[00:00:00] Speaker A: Welcome, listeners. You're listening to the Deeds in the Desert, where real estate investors tune in for the latest news.
[00:00:08] Speaker B: And welcome back to another episode of Deeds in the Desert. Today we have Sanjeev, the mastermind behind Rhino Investments, with us to talk a little bit about private lending versus banks and maybe ignite versus other, other private lenders. How are you doing today, Sanjeev?
[00:00:22] Speaker C: Good, Pat. Thanks for having me.
[00:00:23] Speaker B: I appreciate you stopping by. I know your office isn't too far away, but to bring you out on a 100 plus degree weather day and drive down here, I appreciate it.
[00:00:31] Speaker C: Yeah. Appreciate you having me.
[00:00:32] Speaker B: Absolutely. So let's just dive right in.
We talked on the onset of what this episode's about, about how we compare against banks and other, other private lenders. So why does a developer like you, who uses institutional financing in most cases, come to private lending?
[00:00:48] Speaker C: Yeah, I mean, I think private lending's got some very unique characteristics to it. Number one, time and speed.
A lot of times banks, you know, they, they have to go through a committee. They have to do certain things. It takes them a long time to get through. I know oftentimes with our banks, it takes 60 to 90 to 120 days.
The other part is, is that there's a little bit higher cost. You know, a lot of people factor in the cost. But the reality is if your project can't afford a few extra points, you really might want to question whether you should do the project.
So it's really for. For ease, for speed.
Our relationship with you guys has been great. So my thing is more being able to get the project done.
And, you know, nothing against banks because we use banks as well, but this is my preferential way of funding our projects.
[00:01:35] Speaker B: Yeah. And, you know, when investors come up to me and ask, you know, why do groups like you even exist? Why are you in a place when banks have been around for eons? Why? How do you have a niche? And I always say the speed, ease and convenience, which is kind of what you just harped on, the speed in which we get it done. It usually doesn't take us 120 days. We'll usually get you an answer in a week or so and then work to finance it within that month or so. And then the convenience of it.
[00:02:00] Speaker C: Right.
[00:02:01] Speaker B: It's you're dealing with one person or maybe two, as opposed to a whole committee dealing with underwriters, processors, closers, committee members, C suite level. So you really have a direct portal and pathway to the people that are really making the decisions for you. How does that help you and your business to get more deals, better deals. How do you utilize that? Speedies and convenience for you personally?
[00:02:27] Speaker C: Yeah, I mean in our business it's important, you know, to be able to get projects done and have certainty that you can get the projects done. When we're dealing with sellers, oftentimes they know that we're going to perform because we know we're going to perform because we have ignite in our back pocket.
Now at the same time, speed is key because if you're selling something to someone and someone comes in and says, hey, I'm going to get it done faster, it's generally more lucrative. So there's advantages on each aspect of what we do to be able to use the private funding side. And for me generally or for our company, we generally focus on certainty, reliability, the trust. We have a great trust with you guys and you know, we, we, to be frank, we get offers from a lot of different debt funds.
We stick with Ignite and a few others for the specific reason that we know what we know and the certain and reliability of, of that lender, including you guys.
[00:03:27] Speaker B: Yeah, the certainty of execution is usually of the utmost importance. With a deal like, you know, gentleman like yourself who's always out there dealing with quick turn properties, quick acquisition, you're usually not the one that's going to pay the most for a property, but usually the one that'll get it done the quickest. Is that right?
[00:03:43] Speaker C: Yeah, yeah. I mean we're, I wouldn't say we're never the highest buyer but you know, or payer but you know, generally we're right around the range and you know, if you're picking a buyer who has certainty or if you're picking a buyer that might give you the highest price, especially where the market is today, certainty definitely has its benefits, no doubt about that.
[00:04:03] Speaker B: Because that certainty to close that ignite has offered you and some of these other lenders potentially as well, has that enabled you to get some deals done that you may be otherwise wouldn't have with a bank?
[00:04:14] Speaker C: Yeah, absolutely. I mean there's many deals we've done that we've done, you know, with, with Ignite and you know, and the reason why we were able to get those deals done was because we had ignite ready to move fast. You know, oftentimes what we often find is we find sellers who are in contract for a higher price with another buyer and that buyer can't perform for whatever reason. Rhino was close. We hung around the hoop. You know, in essence that comes back to us, we're now able to execute based on our relationship with Ignite and you know, using, using private money. Whereas if we go to a bank and we've got to restart an entire process and we've got to go through that process where there's other decision makers, it's not just one person making a decision or two, it's, it's a committee, it's a vice president, it's other things. And yeah, you get a little cheaper money. Sure. I mean, and it's worth the work if you can get it done. But for us, again, when we look at a project, we're looking more for speed and certainty.
[00:05:11] Speaker B: Right. And so the projects that we get involved with are not your long term hold deals, it's your quick acquisitions ones that you want to get under your name and then figure it out later. Is that where you personally have found the most success with our type of financing is you did utilizing us on the front end for a short period of time or is it usually kind of in the mezzanine section or, or maybe even long term debt?
[00:05:34] Speaker C: No, it's more for the, for the get in, get it done, move on to the next, you know, market conditions change. And so, you know, you're always trying to get it done as fast as possible. Sometimes things take a little bit longer based on market conditions, but you know, you're, you're not trying to spend years, you're trying to spend more months to a year to get a project done.
And that's what we really focus on.
[00:06:00] Speaker B: Absolutely. And speaking of market conditions, you know, I don't know if it's just me, but over the past maybe two months or so, kind of started seeing things ease up a little bit. Buyers kind of patrolling a little bit more and sellers may be a little bit more willing to, to transact and make a deal happen. Is that kind of what you're seeing? And if so, how long do you expect this to continue? Or maybe even more importantly, kind of break free and actually get a lot more deals done?
[00:06:24] Speaker C: Yeah, I mean, the interesting part about real estate is real estate's a hard asset. And so the thing that's not changing in real estate is construction cost. It continues to go up and when I say not changing, it's not going down. And so people are starting to realize and investors are starting to realize that it's not going to go backwards.
And so you're seeing more people come off the couch to get back in. Also, you know, you've got the feds that have held Interest rates for a while. There's some conflict between the administration and, you know, the Fed chair. And you read and hear all this stuff. The reality is that the Fed chair's out by May. There's going to be a new Fed chair. The minute that the interest rates drop, commercial real estate is going to just boom. And our personal opinion is just because a lot of people have been waiting and watching. Yes. And, you know, a lot of people also had some, you know, interesting success with the stock market. You know, it went up, it went back down, it came back up to par.
So, you know, as these things go on, there's a lot of movement throughout, you know, all sectors. And so once the interest rates change, commercial real estate's really going to open up.
[00:07:30] Speaker B: And when it does open up, how do you foresee yourself and your company fitting into the niche that you want to create going forward?
[00:07:38] Speaker C: Yeah, I mean, we're value add developers. So we're constant whether it's good market, bad market, high interest, low interest.
Our job is to go in and find projects where we can go and add value, you know, and try to add value instantaneously at some point or another.
And so, you know, what really changes is more or less that there's much more buyers and, you know, the market opens up for us. So we don't necessarily change our strategy based on certain things, but we, you know, it's like anything, you know, when, when it's starting to get hot. You know, like as of, as of the last few weeks, we've put over $100 million of contracts out for sale.
So, you know, we see the market starting to heat up and we're seeing that it's becoming much more, you know, active.
[00:08:24] Speaker B: Absolutely. And when you see it become more active and you're out there dealing with, Dealing, wheeling, dealing as you always do.
How does Ignite funding fit into that role?
[00:08:35] Speaker C: Yeah, I mean, Ignite's our go to.
We have a great relationship with you and the Ignite team, and you've been very reliable.
So, you know, when we look at things, we look at things in two ways when we're buying something. First, you know, do we buy cash? Second, you know, do we go to a bank? Third, do we go to Ignite? And you know, generally from there, we'll. We'll trickle it down.
And the bank part has really not made sense because the banks are asking for more money down. They can't project out what the value is going to be.
There's a lot of just red tape that doesn't make today's environment easy to play. And there's a lot of capital at the banks. Sure.
But they're just not giving it out.
[00:09:14] Speaker B: Absolutely. And so when you look at the debt side of things from Rhino's perspective, how does Ignite fit in there? What kind of, what percentage are we of that overall portfolio?
[00:09:25] Speaker C: I would say you guys are about 15% of our debt. Maybe, maybe 10 to 15% of our.
[00:09:31] Speaker B: How much for the other private lenders?
[00:09:33] Speaker C: Probably another 5 to percent, maybe 7%. As you and I discussed earlier, you know, we're, we're really moving away from a lot of other private lending shops that we've dealt with during this time. You know, a lot of bridge funds have had issues and so they haven't been able to fund their obligations, which has hurt us as a developer. And you know, we haven't had that issue with Ignite. You know, it's just been steady Eddie, let's go. You know. And so we've slowly trickled our way down and we have, we have great relationships with banks like Barclays and other institutional lenders. And you know, we're kind of trying to continue that realm and, and really Ignite.
[00:10:09] Speaker B: Gotcha. So on the private side, 20, 25%. So the remaining debt, is that usually based on banks or is there some mezzanine one off sources, high net worth individuals or is it exclusively banks and institutional.
[00:10:21] Speaker C: It's really exclusive institutional or like insurance companies, conduit lenders. Majority of its non recourse financing. Kind of steady Eddie, just, you know, it's coupon clipper type of stuff. Right.
And we do have several banks, we do have several local banks we work with, but nothing. No, no, no. Other smaller private lenders we're dealing with right now. And gotcha, you know, borrowing from so.
[00:10:46] Speaker B: 80, 75, 80% of your portfolios with institutional coupon clippers, let's call them, and most of that is non recourse with our side, it's full recourse personal guarantees against everything you have.
Previously you said that you're a value add developer and you bring in value instantaneously. Is part of the reason that you're okay keeping on PGS personal guarantees on the Ignite funding side is because of that immediate value add that even if you were getting into something at 100% loan to cost, the value that you're adding, there is already enough buffer to not have to worry about a PG as much.
[00:11:23] Speaker C: Yeah, 100%. Rhino's philosophy is you make money on the buy, you don't make Money on the sale. So it's important to buy right when we're, when we're reviewing our stuff. Even when you're reviewing our stuff, you know, or your team, we go through it pretty in depth, and so we. We know we're safe when we get in.
You know, sometimes what changes is the market conditions. You know, if it slows down where there's not as much active capital, you know, it might take the project a little longer than what we might expect or like. But it doesn't change our business plan and it doesn't change that there's profit there.
[00:11:55] Speaker B: Absolutely. So that immediate value add that you usually bring, what form is that? Is that tenants in tow, immediate rehab? Is that entitlement that you're getting done?
What, what is it that is unique maybe to you or your industry or your group within this industry that makes you better than most?
[00:12:13] Speaker C: Yeah. And I wouldn't. I wouldn't know if I'd say we're better than most because we don't. We don't. We don't. We don't know most, but. But generally we focus on relationships and we build for specific tenants. We build. We build with specific lenders.
We've kind of narrowed our net down. You know, it's kind of as. As when I was younger and we were. We were getting started, the net was wide. Now it's gotten tighter and tighter. And really it's, you know, it's whether it's going in with the tenant in tow, whether it's, you know, going in and seeing that there's undervalue, meaning that the property is just. You're buying it. Right. You know, sometimes we're buying stuff at way below replacement costs.
[00:12:49] Speaker B: Yes.
[00:12:49] Speaker C: Right. And so that's a key metric for us is what's replacement cost? Could we rebuild this today at the same price?
And then what's the market like? Right. And so I think overall, our kind of secret sauce is just our relationships and the ability to put a game plan together that we push pretty hard to execute.
[00:13:06] Speaker B: Yeah. And I would argue that's really where you guys hone in and where your expertise really shines is the execution. A lot of people can talk and rely onto their partners and their relationships, but their relationships are only as good as your ability to execute, because if you can't execute, they're not going to be your partners and your relationship going forward. So your ability to withstand seeing that over market downturns has, in my opinion, been instrumental to your overall success and hopefully for your longevity in this industry. Going forward, because of that, the value add that you bring to the table is mostly tenants in tow some of the time and a lot. Most recently, we've seen a lot of your value being in the sum of the parts where you're going in and buying one whole project and then dividing up. Can you kind of explain how you look at that when you first go in to underwrite a particular project like that?
[00:13:58] Speaker C: Yeah, I mean, it's like anything, right? When you buy something in bulk, you know, you go to Costco and you get a cheaper price because you're buying a bulk amount. Right. And so when we buy these properties, oftentimes just like Costco, we're buying in bulk, where we're buying the whole thing and we might break off certain pieces that might be more for, you know, a different type of buyer. And what does that mean? Somebody who doesn't want to operate a shopping center, but they want the passive income, they want the depreciation, they want all the good stuff that comes with it, but they don't want the management part of the entire center. So we, we generally, often when we do breakups, we break it up in a way that makes it convenient. And you know, the other part is, is that for every sector, whether you're, you know, I'd say 5 million and under to 5 million to 10 million, there's more buyers than 5 million and under than there are 5 million one to 10 million. Right. There's more buyers of 5 million one to 10 million than 10 million one to 20 million.
And so as that narrows down, you know, you have less people that are actually able to bid. And so, you know, we try to break it up in a way to create more buyers and also create a way to give people what they want. And so that has been a great strategy for us is breaking things up and it's worked well.
[00:15:11] Speaker B: Speaking of strategy, where do you see yourself, guy? Where do you see yourself going in the next few years over either asset class or location wise? Right now, most of the loans that we have with you on the western part of the United States, excluding California for our reasons, not yours.
And how do you see that kind of curtailing into the future?
[00:15:31] Speaker C: Yeah, I mean, we like the west coast, cause obviously we're here in Vegas. So for us to get on a plane, it's easier drive around.
We've developed everything, we've done office buildings, multifamily storage, industrial.
We're sticking to retail right now generally based on our relationships.
We, we prefer the west coast, but we'll go anywhere because we're, we're deal sensitive. We're not geographically sensitive. So we'll go to, you know, we just did deal in Gallup, New Mexico. Small town, you know, in New Mexico. But it worked out great because of our relationships with, with the tenants and, you know, so we're not necessarily geographically sensitive as we are more deal sensitive.
[00:16:14] Speaker B: Got it. And the deals right now are mostly on the retail side because that's where you find the most opportunity and have the most connections currently. Do you see that changing over the next two years?
[00:16:27] Speaker C: You know, I never forecast out more than 18 months, only for the reason I didn't know what happened 18 months ago. And I don't know what will happen 18 months from now.
But if I was looking at my, my, my magic ball, it would probably be somewhere sticking around there. You know, retail has an interesting problem in the fact that, you know that there hasn't been a lot of retail built since 2010, meaning shopping centers or, you know, other things that have actually been built from the ground up. There's a lot of pads, you know, new Starbucks, new Chipotle's, you know, new raising canes, all this other good stuff. We all love to eat. But there hasn't been a lot of new centers. So it's kind of created a supply and demand issue. And so if you have those relationship with those tenants, I mean, if I would just tell you. It's funny, I talked to one of my cousin's kids and you know, he called me last week and said, I want to get into real estate and I want to be a retail developer. And I asked him, first question, I asked, who do you know?
He goes, what do you mean? I go, who do you know? How are you going to fill those tenants up? What are you going to do? And so those relationships again become an important part to be able to move with speed.
Now anybody can do what we do. Just a matter of time. You know, some people take a year, some people take five years, some people take 20 years.
We try to stay in that 18 month or less period.
[00:17:44] Speaker B: Got it. Which kind of rides right along with our typical term with you, which is 18 months.
[00:17:50] Speaker C: Right.
[00:17:51] Speaker B: That's the shorter time frame. Both from a lender's perspective as well as an owner or a borrower's perspective is more certain than distance in the future. So that that 18 month time frame for us on the lending side, for the same reason for you on the ownership side, is you have a better understanding of what things will be like in 18 months than in 20 years from now. During that 18 month stretch you have kind of transformed your company a few different times, right? We have been involved with office, with industrial, with self storage, with drive through retail shopping centers, malls, kind of, it's run the whole gamut and it's kind of changed throughout time where you found those deals.
One of the things that we like the most about you is the agnostic behavior that you have on deal classes, deal basis. You will, as you say, look at it on a deal by deal basis and not necessarily pigeonhole yourself to one asset class glass. Because of that, you're mostly in retail right now. Because of that, you're mostly on the west coast right now. And that's where most of our projects are. On the projects that we currently have with you, all of them have personal guarantees on it. Are you worried about any projects you currently have with us that you're, you're not going according to plan or, or you're kind of shaking your in your boots a little bit of how you're going to get that paid off?
[00:19:16] Speaker C: I mean, I'd say no, you know. You know, I'd say, I'd say that does not keep me up at night. I'm not worried about that. You know, our company's very, very solid, you know, and you know, everything seems to be moving as planned. But again, some stuff has taken longer only for the reason that the market has changed. I mean really, real estate has had a few good years, but it's, it's been, it's been choppy and I think next year is going to be a beautiful year. If, if we just get the interest rate dropped a hair, that's all we're looking for. That's it.
[00:19:45] Speaker B: Just a little hair.
[00:19:46] Speaker C: That's it. That's it. Gotcha.
[00:19:49] Speaker B: Sometimes that's easier said than done, right?
[00:19:51] Speaker C: That is for sure.
[00:19:52] Speaker B: Well, I really appreciate you coming in today and joining us on Deeds in the Desert.
If you wouldn't mind liking subscribing and following everything we have for you. We'll have more borrowers just like Sanjeev bringing you the most up to date information and coming from the masterminds themselves. I appreciate it.
[00:20:08] Speaker C: Thanks for having me Pat. Appreciate it.
[00:20:11] Speaker A: Thanks for joining us this week on Deeds in the Desert where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends. Who doesn't like learning about passive fixed income, right?
Still hungry for more education? Visit our
[email protected] or if you're ready to take the leap and start investing, give us a call at 702-761-0000 and Schedule A free investor.
