it, then then your pipeline becomes You know, it versions and, and it really capital becomes a constraint, and then managing that capital, right, those investor relationships and all those things is very different than you know, acquiring property and even the asset management right, which is what many of the participants in this space that’s their passion, you know, their deal guys, they like negotiating, they like underwriting, they like you know, real estate for, you know, for the real estate, but yet you know, what comes along with it is that you really need to use other people’s capital to grow and scale a real estate investment firm. And I think from the investor side right, it’s now that they are aware that you know, you can allocate capital into these alternative investments and specifically real estate ventures into agree that you’re credited especially that’s what most of the opportunities are available to them. It’s just you can really generate outsized returns, right, and I think, above average risk adjusted returns. And but the issue of course, once again, is figuring out who’s offering those investments and then figuring out whether or not you should trust them with your money, I think is that problem now that needs to be solved? You know, back in the day, you know, if you were gonna invest in a deal like this, it was probably in the town you’re you lived in, right? And you probably heard about it from buddies on the golf course. And that’s fine and dandy, but you know, that’s not super scalable. So even even from any deal sponsors I mean, even as human beings I mean, how many relationships can we really build I mean, it’s some of us more guys like me fewer, I’m introverted. Anyway, many real estate guys are probably similar. So they’re not it’s hard to go out there and sort of build the net new relationships with people that are in your locale, there’s sort of a finite number, but now that we can advertise these things broadly, you know, you can develop relationships with the power of the internet, but you run into this problem of you know, there’s there’s limited oversight and regulation by design which is which is which is a good thing, we want to keep it that way. But at the same time, we want to make sure that the good guys are winning and that you know who they are. That’s sort of when I wake when I woke up this morning that’s really what I’m all about Darrin is I woke up this morning a leader of a movement you know, I really believe that that this is what the industry needs Is this fair play you know to ensure that it can proliferate and I believe that limited partners deserve to have greater transparency into these investments and you know, I’m a lead the movement and try to help create and foster the solutions and implement them so that so that that continues.
J Darrin Gross 9:24
Got it. So Verivest, you guys kind of set between the deal sponsors and the investors as far as a kind of a lens to look through that, that looks at the the deal sponsors and kind of, do you rate them or do you just kind of composite, the, you know, profile the information or how, how does an investor What do they see when they when they look at a Verivest, is it a report or is it a subscription or how is it that the information is made available,
Lance Pederson 9:58
So the way we structured that component of it is we’ve created a directory. So each sponsor has a profile. And so investors can go there and they can filter that directory by, you know, property types geography, you know, you know, try to narrow down, like who’s doing deals that look like what I’m looking for. And then what we don’t rate them. But what we do is we say, Okay, well, if you want to be a verified, you know, you want to be verified, verified sponsor, then you and the principals of the firm those who control this firm that you’ve representing your company need to pass a background check. So will that look back seven years and you can’t have any felony criminal convictions? No, you know, personal or business bankruptcies, no unresolved accusations of fraud from investors, no regulatory sanctions, you know, the bad boy stuff. And then the results of that background check are publicly accessible to the world. So even if, you know, if you’ve been in some lawsuits, those are going to show up. I mean, it may not be a disqualifying event from being veribest verified. But you know, nonetheless, those are the things that show up because, as we know, that’s sort of where you can find some red flags. People are highly litigious, although it’s not my place to sort of pass judgment on what’s too litigious or not. And I’d rather not do that. And veribest would rather not do that. I if we make that information transparent to the investors before they invest, they can say, well, this person, although, you know, has no, no one’s accusing them currently of fraud that hasn’t been resolved, you seem they seem to keep running into issues, right. So giving that in that information, and you know, what happens when they know that’s going to be accessible, the guys who have questionable backgrounds, guess what, they don’t participate. And then for those who do participate, it’s sort of that reminder every day that they wake up, to sort of keep their nose clean. So to me, you know, that’s, that’s that component of it. And then the other big piece that we do, once again, we’re not rating it, we’re just we’re just the twist is all what’s objective and empirical. And what can we measure? So someone’s telling me on the phone, that that they’ve acquired $500 million worth of multifamily properties? It’s pretty easy to say that, you know, eyes the investor having just met them minutes before, how in the world can I? How can I corroborate whether or not that’s an accurate and true statement or not, I can’t. So what’s happened in this business, which is one of the reasons why I sort of, you know, ny veribest started to go down this road is that I saw that misrepresentation was becoming rampant. And that’s a problem. And I think that, unfortunately, many of the participants in this face, you know, deal sponsors or real estate guys, I don’t think they fully appreciate sort of the how important it is to not misrepresent yourself, right? So it’s fine to exaggerate your fishing expeditions and your high school football career. I mean, I mean, it’s not fine, but I don’t care, right? Like it’s not, it doesn’t affect me. But you exaggerating your, the the length, and the your track record is a problem. those are those are securities violations. And it’s serious stuff. And you’ve been in the insurance business notice, you got to take licensing and tests, and I’ve been a registered representative and an investment advisor. Rep, I’ve had to pass the tests. I know how I know how important those things are. But it’s happening, and it’s happening too much. And we have to clean it up. Right? Like, it can’t be that way, you can’t fudge numbers like that, because people make decisions based upon that information. And it’s been great, because we’ve been on a historic Bull Run. So everyone looks like a genius. But at some point, some point that stops, right, it’s these these markets, real estate is cyclical, and it will cycle and they’ll you know, I just don’t want to see a situation where a bunch of people raised a bunch of money did a bunch of deals based on you know, fabricating sort of their claim. So we allow sponsors to pay us to verify their track record, right. So my whole thing is, listen, pay us once we’re an independent third party and just keep paying us to verify the things you do, you now have a living track record. So when you make the claim that you’ve acquired half a billion dollars worth of real estate, you can literally say, well, don’t trust me, just go look on my profile on veribest. And you can see that, you know, that, that they’ve already checked it. Right. And so and I think that removes a lot of friction from that. what amounts to a sales process fundraising and getting someone invested in a deal that’s friction because I as the LP or the passive investor, it if I can’t corroborate that, it’s going to cause me to do things differently, right, I may I may write a smaller check, right, I only invest 50 grand instead of even though I could write the $200,000 check. Or I may decide to pass on this deal and wait for deals later to get more comfortable and see more before I invest. Or I may not invest at all because I just can’t bring myself to doing it without being able to corroborate those claims.
And then you know, and then for us, the last piece we do is just after someone makes the investment into it. Deal. Most of these things don’t have audit requirements, right? So no one’s really you know, a tax returns being done by a tax preparer but he’s not it he or she’s not digging into the details, right. So what we do is we monitor, we have a service where we’ll monitor that deal on a quarterly basis and basically review the financials. It’s like audit light, where we’re making sure that the fees that are being charged, you know, are being calculated correctly per the operating agreement, making sure that all the money’s going where it’s supposed to go make sure that the assets and on the balance sheet actually exist. And make sure that there aren’t any, you know, related party transactions or money going out the backdoor, which is most Ponzi scheme and fraudsters that’s what they do they have control of the money and the money has its way of sort of disappearing and sitting in some you know, company account or you know,
J Darrin Gross 15:51
Right now making it back to the investors. Yeah, right. So you mentioned kind of the you know, the fishing tails or just the kind of the not the truth per se I’m curious in in your discovery mode Have you found that those are typically like intentional or are a lot on just like they don’t know the rules and the boundaries as far as what they can and cannot say?
Lance Pederson 16:21
I think I think what happens Darrin is that when because they aren’t necessarily paying super close attention it’s so what happens in conversation and then ends up translating an email communication oftentimes is that we always throw out sort of these round numbers and the numbers just I think, depending upon the person tend to be you know, anywhere from 10 to 40% more than they really are so what we’ve seen already early on in this process is just in my you know, in our conversations with the prospect this prospective member of front like hey well How much do you think it is or whatever right and then when push comes to shove and we they actually give us the information then we start to see that there’s there’s a gap right and then you start to hear the we have but why included the stuff that I did when I worked for this other guy that did whatever and you know and it’s just it’s it’s once again it’s not like they’re trying to lie it’s I mean it’s just that they don’t think they realize that okay, but you have to be able to prove it right like and and so in you know letters you know, you’ve been in the business and you’ve seen a lot of LP activity a lot of investors are kind of getting into syndication games so you’re sweating also seeing is people that have invested as LPs in deals sort of trying to count that in you know, this these claims about how many doors they have or you know, and it’s just it’s just stuff like that it’s like I don’t have a problem with it right like obviously you know you making a $50,000 investment in a in another person’s deal to me is part of your track record right because you made the investment so versus you not having made the investment it makes you more experience than the person who hadn’t you know and and then of course if you make the investment the deal goes full cycle and it’s a win then you know, you should get credit for identifying an operator and ideal that you invested in and you know, when you get as much credit in the mind of a prospective investor as you would for someone who actually found the deal and bought it managed and operated it No but it’s it’s so that’s sort of the way I look at it
J Darrin Gross 18:19
Yeah and I think that is kind of one of these you know, when you get down to it and you and you really study the numbers and stuff I found that to be a consistent thing or some you’ll say I’m in you know, hundreds of doors or whatever and you find out that they’re fractional you know and like so they are invested so I don’t want to like take that away from them but it just it’s more a matter of I guess clarity and kind understanding level of participation kind of thing and and I think the to the to the to the good again being involved in in deal and stuff and and you know watching others operate and stuff definitely helps one see how to or how not to or what, you know, how to overcome certain situation or what if there is value in that, but definitely it is it is kind of a an interesting, you know, tale of sorts, you’ve got to try and parse to try and fully understand where somebody’s sitting. Yeah. So so you guys then if somebody is very vest verified then you will do like a quarterly is that basically taking their their quarterly report and then just measuring that against you know, what you find or how, how, how deep does that go? He said, it’s kind of a light, but I’m just kind of curious.
Lance Pederson 19:40
Well, yeah, I mean, I think it’s it’s like compared to a full blown financial audit, I mean, so I’ll tell you what it is and you can tell me if you think it’s like so yeah, and for the record to the other step, the other state of member we have the very best verified gold members and a gold member is someone who’s engaged us to monitor the totality of the amount of capital they have under management, so they so what they’re doing is on a quarterly basis, they are sending us their income statements, balance sheets, bank statements, bank reconciliations, and a general ledger detail, and any backup documentation on acquisitions of assets, or dispositions of assets. So basically, they’re sending us the financial package, one, one, what that does is it requires you to actually have a process in place where you’re closing your books, at least on a quarterly basis, which actually disqualifies lots of people. So another pet peeve of mine, I don’t understand why that’s such a problem. But then how you can actually operate a business without doing that. But nonetheless, we requested information, which is information that should already exist, right? If you’ve done a closed process, everything I just said is readily available. We take it in, and we make sure that everything ties out income statement ties, the balance sheet, the bank statements tied to the bank, rec, the bank rec ties to the balance sheet. Because he that’s how people sort of fabricate things, right is that it’s really hard to like fabricate financials, but if I get that total thing, I can basically tie everything out with all the reports, I just said, if you know what you’re doing, and we do have a bunch of accounts that work for us. So So that’s sort of what we do. And then we spend much of our time focused on money out, right, so the cash out the door, is where we hone in on like, okay, I mean, money came in, that’s, that’s great. But where did the money go out, and we look at the operating agreement, it says the manager is going to earn an asset management fee, and the property manager who’s a third party property manager earning a fee based on this, we’re going to make sure that the fees that those people are earning is actually the amount that they should be earning. Because that’s the other thing that happens is that well, no one’s paying attention, I’ll pay myself double, you know, the asset management fee, who’s gonna really notice, right, and the reality is probably nobody. But we do, and it’s sort of, that’s that proof that it’s like, hey, everything you’re seeing here is legitimate, and you can sleep well at night, knowing that someone who knows what they’re looking at is looking at it regularly on behalf of all the investors,
J Darrin Gross 22:07
I would think that’s, that’s definitely a higher level of certainty and, and would give any investor, you know, comfort to know that, that everything is because like you said, the, and I think, you know, real estate lends itself to a lot of lesser sophisticated operators, from a standpoint of just, you know, getting the once you qualify for the loan, kind of thing, you know, you talked about as far as management operations, reporting requirements aren’t that great. If you’re operating your own deal, you might have to provide financial the bank annually or something like that, but, but when you’re when you have other people’s money, and have to be able to provide them the level of detail, or some sort of report that assures them that their money is what is where it’s supposed to be. And that, you know, they’re going to get paid, and they’re going to get their money back. You know, it’s definitely a degree of, of reporting that they may not have been used to, on their own deal, you know, kind of thing is, whereas when they, when they start working with others, that is absolutely a requirement.
Lance Pederson 23:16
Yeah, I mean, it shouldn’t, it shouldn’t be right. And that’s why I was telling guys all the time, like, let’s just seems like this is a lot of stuff I’m like, but you don’t understand, like, if we don’t, as an industry start doing these things ourselves, then what’s going to happen is, and we’re already seeing some of this is that it’s the regulators are going to come in and start requiring it of more people within all that’s gonna do is the way that they’ll implement their regulatory regime will be far worse. And we’ll make it so that most people that are trying to participate, now, the barrier to entry will be even higher, which is what, you know, I think we’re starting to see Wall Street, sort of realize that the public markets are shrinking, you know, their ability to generate, you know, alpha that markets not there. And, you know, they’re they’ve got lobbyists looking for ways to sort of, you know, get access to more of that retail type money, you know, the accredited investor money, and it’d be a hell of a lot easier to do that if, if it wasn’t all flowing to a bunch of, you know, random, highly fragmented individuals and all sorts of corners, you know, like, it’s just, it’s, anyway, the point is, it’s the right thing to do no matter what, I think that it definitely demonstrates that you have competence, right? That you’re able to do that you’re willing to be transparent, which is the whole point, right? Is like how do we narrow down the universe for perspective, LP, who may not be as sophisticated yet or whatever, we need to narrow it down this sort of it certainly narrows it down and then it gives you greater certainty. And it’s a way for those who are really good at what they do to demonstrate that to the world, when they may not be the world’s greatest marketers or have the best branding or whatever but it’s that’s you know, that’s sort of what I’m after. I’m we know of having been we’re very active investors. ourselves you know the guys who are some of our best operators that we invest with, I mean, on the surface they don’t necessarily look like they are. right but but but these they’re the type of people that do everything that we’ve been talking about during this episode. Right?
J Darrin Gross 25:15
So do you does Verivest offer a verification for individuals that are doing one deal at a time or more fund oriented?
Lance Pederson 25:31
So the I mean the one deal at a time, if it’s syndicated equity then that fits in right I mean, those who are like acquiring single family homes with their own money and some baina
J Darrin Gross 25:45
Yeah, I wasn’t planning but I meant more like somebody that’s that’s doing a syndication as opposed to a fund.
Lance Pederson 25:51
Yeah, yeah, definitely. I mean, I think the syndications are Yeah, it’s it’s, it’s really targeted at syndications. And, and those who’ve graduated to using funds is really the, the any I mean, I think the key here, right, is that it’s anytime that investors putting money in where they’re in that limited, you know, and, you know, their limited partner there, they have, they don’t have any, they have no rights, they’re completely abdicating the decision making authority to some other party. That’s, I mean, that’s really the the rub.
J Darrin Gross 26:22
Right? Are you seeing more of the experience syndicators leveling up to creating funds? I yeah.
Lance Pederson 26:33
Yeah, I mean, I think I think we are, it’s a bit of a, you know, a love hate thing for people. But I mean, I think what we what I’ve been telling guys, you know, is that if, hey, if you’re in a position where, you know, you’re going to syndicate six or more deals in a given year or something, you really should think about sort of launching at least what may amount to like a co GP fund or just a co investment fund. So even though the fund may not end up, you know, wholly owning all of the assets, I mean, that’s a pretty steep climb to sort of go straight from syndicating one deal at a time to that, but it’s a good interim step, right to demonstrate to your investor base, like hey, there’s a more there’s more efficient ways to sort of capitalize our deals and we’re getting to the point where we need to start using those you know, those ways which would be a fun and I think it’s a good so rather because a lot of people look at it very binary like I’m going to syndicate each deal or I have to have a fund that’s going to raise all the equity and in control the equity in the deal. And I’m going yeah, that’s a really steep and wide you know, deep and wide Canyon. That’s a really hard leave to sort of make, but I think that offering that and starting to put that in place early where it’s like hey, and what we did that you know, at fairway America, that was sort of what we did is say, Hey, we’re gonna start syndicating some deals one off but it the first look is gonna go to those who are foreign investors. So for the investors listening, I think you got to understand that the more successful people come they become and the more velocity they have, it sort of may make sense for them to make that leap and don’t be surprised that that’s sort of what happens is they’ll say, Hey, I’ll give you a look at these these one off deals that you’ve grown accustomed to, but only if you’ve you make an allocation of the fund as well.
J Darrin Gross 28:24
Well it makes sense you know, from a standpoint of you have the investors capital you’ve you’ve you know implied you’re going to put it to work and they’ve they’ve gone with you and now you have an opportunity to get a reward and investor money and make the you know the returns or your investors are looking for I find it fascinating just fell in again kind of going back to the the impetus of all this kind of the JOBS Act really kind of freed up all this or created all this opportunity whereas before it was kind of like you know, like suddenly you know, somebody the golf course and just how it’s kind of proliferated and and really, you know, kind of what you you identified as well it’s just the you can do this but how good are you at marketing or, or attracting capital? And is that space kind of becomes more known and crowded you know, how can you you know, stand out and make certain that people know that you you can do are able to and provide the returns that they’re looking for and have something like veribest that can actually you know, provide some transparency to it and and you know, third party I think it’s I think it’s an awesome idea that you guys created this and I’m you know, the few syndicators I’ve talked to that are that are clients of yours. You know, are gone Wow, this is exactly what the space needed. Because of of just the the lack of ability to discern, you know, a, you know, an operator that that is doing well versus one that tells him a good story one that’s more marketing oriented kind of thing. So I think that’s, that’s a great thing. So you mentioned you know it, fairway, you guys were doing the the funds and also sponsoring some deals. Do you find that that all of that experiences and also helps you be that much more able to discern? You know, because obviously, everything we’ve talked about so far has been more about numbers to the numbers match. But I’m just curious, your your own experience and having been in the market, as long as you guys have, are there things that you for that maybe that the, the numbers don’t tell that, that help you? And again, I know you’re not grading and you’re not providing any subjective reporting, but I’m just kind of curious, does it does it? Does it show up anywhere? That experience you guys have?
Lance Pederson 31:07
Oh, most definitely. Yeah, I mean, most definitely, I think that My take is on everything we’ve spent all our time just talking about is the sort of thing that that removes a bunch of the bias we have just because we’re human beings, and we’re attracted to certain people, and like, you know what I mean, like, you’ve got that whole thing, we just, there’s so much bias built in. So as investors, and it doesn’t matter, if you’re real estate investor investing in equities, like, it doesn’t matter. I mean, to be a good investor, you need to learn how to keep yourself out of that as much as you can, you know, you can’t be emotional, right? You just can’t, right, like, you have to have a process. And so, for us, what we found is that, you know, we were no different, we’re professional investors. But, you know, we were assessed as susceptible as anyone else to just those marketing things, and the charisma of a given operator and, and, of course, we’re human beings, we’re going to be so much the things I think that are important. That’s why I say, take this stuff off the table, right? Like, this is stuff that’s empirical and objective taken off the table. Okay, so you know, what you’re dealing with. When it comes to the people, I think one of the most important things that you have to look at as a passive investor and the things I’ve we’ve learned through going through this process of like, you know, how do you do it and get become better at figuring out who you should invest with? And what deals you should invest in is that it really is about the people. So it’s, it’s looking at who’s on their team, right? Who are these people? What roles do they play specifically? And what is their background? Right? Which ones again, might not necessarily show up on the track record stuff that they have as a principle and its principles, whatever. I mean, it’s still these other things are important. And and then the other big thing is just what’s their strategy? Right? Like, do they have conviction about their strategy and their mandate? And is there a method to their madness, right? Because it’s it they, once again, there’s no right answer, per se, but if they haven’t, they don’t have clarity about how they do what they do, why they do it, you know, all those things, you need to dig into that stuff. And you need to be able to get to buy into whatever it is they’re telling you. Right? Because that’s the risk mitigation part, like that’s the extra it’s like, how do you do what you do? And why do you do it? And then you have to ask yourself an investor does them doing that mitigate risk, right? Like, if you like a multifamily guy who goes in and makes a big deal about having social services for their tenants? And, and you know, and then whatever it is, they’re doing these different types of amenities? Like, those are the people who thought through that, and they’ve got a bunch of different things they do that’s like their playbook that they run, you need to be looking for stuff that a little more depth to it than just like we buy ugly apartment buildings, or you know, I don’t know, right? Like, you want to push on all those things, to see if there’s any depth to it, or any conviction behind it, or they just this is looking for the passing fad, right? And that’s why I mean, I don’t like to be the guy who says, like, oh, people who invest in markets, they’re not in, that’s impossible. And I would always pass on that maybe that’s your own mandate or philosophy, that’s fine. But that’s not necessarily true that someone couldn’t live in California, and invest in a bunch of multifamily deals in Arkansas, but I want to know how in the world, they’re going to do that, you know, and do it successfully and ensure that you know, that they’re not, you know, that there’s not risks that they can’t mitigate because of the distance as an as one example. Right, like so. Those are the things we’ve learned like, it’s just not easy. It’s not simple. And you really have to like do your homework on everything.
J Darrin Gross 34:40
Yeah, no, I think the the, the question I think is outstanding, and I think it’s just across the board. On it kind of goes back to the start of this when the the JOBS Act passed, and how the market has been running up ever since. And you know, how many guys got in when the market was upside down from the, you know, the great recession and have been able to produce these amazing returns? How does their experience translate when there is the, the, you know, future dip correction, whatever you want to call it, I think ever since I’ve been doing this podcast, there’s been a, a, you know, in anticipation that we’re in the late innings of a baseball game, if you will, for an analogy, and that, you know, it’s it’s coming, but there’s continually these different you know, factors that have changed the lay of the land or they continue to promote this run. And so I think it’s, it’s crystal ball business is not what I’m, I don’t think anybody has one. But it’s, I think, just again, everything that you’ve, you’ve talked about this, it’ll be interesting to see how, how these, you know, players do when, when they, you know, the market is corrects itself or, or whatever the next challenge is, and it’s not necessarily a correction, but just a change in the in the course of the winds or, you know, the wind blows a different way.
Lance Pederson 36:16
So you got, I mean, we, you know, a book that I think many people quote is one of the greatest business books ever right was good to great by, by Jim Collins, in the whole book is based on studying comparable firms that we’ve all heard of, you know, head to head, right? And which ones are the ones that went from good to great. And so at the heart of that, and if you listen, if you follow Warren Buffett at all, right, like, what’s his whole thing? It’s all about the teams. It’s all about the leadership of these companies, or whatever. So it’s the, it’s this intangible stuff. It’s like, what are they made of, you know, what’s in them. Because what happens is, that’s why you have to figure that out. And that’s why we don’t Advair Avast, I don’t tell you what deal to invest in. I don’t want to do that. I don’t want to be in the business of saying, you know, shilling this deal, like, you know, put money in this deal. It’s the greatest deal in the world. Right? Right, right. I’m like, I just don’t believe in that. What I believe in is like, that’s your job, you’re an investor. If you want to be in the game, then you need to get learn enough, educate yourself enough to do that, I’m going to help you, we’re going to do as much of that stuff that’s really hard to do for any given individual, but you can do the stuff I’m talking about. In fact, that’s what we tell our sponsor members is that we’re providing you because we have the level of insight into your operation as we do. Our willingness then to provide you with a platform to share what you’re made of with the world goes way up. Because if I didn’t have that level of insight, I’d be super nervous that I’m letting some you know, charlatan up on stage, you know, tell you how great he is. Right? So it’s To me, it’s that’s not my job. So my job, the pitch the deals is not my job to sell, why I’m why I’m, you know, this guy’s great at what he does, it’s their job. And if they don’t figure it out, they won’t get capital. And if they do figure it out, you know, they might, right. And then investors need to also do the same. They need to dig in and see what makes these guys tick. And what are they all about? And do you believe in it or not? Yeah, I don’t know. I don’t I don’t know the answer.
J Darrin Gross 38:12
Right. Right. Right now, and I think, you know, there’s always a, you know, a degree of risk in that. But I think just to try and eliminate the noise as much as possible to where you can, you know, see the numbers and make it more empirical, certainly is a good starting place. I’m curious, is there any asset class that you guys don’t work with as far as any any of the investors is or do you work across all the asset classes for real estate investors?
Lance Pederson 38:42
Yeah, we were Yeah, across all the asset classes for real estate. I mean, we’ve we’ve got, you know, guys doing tax liens, and, you know, single family multifamily. I mean, I can’t think of anything that I mean, obviously, some of the special purpose stuff, we probably haven’t, you know, haven’t done anything with the ski resort there. But it’s not to say, I mean, I mean, we wouldn’t stay away from it. So I mean, I think for us, that’s the other thing is just, it’s, hey, if it has if it’s real estate, and you there’s a strategy you can put around it to acquire it and add value to it and do whatever, then, you know, then it makes sense. They need some of this ATM stuff, which isn’t really real estate, it’s like personal property seems to be popping up. I’ve got a client who’s, you know, thinking about doing a fun with one of those. So that’s kind of different, but the mechanics are kind of the same. Now on the monitoring front. You know, that’s not something we could monitor as a good example, because I have no idea how to keep track of 3000 ATMs around the country, right, like, right, but I certainly know how to figure out with real estate it should be titled, and, you know, with the technology that exists today, we can, we can we have much higher levels of certainty that that things are properly titled.
J Darrin Gross 39:54
Well, income and expenses, right.
Lance Pederson 39:56
income and expenses bank and cash and tax returns and You know, so there’s when you know the financial side I mean, it really is I know it’s complicated lots of people but you know, when you do know it, it’s like, it’s either right or it’s wrong.
J Darrin Gross 40:09
Right? Math. Yeah, like it. Got it. Lance, if we could, I’d like shift gears here for a second. By day, I’m an insurance broker and work with my clients to assess risk and determine what to do with the risk. And there’s three strategies that we typically consider, we first look to see if we can avoid the risk, that’s not an option, then we look to see if we can minimize the risk. And when we can’t avoid or minimize and let’s see if we can transfer the risk. And that’s what an insurance policy is. And I like to ask my guests if they can look at their own situation could be their clients investors the market, in tenants interest rates, however you want to define that. But if you can take a look at the at the situation, and identify what you consider to be the biggest risk and again for for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer. So if you’re willing, I’d like to ask you Lance Pederson what is the BIGGEST RISK?
Lance Pederson 41:21
Yeah, I mean, this is a bias answer but I wouldn’t be doing what I do if I didn’t believe it. I believe that the lack of oversight and I mean is as it pertains to a limited partner investing into a deal that’s controlled by somebody else is just if no one’s watching what’s going on that’s the biggest risk that you’re more than likely not being compensated for you know, in whatever return you’ve been quoted so to me to your to your three step thing I don’t know how to transfer it because there’s no you know, no one’s writing I mean, I’ve seen a few where you can insurance on stuff like this but that’s ridiculous but you can minimize it right? And I think that’s what veribest does, is we just we just minimize it. Is it foolproof? No, it’s not but it’s a big deterrent, right and you take that off the you take that off the table so once again much like concerns the cost of the monitoring and even the light touch in the way we do it to keep that cost down it’s certainly minimises what I believe is your biggest risk is just some go sideways they stick their head in their sand and they start moving money out of the deal and you don’t become whole because of it. How many times have you heard that?
J Darrin Gross 42:32
Yeah, no, absolutely the the you know, the ponds here just you know, again, like you said, People aren’t watching the numbers and nobody’s paying attention and go. Lansa can’t say thanks enough for taking the time to talk today. Before we wrap up, where can listeners go if they’d like to learn more connect with you?
Lance Pederson 42:57
Sure. I mean, so you can go to Verivest dot com check out the directory. there there’s a little chat bubble there. I currently man that I like to be on the front lines. As we you know, the service gets off the ground so you can chat with me there. I’m on Twitter at L at L Pederson. Pederson. pretty active on LinkedIn as well. So yeah, it’s it’s pretty easy to get ahold of me or find me.
J Darrin Gross 43:25
All right. Well, Lance again, I can’t say thanks for taking the time. I’ve enjoyed it. learned a lot. And I hope we can do it again soon.
Lance Pederson 43:33
Yeah. Thanks, Darrin. Appreciate it.
J Darrin Gross 43:35
All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.
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