Opportunities in Venture Debt feat. Jeremy Hill

I think entrepreneurs are getting smarter. They're understanding the value of their equity. If we think about where private equity was 18 to 20 years ago, and it's just become this monster in private markets, we're seeing the beginnings of that for the next 20 years in private credit.

The ability to get private money has always been there, but it's been less institutionalized, and now there's a lot more options. Definitely something's been happening over the past several decades.

There is this disproportionate growing group of companies that we find that are past that friends and family, mom and dad, rich uncle round of raising money. They're just not yet to a point to where institutional capital can afford to pay attention to them. Most businesses don't fit into a normal banker's box, and less so now with where interest rates and regulations have come. There's 220,000 companies in the country that are between this kind of $10 million in revenue and $120 million of revenue, and that's where we see trying to provide value.

Hello, future billionaires. Welcome back to another episode of the Invest Like a Billionaire podcast. Got a fun interview today, talked with Jeremy Hill. He's with JV Capital. And has been in private credit for over the past 2 decades. If you have been following us at all, you know this is a sector of investing that we're very, very interested in. I think there's a lot of opportunity. And so he shares about how he got into this space, where he's seen opportunity. And one of the cool things we spent a lot of the conversation on is talking about corporate credit. So this is actually lending to businesses, small businesses, as an investor instead of as an equity investor, do it as a debt investor. And a very interesting strategy. This is really cool to kind of learn more about it. I mean, if you're kind newer to private credit, you know, we have a whole private credit masterclass that we've done. We'll link to those in the show notes here because this is an area you want to be paying attention to and understand as an investor, the opportunity that's happening to be a credit-focused investor, you know, high yields with lower risk. It's a great thing. So as I always got to say with someone I bring on that is potentially raising capital, I got to give a disclaimer, you know, I've not done any due diligence. If you're interested in learning more about what they're doing, you got to do that on your own. Do your own due diligence. This is just purely informational. We bring people on that we think have an expertise in an area that we're curious to learn about and hear their thoughts, but we've not gone any farther than that. So I just want to be clear with that. Appreciate you listening. If you are enjoying the show, you know, please rate us, review us, share with a friend. It helps us continue to get the word out and get more people to Invest Like a Billionaire. So with that, enjoy the show. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Welcome back to another episode of the Invest Like a Billionaire podcast. I'm your host Ben Fraser, and I've brought on an awesome guest today. We have Jeremy Hill. He is the founder and managing partner of JB Capital. He's been in the alternative investment space for over 25 years and has been most of his career spent in the credit side of investing. And as you know, you've listened to the show, we've been talking a lot about opportunities in private credit and in this whole kind of area that some people are newer to because they haven't heard of it or they've been focused on common equity investing for a while. We really believe at Aspen it's really a big opportunity for the next few years. And so I wanted to bring Jeremy on and talk about what he's seen, his firm and his expertise in this space, and really kind of set the landscape for why there's opportunity now. So Jeremy, thanks for coming on the show and excited to have this conversation with you. Give our listeners a little bit of background on you, on your firm, and kind of how you got into the space you're in now?

Well, first, thanks for having me. It's great to see you again and looking forward to our conversation. So how we got into this whole thing, like, I don't, I don't want to start with like, bet midriff wind beneath my wings. I was born in a small town. It's, you know, I think like probably more often than people, it's not a perfect path, right? You kind of start down this path and there's that thing of evolution. It is that you wind up somewhere. Well, later ours was a little bit like that. So I got into the real estate business years and years and years and years and years and years ago. Loved the real estate business, kind of grew up in the real estate business. My father was in heavy construction, my grandfather was an architect. And so I've been in, you know, construction boots and work hat and dirty jeans and shit like that since I was a kid and just loved it. Love watching bricks and sticks and dirt and stuff kind of come together and become something. That's just still, you know, 25, 30 years later, one of the coolest things. And so got in the real estate business just from a sales and marketing and brokerage standpoint. This is 25, 27 years ago, 25, 26 years ago. Loved it, enjoyed it, and was bored in 6 months. And right in it. And it wasn't that the business was boring. It wasn't that I didn't appreciate the business. It was just I was in the state of Washington at the time. Living outside Seattle. We live in Arizona, outside Scottsdale in Paradise Valley now. And you know, at the time there was 25,000 or 28,000 real estate brokers in the state of Washington, and now there's 25,001 and everybody's smarter than everybody else. And I was like, ah, no, I'm, I'm not interested in it. Like, this is just like, I like it. I like all those aspects of it, but I just got bored with that. And through kind of just an evolution of things, I started meeting builders, developers, and investors and guys that were taking a different approach to real estate and I liked that because it was a little bit more nuanced. It was a little bit more strategic, but it still had that underpinning of real estate to it. And, and that part was cool. And you weren't one of 25,000 other schmucks trying to do something. There was guys that were taking an approach to that, that were getting things done and having a bigger impact. And that to me was, that was intriguing. That was cool. And so I met a few developers and the developers were telling me, you know, stories about what it is that they were doing. And I started talking to them and sit down with Ben, you know, Ben, tell me about your deal, what you do and so on and so forth. And I met this developer named Jeff and he tells me about his project and we get into this project and he goes, you know, here's how this works. And just a dummy, I asked him, I'm like, so like, where does, like, where does the financing come for this? Like, how do you, where's all this? How's this work? Right? Because I didn't know. Right. And you didn't know. You didn't know. And I didn't know it. He goes, oh, well, this deal's, you know, for these dozen townhomes or whatever it was, you know, it's about $4.5 million at the time. And here's where this is. You know, we get about half from the bank, we got a little bit of our own money, and then, you know, we go to investors. Okay, well, why do investors come with you? And so this whole evolution of things kind of came, and JD Capital at the time just kind of fell into place. Like, I did a couple of deals and helped some guys raise a few million bucks for some projects. It is— didn't charge them anything, didn't even know you were supposed to, didn't know that. And I was just like, I'm just helping out my new buddy, right? Helping him get his deal done. That was cool. Now I got a new friend. We could talk about real estate, drink beer and talk story. Cool. This is fun. And one of those guys referred me another developer and he said, hey, I got this project. It is— Jeff and Dan told me it is— that you helped them with something. You want to come take a look? Sure. And so through evolution of things, he's like, okay, well, you know, we're short about $1 million at the time. Again, this was however many, you know, 20-something years ago. Do you think you could help?

That.

Maybe, you know, give me your stuff. Let me see what it is I can do, so on and so forth. And so we're kind of finishing this deal. And he goes, well, what do you charge? Charge? Uh-huh. Wait a minute. Hold up. Before you open your mouth, I was like, charge along 3 to 5%. I'm like, oh, we charge 3%. And he goes, okay, on the money raised? I was like, yeah, of course. He goes, cool. Do you have a contract or something to send over? Of course I do, right? And, you know, Right? And so we kind of shake hands, put this thing together, and I'm leaving. And he goes, hey, by the way, what's the name of the company? JB is my nickname. I was like, it's called JB Capital. He goes, I think I heard of you guys. I was like, of course you have. You know, we kind of, you know, shake hands. And I said, okay, great. You know, I'll follow up and get you everything you need. So I got in the car, called my attorney, and I'm like, John, I I think I just started a business. And he goes, okay, well tell me about it. And I'm like, here's what kind of happened and here's this deal and so on and so forth. And he's like, dude, do you have any idea what you're doing? And I was like, kind of, you know? And so, but I need you to put together a contract today because I told him you'd have one. And oh, by the way, can you go start a business called JB Capital? Right? And that's how that deal came together. And then over the next, that was the end of 2002, between 2002 and 2008, purely for real estate capital. We put together about $550 million in deals in just kind of private real estate capital for these builders, developers, and otherwise it is that we're looking for differentiated capital and had a wonderful time with it. And that kind of evolved more so into corporate credit. And so for this last kind of 18 to 20 years, we'd been running kind of a boutique investment shop. It is that put together capital. And so we did about a billion or so dollars in private capital deals. Before we started our first funds investing off of my balance sheet and then raising money alongside that 4 years ago. So now we have 3 funds in the market and we're investing in private credit and corporate credit as well as some real estate credit deals and just having a ton of fun. So there's your short story.

Long.

Yeah.

So I mean, you've seen, I think you said over $1 billion of transactions in the kind of private market space and You know, so the first day you talked about, it sounded like it was an equity investment, but you've kind of shifted now to private credit. So give us a little sense of what that shift was like. I don't know if, you know, 2008, 2009 maybe shifted your perspective or when that kind of shift happened where you're placing more, you know, structured capital or mezzanine financing versus just pure common equity. And, You know, when that shift happened, and I'd love to talk after that on really what's the broader opportunity happening right in this market.

Yeah. So for us, everything it is that we've done has been some sort of structured capital, some form of debt. We've tried to even stay away historically because for convertible debt, because convertible debt has the option to become an equity security. And so we were never really in kind of the BD securitization space. So we kind of wanted to stay away from that. And structured capital, debt one way or another was an easier way to accomplish what it is that we wanted to accomplish. So the totality of everything, it is that we'd, Bob Fraser's really been in this kind of private capital marketplace, starting in real estate and moving towards corporate credit. Partly, I think, I think I was too dumb to be an equity guy. And I don't say that, you know, self-deprecating. I just say that like there's some things I don't understand. Like I didn't understand how, companies were getting 15 to 20 times valuations it is, and it was going to make sense. Like, I'm kind of a jeans and cowboy boots and dummy kind of guy, and 20 times valuation on a company that's losing money, I'm like, okay, but you owe me $5 million, right? You know, it was easier to do that in my brain, and I could explain that and justify that and rationalize that when we were raising money, different from defending evaluation. So if I was sitting down with Ben's software business or healthcare business or whatever it was, and you told me your business is worth $10 million, cool, awesome. $100 million. Awesome. Sounds great to me, right? Either way, regardless of the fluctuations in the value of your business, as that's ebbing and, you know, going through certain ebbs and flows, you've got a cash flow issue. It is that we're coming in and we're investing in based upon that cash flow and where it is that you're going to be. And regardless of whether your business is $10 million or $100 million, still owe me $5 million. So, right, um, I liked that. And over time, we got smarter about that to where I feel like we were able to, to structure things to where we could generate equity-level returns with all of the protections of being a lender, right? So I would always think of when you're doing structured debt deals that debt was almost like a like a bit in a horse's mouth, right? Like I can speed him up, slow him down, put him in the stable, back him up, do whatever it is. Like I don't have to own the horse to control the horse, right? Right. Well, 8-ounce piece of steel, if it's done correctly, can control a lot of what it is that's happening. And if you do debt correctly, I feel like it is that you can control and manage some of those expectations without having to go on the valuation ride up and down.

Yeah, that makes a lot of sense. Yeah, absolutely. And then I remember I used to be a commercial banker and, you know, it's now being on the equity side and the debt side still, it's, you know, people say, oh yeah, I own, you know, $100 million of assets. It's like, well, technically the bank, you know, yeah, they may not own it, but they control it until it's, you know, you don't have a lender involved. Yeah, you're, you're still beholden to the lender. I think there's a great Great point you make there with the kind of bit in the horse's mouth. Yeah, I think it'd be helpful maybe for those that are newer to private credit to kind of set the stage for what are the options out there? What does the landscape look like? And I think it's a space that you and I are aware it's been around for a long time, right? But a lot of people, they're just hearing about it or they've been hearing private credit or private credit or private credit, but One, it sounds like a new thing because they haven't heard of it talked about a lot before. And then two, it's a very broad term, right? You're talking about investing in businesses. You're also talking about real estate. You're talking about, you know, mezzanine financing, preferred equity, you know, debt-like investments, you know, and you do, you do corporate credit and real estate credit. So talk a little bit about, you know, the broader landscape and then kind of break down some of those kind of components for us.

So you're, you're right, even though right now private credit is getting tons and tons of press, it's not a new thing. So if you think about private credit in its most simple form, private credit, you should think about it as basically non-bank or non-traditional financing, right? So non-traditional financing has been around forever because you borrowed money from your uncle, right? Or the guys at the country club or something like that. Like People have been doing that forever and ever and ever and ever, right? Moving more now so towards an institutional approach to private money, which is why it is that you're seeing that kind of gain a lot of steam and a lot of headlines and that kind of a thing. I think that's for a couple of reasons. And so for the listeners that is, that have been around a while, been investing, paying attention for a while, prior to Great Financial Crisis in 2008, you had in the country, you had 11,500 thrifts, basically commercial lending institutions, right? Your normal banks coming out of 2008. After that, in 2010, we had 6,500. So we had basically almost functionally been cut in half. From 2010 to '15, we went from 6,500 to 5,500. From '15 to '20, you go from 5,500 to 4,500. And now we're sitting at about 3,800. There's going to continue to be a consolidation and kind of an atrophy there from normal traditional lending. And so By default, what that does is there's fewer choices, right? So whether you're a borrower or a consumer, doesn't matter. There's fewer girls at the dance, right? There's fewer lending options. And so at the same time, it is in the traditional commercial space to where it is that you had 11,500 or so banks at the time, there's about 1,000 or so to 1,200 groups that were private equity, private credit, venture capital, MES, SBIC, blah blah blah, whatever, alternative capital, right? That number is now $15,000 to $16,000. And so you've almost seen this kind of inverse slip, flip from traditional kind of, you know, uh, commercial public lending markets it is to this whole alternative space. I've seen a major shift there. Um, a little less regulation, um, which can be good and bad. Um, but a lot of guys are going into that, and the reality is, is that most businesses don't fit into a normal banker's box and less so now with where interest rates and regulations have come by default. Most people are kind of looking at alternative options rather than kind of primary traditional options. So I think that that's been kind of the backdrop of what's happened. I think now we're moving to a point to where private lending is going to— I think we're seeing this kind of first 1 to 2 years of about a 20-year bull run. So if we think about where private equity was, you know, 18 to 20 years ago, and it's just become this massive, just monster in private markets, I think it is that we're seeing the beginnings of that for the next 20 years in private credit. And so you're seeing a bunch of headlines now. I don't expect them to go away.

Yeah, no, that makes a lot of sense. And I'm glad you had the numbers off the top of your head on that consolidation, because that's definitely something that's been happening over the past, you know, several decades. We actually just did a whole private credit masterclass that folks can go listen to 'cause we kind of set the stage for some of these dynamics are going on. One, you have consolidation in traditional lending, you know, it's to your point that it continued to happen aside from the fact that that's just, you know, the industry's in a consolidation mode. But with the new regulations that are being pushed out with the, you know, Basel III Accord coming out, it's going to continue to put more pressure on smaller institutions which are generally the more flexible type of lenders that can be more creative because it just creates this, you know, additional overhead and a harder cost to compete with the larger lenders. And so it's creating this huge opportunity because, you know, the ability to get private money has always been there, but it's been less institutionalized. And now there's a lot more options. And then you look at the market opportunities, you know, real estate's very different than maybe the corporate sector, but Because of a lot of the headwinds in commercial real estate, you're seeing a big pullback of new capital and appetite from lenders to want to put new capital out. And then even if they wanted to put new capital out, they're not getting the payoffs on their balance sheets that they expected with the maturities because a lot of the interest rate increases have put a lot of pressure on their current balance sheet of the loans that they have to where they're not going to be able to get the refinances that they thought because of cash flow constraints. So it's keeping loans on their balance sheets and that they can't get paid off and they use to make new loans. And I would assume the same thing is happening on the corporate side, right? Where that's probably a lot more, you know, bigger booms and bust cycles, you know, given all what's happening in private equity. But talk a little bit about the corporate credit side because that's an area we haven't spent a lot of time talking about. I'm on the podcast and I think is a very interesting kind of play right now with, you know, things going on in just the broader capital markets. But, you know, from my standpoint, it can be very attractive for the borrowers in these businesses that are growing or maybe hard to get an equity investment, or if they can get an equity investment, it's very expensive for them because they're giving up or diluting their ownership and they're basically giving away that future value to someone that may not have the same, you know, goals or, you know, desired outcomes as the owner, the founder. So talk a little bit about that whole space in corporate credit side and where the opportunity is, what you're seeing, and kind of how the, you know, mezz debt or venture debt kind of product fits the need.

Yeah, so, You had said earlier, it is that there are, you know, there's tons of different flavors of private credit. And so both for corporate credit and real estate credit, I mean, you remember Baskin-Robbins 31 flavors? There's at least 31 flavors of, of, and probably, probably more than that. And so when we share our opinion, my opinion's just our opinion. It doesn't mean it's right. It doesn't mean it's wrong. It's just our opinion and how it is that we're viewing things and opportunity. And so, So for us, when we look at the corporate credit landscape, we look at normally banks have been a solution to a degree for normal kind of growing operating businesses. They've become less and less relevant of late and will probably continue to be. And so right now for Ben and Jeremy's growing business, whatever that is, right? When we're looking to grow, we're looking to do that, banks have become less relative and they're They're doing a good job of like savings accounts and stuff like that when my kid gets birthday money from grandma, right? Like they're really good at serving these businesses that they can lean on the SBA for.

Yeah.

And they're really good at, you know, the company that's already doing $100 or $200 million a year in revenue that they can just service the crap out of. Anything in between, they're just freaking useless. They're just useless. And so normally that would kind of drive guys that is into either venture capital or venture debt or mezz or private equity or otherwise. And you've seen this kind of shift that as if you think about, you know, kind of banks, private equity, venture capital, angel and other stuff, and then kind of friends and family stuff, the banks have kind of become more, you know, irrelevant and kind of moved out of the way. And private equity now is almost functioning taking the place of what banks have done the last 10 or 15 years. And so in that case, now venture capital is almost acting like private equity. And you look at these guys, it is that were, you know, the local rich angels and syndication groups and old rich guys and golf club guys. It is these guys all think they're fucking venture capitalists, right? You know, and so this weird kind of shift has happened. And so for us in private credit, where it is that we're seeing value And there's guys that do much bigger deals than I am, and they're all smarter, better looking, have more money and bigger trust funds than I do. Who cares? We're looking at things a little bit different. And the opportunity set is that we see day to day is more kind of Main Street businesses that reflect maybe you and I a little bit better. And so there is this disproportionate growing group of companies that we find that are, they're kind of past that friends and family, mom and dad, rich uncle round of raising money. They're just not yet to a point to where institutional capital can afford to pay attention to them. So if Ben and Jeremy don't need to borrow $20 or $50 or $80 or $100 million, we need to borrow $5. It's kind of a weird check because that, right, that $5 million is a giant scary check for the local rich guy in your community to do by himself. The wealth manager or the family office or whoever it is that has the balance sheet to do so doesn't They don't necessarily have the human capital or the expertise to help you put that deal together, to sit on your board, to help you hire VP of market. Dude, they just, they don't do that. The guy in Chicago that, that's exactly what he does. Well, his last fund was $1 billion. Like he, it doesn't matter if he likes you, he can't afford to write a $5 million check. Like $5 million is the Christmas party, right? Like no joke. Like they can't afford to allocate resources there. And so you're finding that these companies, it is, are kind of left to their own devices. And so right now there's about, there's, I think the government says there's 220,000 companies in the country that are between this kind of $10 million in revenue and $120 million in revenue that are underbanked and underfinanced. And that's where we see trying to provide value. Like, I'm not going to be Blackstone, don't care. But I don't want to do the little, you know, $100,000, $200,000, $500,000 deals. We're trying to play in that niche. It is that where we can make a make a big difference to these companies that grow and then ultimately kick them out of the nest and have them go, you know, pass the baton to somebody who can help them accelerate beyond what our capabilities are. That's where we're seeing.

Yeah, that makes a lot of sense. And, you know, to that point, even they're, you know, the guys that maybe do have, can play in that check size, maybe like Silicon Valley Bank or the other ones that, you know, were doing this. I don't know what their involvement is now with some of the things they had going a couple years ago, but they're also disproportionately focused on tech companies. And so if you're not in tech or don't have, you know, the tech scale potential, you're now even, you know, further kind of shunned into, you know, we don't care about you. But it makes a lot of sense. And I think from a borrower standpoint, I mentioned before, it can be expensive to go get equity because especially in those earlier rounds, you generally have to give up a lot of shares and ownership to incentivize the capital to take the risk on the upside. And so it's not always a great match with the goals of the company anyway to go take equity. And especially if, you know, this is more mom-and-pop business or a family-run business and, you know, you go bring in traditional VC capital, their goals are to grow at all costs and they just, you know, let's, light this, you know, put a few turbo, you know, jet engines on this business and see what happens. And if it breaks, this is kind of part of the business model and, you know, the fallout we don't care about. But that's not always the goals of the company. So venture debt, it's, you're not giving up ownership, you're now creating additional cash flow burden to pay, you know, the lender. But if you're already an established business that has, like you said, existing revenue and client base and they're looking to just take it to that next level, that's a really great option, right?

Yeah, it's, I think entrepreneurs are getting smarter. Like I don't think the bloom is off the rose completely with venture capital, but I think like you said, you know, entrepreneurs and business owners, it is, are wanting to, they're understanding the value of their equity and once you give it up, it's hard to get it back. And are there ways it is that they can accomplish some or most of what it is that they're trying to do without having a dilutive event, right? So, and if they can do that with— I mean, candidly, that's another reason why kind of private credit is continuing to grow, is that I think entrepreneurs are wanting to stay private for longer. They're wanting to protect that equity for longer. Private credit's a mechanism for doing so. I think the other thing it is that you know, we've heard way too many horror stories about guys that gave up private equity, or gave up equity, it is, in VC to Joe's VC company. It doesn't matter who it is, right? And everything is great, just like it is when you start dating. But the minute it is that you're not meeting numbers, that you're not on track, that you're not one of the top 1 or 2 performers in that fund or in that sect, um, for that, for that VC, then you go from being at an MD level to an associate level. Now I don't have the attention of somebody with influence that can actually make my business go. I've got some B-school puke in a Patagonia vest that, you know, right, it's done less than I, right? And, and so was there actually value there for me giving up that 20 or 30% number, right? And there's— and that happens too often. And so if folks can protect their equity for longer, they're, they're going to do so. It can't leave the they, they should.

Yeah. I mean, the other thing too is, which I think is, you know, you can correct me if I'm wrong, but it feels like there's a shifting of the tides for startups, growth companies. You know, it was almost like a badge of honor, your, your cash burn number, right? It's like, oh, you know, we're burning $100K in, you know, cash a month and because we're growing at all costs. But there's that's just pretty undisciplined, right? But to actually take on venture debt, you actually have to be a little more disciplined because you have to service the debt. And I think it actually creates a more metered approach to growth because you actually care about profits along the way and the ability to service that growth. And so how do you kind of look at, you know, what's like an ideal borrower for you and how are you underwriting an actual loan in your portfolio that you might make to a business owner?

Yeah. The ideas of this time to where it was raise a whole bunch of money and grow at all costs and damn profitability, I don't know if those are over, but they're certainly less so. I mean, if we get to this idea of, hey dude, nobody's coming to save you, if there's no more money coming in your business, like no, no, no next round to bail your ass out. If you had to make money tomorrow, what are you going to do? Where are you going to cut? How are you going to— how are you going to change? I think that that is becoming more so the philosophy here and will hopefully continue to do so. More so the philosophy of these guys. For us, the venture debt guys typically are looking at underwriting Ben's software business or whatever it is. First, based upon the fact of who your sponsor is, right? Is there a venture capital firm, private equity fund that'll sponsor in there that's already put $2, $5, $10, $20 million in there? And based partly upon their assessment, that's giving credibility to that business above and beyond what it is that the business is worth. So when you look at businesses like a Hercules or Trinity or SBB or any of these guys, historically they were sponsor-driven first. And oh, by the way, Ben and Jeremy, tell me about your business. Businesses, right? Kleiner's in it for $50 million. You got to be cool. What do you do again? Right? Like, we don't, we don't do that. So sponsor or not, I kind of don't care. If it's there, that's great. If it's not, I'm perfectly okay with that. About 80% of our portfolio is non-sponsor-backed companies. So these are founder-led businesses. These are the guys that are, you know, raising money, friends, family, their own stuff. They're checking an account of, what are we going to have? It's like, hey, we're We're in, baby. How are we getting this thing done? Right? And so when we're looking at things, number one, you know, does it fit the kind of the market it is that we invest? Like, we don't invest in everything. We invest in 4 or 5 things, kind of technology, technology-enabled service, software, healthcare, health tech, direct-to-consumer, and then the upper end of professional services, law firms, CPA firms, wealth management, that kind of thing. And so if you don't fit in that box, that kind of kicks us out right away. Doesn't mean I don't like you. It just means I don't understand you. So I don't need to get up to speed. So we look at those kind of things. I don't do startups. I don't do good idea on a cocktail napkin. If only we had $5 million, I'd be on the COVID of Forbes. I'm not that smart. We're not going to do that. So we look at stuff that is— that's up, running, working, generating cash flow, keeping the lights on. And now you're at an inflection point. You are trying to buy the guy across the street. You're trying to get V4 of your product out. You're trying to do whatever, hire 5 new guys, grow the business, do whatever it is minded. And you need some type of differentiated capital, it is, in order to accomplish that. That's kind of where we come in. And that part's been really good for us. So when we're underwriting those things, that's number one, you know, how do you fit the market? It is that we're in. Where is the stage of the business? What is the need for capital? Like, I'm writing kind of $1 to $10 million check sizes. So if you need $200 grand, I'm not your guy. If you need $20 million, I'm not your guy. We're kind of in this little, you know, market there. Are your uses of capital prudent and thoughtful? You know, and then are your expectations on that capital prudent and thoughtful, right? We're a $5 million business. We want to borrow $25 million. I only want to pay 2% and I need it for 20 years. Dude, good luck. Let me know how that works out. What are your expectations of this? And then ultimately, you know, when we get there, Do I like you? Are we going to get along? If you and I are going to be friends and talk to each other every 2 weeks and see each other once a month for the next 3 or 4 years, is this going to be a painful experience? Right? And so we kind of walk through and underwrite those things. And then ultimately, do we think it is that we can help? Even if I like Ben, I like his business, I like what it is that you're doing, but I don't think that is that we have resources that is above and beyond capital to help you. Then I shouldn't give you money and you shouldn't take my money. Because if the only thing I bring to the table is capital, I'm sure that there's somebody that's bigger than me, smarter than me, more capital than me, cheaper rates than me, and will do you better. So there's got to be something there it is that we can do that accelerates or lubricates your efforts to help you get to that next point better or faster or smarter or something. Right. So that's how it is that we look at the world.

Yeah, that makes sense. Any other broader thoughts on, are you seeing more opportunity now than you have in the past few years just across, you know, real estate and corporate credit? And where do you kind of see, you know, going forward with this sector and just this asset class of private credit in general?

Yeah, I mean, I think for you and me both and the audience listening, private credit isn't going away. I really do believe it is. The more and more it is, I look at this and read and study and this kind of thing is that we're at the kind of beginnings, couple of years of this kind of 20-year bull run on private credit. So I don't think it's going to go away. So it's for you and me and the people that is listening, get smarter about it, read about it, find something that resonates and makes sense to you. Your funds at Aspen are fantastic and a great place for guys in real estate. For us, we're seeing opportunities both in real estate and in corporate. On the corporate side, again, I go back to that idea of we're not startup investors, but I'm not competing with BlackRock and Blackstone and KKR. We're in this you know, $10 to $50, $10 to $80 million companies that need differentiated capital where they've gone to their bank and their bank can only get 'em sort of there. I need to borrow $10 million. Yeah. The bank's comfortable with $7 million. And so now I'm kind of there and kind of not. So now what the hell do I do? Right. You know? And so we're good at kind of coming in and working alongside and solving those problems. I think that there is always going to be a need for nuanced niche capital. Banks are going to become less relative. You're going to see the institutions continue to raise more and more and more and more money, which is— God bless them, good for them. But what that problem not solved doesn't solve when you're raising $1 billion or $5 or $20 billion into a single deal, it prevents the opportunity from doing a $4 or $5, $6, $8 million deal, which is what the backbone of the entire country is. That's where I see our value in private credit. On the real estate side, I think it is that there are still a number of incredible opportunities. It is in the private credit side, it is to happen. I think it's a little bit different. I think one of the concerns it is that you and I mentioned, we're kind of talking about is this kind of impending maturity cliff that is the began kind of the end of last year. And so that is going to create some disruption. Like we're starting to see legacy assets. This has happened in Phoenix, Seattle, Houston, a couple of other markets that we've been looking at to where there was a, you know, an office building. It is that 8 years ago sold for $75 million and last week traded at $10 million. And you're like, what a great opportunity. And it's like, well, maybe, but what the hell are you going to do with it? Like, there's nobody in there, right? Like, we're going to— we're going to turn it into a club. We're going to turn it into You know, housing, we're going to like, I mean, there's something there that you can do with it, but, but just because it looks like a deal doesn't mean it is.

Yeah.

And so I think that there's going to be a lot of opportunities there. I still think it is that there's a tremendous amount of opportunities in housing. We're still in a, you know, we've got two issues in housing across the country is you have a, you have a deficit to demand. So you have a supply issue. We're functionally about 5 million units short of what it is that we need across the country. And I think last year we had about 500,000 starts. So people need a place to live, eat, sleep, drink, no matter who the president is, what interest rates are, who you vote for, what book you read, you still got to have a place to sleep. And we're at a deficit there. So you've got basically a 5 million unit shortage and you got about 35 million units across the country. It is that are functionally obsolete and need to be burned to the ground and rebuilt. So you got an availability issue and you got an affordability issue. Stuff's expensive. Like I remember what my wife and I paid for our first house. I remember what we rented my first apartment for. And I look at my kids graduating school now and I'm going, oh my God, are you freaking crazy? Like it's nuts. So there are definitely opportunities in, I think housing it is that is still there. We've had a major industrial wave, an onshoring wave that I think will continue. There are opportunities in retail. I don't understand it, so I stay away from it. I don't see the opportunity in office. Doesn't mean it's not there. I just don't understand it. I'm seeing more people kind of blend back and get back into some of the hospitality side of things and tourism. I don't know enough about it, but there's some smart people I know that are doing very well there. That's just not me.

Yeah. Yeah. No, I would agree with that sentiment in general. Just housing still I think in certain markets they're definitely oversupplied in the short term. And we saw, we saw a massive amount of deliveries in the last year and in this year. That'll take some time to absorb because we're seeing rent, negative rent growth in a lot of markets. But to your point, the construction starts have actually fallen off a cliff, you know, even more so this year. And over time, that demand and household formation is going to continue and we're going to be back in the same boat a couple of years from now. And then, yeah, industrial, we're very bullish on retail. We really like because of a similar reason to multifamily is there's nothing's been built in, in like, you know, big box retail. Yes. But small strip centers, which were a lot of the demand is shifting to as people have kind of gone more suburban. Nothing's been built really for several decades because it doesn't pencil. So we're actually see these trade at like below replacement costs, right? That's usually a good sign when, yeah, asset values are trading there. But, you know, definitely agree on some of the opportunities. Where's the best place for folks to learn more about what you're doing and kind of get in your newsletter and those kind of things?

Yeah, I mean, so you can check us out. Our website's jb-capital.com. So JB is me. I'd like to say it's James Bond, but it's really not. But that'll help you remember it. James Bond Capital. JB-Capital.com, or you can check us out on LinkedIn at JB Capital or Jeremy Hill. Either way, I'd love to hear from you.

Awesome. Thanks so much for coming on, Jeremy. This is a fun, fun conversation, and definitely see a lot of the world the same way. So appreciate you sharing your sentiment and educating investors here.

I enjoyed it, my man. Thank you so much.

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