Real Estate Investment Opportunities Series - DLP Capital

Foreign. Welcome to this White Coat Investor Real estate investing webinar. I'm here with my friend Don Wenner, who is the principal, founder, CEO of DLP Capital. Don, welcome back to the webinar.

Thank you, Jim. Pleasure to be here.

Don, I've been investing with you. You've been managing some money for me. I think it's eight years now, seven, eight years, something like that. In some forms.

About. Right.

Or another. And I've been pretty happy with it. I mean, you've been sponsoring the White Coat Investor conference now for three or four years straight as well. I think a lot of White Coat investors are now familiar with dlp. There's a lot of White Coat investors at dlp. Hundreds and hundreds of White Coat investors that. That also invest money with you. So before we get too far into this, I just wanted to say thanks. Thanks for doing such a good job stewarding our dollars to. To a better outcome.

Well, thank you for that. Yeah. Thanks for the partnership. Yeah. I think seven, eight years about right. And yeah, I think at least four years now been at the conference. And last count I was given, we have close to 800 members of White Coat invested with us. So thank you. And thank you to the White Coat community.

Yeah, I think just that longevity says something. People go, oh, this isn't a brand new company. This isn't a brand new advertiser. This is somebody we've been working with for a long time and nothing's blown up. So that must be some sort of an indication that good things are happening here. And certainly they are. As I think we will discuss today, One of the things I think a lot of people get really excited about when they learn about dlp, though, is not just making money. It's not just having a good investment. It's also about doing a little bit of good in the world along the way. And I love that you have a very clear, carefully defined mission that is not only guiding your life, but is guiding your company. And I'm looking forward to hearing more about that and what's been accomplished with that. And let's get into it. I know you have some slides, so we'll let you present those and then, as usual, move into kind of a Q and A period.

Awesome. Well, I could just let you. You just did the sales presentation for me there, but I'll add a little meat onto that here.

Yeah, people might want a few more.

Details, but I'll start with my disclaimer that says kind of what Jim said. Yeah. Seven, eight years now with white coat alone, you know, 19 years since I founded the company. So the attorney, and I'm sure it says somewhere in this paragraph, would say past performance is not an indicator of future performance. Do your own homework, do your own research. But very proud of what we've been able to do so far. And you know, I kind of put this slide in here to sum up what I'm going to talk about. And for those who are new to us saying, well, why should I pay attention and watch this next few minutes of this webinar and hear about investing in housing, investing with the OP capital. Why would I be interested in doing so? And so we look to deliver sort of the product of the product, right? The product of our funds. What we try to deliver to investors are double digit returns. And we've done that in every fund since we've ever started. Consistent returns, regular monthly or quarterly distributions, depending on which fund, security by owning real estate or loans against real estate, which are the two sides of what we do. So direct funds have direct hard collateral behind them, tax efficiency, which we'll talk about. Each fund's a little different. These investments are truly passive. So even if you invest in real estate in a partnership as an example, you may have to submit your financials to lenders or sign documents or be involved in some level of the work. These are complete passive. Once you sign in, you have no obligation, no day to day work. We have a big focus, as Jim said, around family and providing education, support and resources, such as the, you know, event we did at the start of the White coat event just a few weeks ago. But really what we found for a lot of families, that the safety and security and passive nature of the investments is a great confidence and if, you know, if any of us got hit by the ice cream truck tomorrow, that the investments will be able to easily be transferred, passed on to our family members and then finally impact. And every one of us, no matter if you realize it or not, maybe some don't realize it, are dealing with the crisis of housing affordability. It affects every market in this country, big and small. And either you've probably dealt with it directly, maybe through your time in college or residency, or family members struggling with the cost of living today all across the country. And that's what we do. We provide housing that's affordable for working families. But that's really the start of our, of our job, which I'll explain what I mean by that in a moment. So that's to sum up what I'm going to talk about, why it's relevant to you as a potential investor in our funds. So very quick about myself. Founded the company 19 years ago. Today at the LP Capital we have five and a quarter billion dollars of assets under management. We've invested over $11 billion into what we've been called to do, which is to transform lives through the building of thriving communities. So in simple terms, and housing that's affordable for working families, families, We've done over $6 billion of our investments as a lender and that's one side of our investment fund options. And then over $5 billion directly as a developer, builder, operator of housing communities. And I'll explain both of those. As you'll see in kind of the center of the screen. We've been one of the fastest growing companies in America for now 13 years in a row. And we've grown by about 50% a year for 19 years in a row. And a big part to that is this operating system we've developed that I wrote a couple book. And we help not only run in our companies, but help lots of the borrowers and sponsors we deploy our money with, put the discipline and rigor in place within their organizations, which is a big part of the consistency of our returns we've generated. And then for me, most importantly on this slide is my family there. My wife Carla, married, coming up on 15 years and our three boys, Donnie, Alex and Jacob. This is our headquarters is where I'm talking to you from right now here in St. Augustine, Florida. Last year here at the LP Capital, we did $566 million of re revenue. We have over 3,500 investors invested with us, as I mentioned, around 800 a part of the white coat community. So a big part of our community, 500 plus team members that work here at DLP Capital. And we get to serve about a hundred thousand residents that live in the properties we're invested in right now. Our purpose, as I mentioned, is to transform lives through the building of thriving communities. The longer version is Dream Live Prosperity. We transform lives to the building of thriving communities. And DLP stands for Dream Live Prosper. And our big hairy audacious goal is to positively impact 10 million lives through the building of 5,000 communities. And we think that'll put us one of the hundred largest private companies in America. All right, enough about us. Let me tell you a little bit about the funds and the investment opportunities available to you. So these are our four funds that are open right here today. The DLP Lending Fund and the Preferred Credit Fund. Those are two funds that Lend money. And then our DLP Housing Fund and Building Community Fund. Those are two funds that own real estate. They've all generated, as you can see, double digit returns with regular distributions and liquidity. We have investors in all states across the country, which is pretty cool. I think it was a good almost two years that we were stuck on 49 states. We now have investors in all 50 states, 3,500 families, about half of which are invested in multiple of those funds that I just highlighted. And every year, somewhere around 2/3 of our capital we raise comes from existing investors adding more money with us. And then a big part of the other capital raise, the other third. A big part of that is referrals from our existing investors, which we are very, very grateful for. At DLP Capital we're term often used vertically integrated. So we do property management, we do development, we do construction, all in house. We have all those resources and all those expertise in house. We're not always the developer or the builder or the operator, as we are often the lender, but that expertise is what gives us strength. No matter if we're investing as lender, partner or directly as the sponsor or developer. Our investment thesis here, I'm not going to spend a ton of time on this, but just cover a few of the highlights. This is our thesis, our approach. No matter which fund, no matter how we're investing as lender, partner or directly as sponsor, we're investing in housing that's affordable for working families. And the way we define that in most cases is that our rent is less than 30% of the area median income. And the experts say that's the threshold of affordability, meaning if you start spending more than 30% of your gross income on rent, you're having to sacrifice the basics of healthcare, food, education just to afford housing. So we focus on staying. We actually mandated this. Keep at least 85% of our investments under 30% or well over 95%. And our average rent to income is about 25% across our portfolio, which is considered very affordable, where only a quarter of your income is going to pay for rent. We believe that housing that is affordable will be in great demand in all market cycles. So of course there's lots of questions today. Are we going in a recession, which has been the question for many years, right? Are we going to have a lot of inflation? All these questions, tariffs affecting. What I can tell you is no matter what the market cycle is, there's a demand for housing that's affordable. And that demand arguably only goes up in recessionary. Environments. We are based as investors. What you pay for an asset matters a lot. That sounds simple, but sometimes can be forgotten. We believe that housing supply will continue to be restricted. We believe demand for single family rentals will continue to grow, which is part of our strategy. We believe the Sun Belt's the great best place to invest because that's where the population growth is. And you can read through some of these other other areas. A big one here is we like to invest when there's significant equity behind us in the funds. And I'll explain that more in a moment. We do believe interest rates are going to go down and we do believe construction costs are going to go up regardless of what the tariff policy is, which is important parts of how we think about the investments we make. All of our investment funds are impact investments where we're self mandated. Our funds are mandated that at least 85% of our investments are affordable for working families. That's the starting point to our approach. But that's where everything begins for us. And on average, we're under 25%. But for us, a place that people can afford to live is where our job starts, not where our job ends. Our focus is to build thriving communities. So a thriving community to us is a place where people are living fully. And to us, living fully means you have opportunities for prosperity or success or I. E. You achieve your goals and you have the opportunity of significance, meaning you're helping other people. So to us, living fully is when you're having both success in your life and significance, meaning you're helping other people. So providing this opportunity that people can prosper, have success, but also make a difference on the lives of other people is what we aspire to create. And what I can say humbly, we have the great opportunity to do across communities around this country today, we've developed and we're still tweaking this, we're still developing this, we're still refining this as we test and take action and try different things. But We've developed these 10 elements or ingredients to a thriving community. And it all starts with providing housing that's affordable for working families. Having a deep focus around family, a deep focus around impact and connection and real friendships in the community, and a deep focus around having a relationship with the Lord. And as you can see there, it says, you know, all people are welcome in our communities. We have people of all backgrounds, all religious beliefs. We want to create opportunities for people to have a relationship with the Lord. But whether they choose to or not, everybody wants to live In a place with love and grace. And that's what we look to bring to our communities. And lots of details here on each of these different components that we look to bring to our residents that I won't spend a whole ton of time on right now, but we look to create communities where our residents, students, are serving one another, where they feel that their life matters more than just for their own goals, but that they're making a difference in the lives of other people. And that's an incredible, incredible joy we get to do and be a part of throughout our community today and can tell you lots of really fun stories around that. One of the biggest challenges we face in this country today, it leads to a lot of the economic challenges that residents face are fatherless homes. And there are millions and millions and millions of children right now in fatherless homes. And that not only creates financial instability and people not be able to afford their rent and so forth, but it also has a significant effects on families, on our society as a whole. And so if you take one thing from my presentation, which you could argue has nothing to do with what I'm presenting on, is that couples that pray together stay together. And so we try to create opportunities for families, stay together, to build relationships between husband and wives and amongst kids and their parents, and do a lot of unique and cool things to do that. One of the other scariest stats that face Americans today is that 65% of renters, or 65% of American children going into fourth grade cannot read at grade level. And in apartment communities, those stats are even worse. And it's not that complicated. And we want to help children be able to read. It's arguably the biggest factor in social mobility is your ability to read going into the fourth grade, as crazy as that may sound if you haven't kind of studied that before. And for us as believers, speaking for myself personally, one of the scariest stats on these slides that affect residence day is 94% of renters in America today are unchurched. They're not part of a church community. So 94% of renters are not part of a church community. 80 plus percent of renters say they're not connected to the local community they live in. And 77% of all Americans are disengaged in their jobs. It's the lack of connection, they say today we have the most connected society in human history for the most disconnected. We have a loneliness crisis in this country. And it's worse for renters. Most renters do not know any neighbors. They don't know a single neighbor, they don't know their names. And we've been saying since we started 19 years ago that we provide SAF affordable housing. Safety comes from knowing your neighbors and them knowing you. And that's what we look to create real relationships amongst our residents. People have real friendships, know one another, get the opportunity to do life and serve one another. So that's, that's our approach. And the great news about that approach and taking care of residents is it's good for business. When renters can afford their rent, they pay their rent. When renters feel cared about, when they have relationship with their neighbors, they stay. When people stay, that means we have higher occupancy, we have lower turnover costs, we have lower maintenance costs, we generate higher profits. And that's our approach. And we're blessed as an investment strategy to deal with some of these factors that I'm about to talk about. But as an American, some of these stats are scary in the facts of how unaffordable housing is today. Housing homeownership is more out of reach today than ever before. This slide shows that the average income you need to earn in America to afford the average home is $120,000 a year. But the actual average income is $80,000 a year. Big gap. Most people, simply put, cannot afford to own. We have a $1,100 gap between how much the average mortgage payment is in America versus the average rent. You can see this chart here that shows over the year the difference between rent and mortgage payment. And in 2010, 11, it was actually cheaper to own than to rent. But you can see how these numbers have soared over the last few years with the rising interest rates and rising home prices. And when people talk about housing in affordability, people often ask, why has housing become so unaffordable? And the simple fact is we don't have enough housing. And we've had this crisis in much of the last couple hundred years of our history. And that challenge is only getting worse as construction is slowing across the country. Less homes going into construction, less homes being permanent, less land being approved and entitled, which means that we're going to have a greater and greater shortage of housing, especially in places like here in Florida, in Texas, and the places where that are having a lot of population growth, so less new homes coming to the market. In addition, many people who own homes today don't want to sell them because they have 3 or 4% mortgages, don't want to sell and lose that mortgage and take out a 6 or 7% rate mortgage. So a lot less existing homes coming to the market. All of these factors are creating more demand on rentership across the nation. Today we have 94.8% occupancy and rising. I expect over the next year we'll hit all time high occupancies across rental housing in America today as construction continues to slow, especially again in places where people are moving. And we're going to also continue to see rising construction costs. Even if you put aside all the tariffs conversations today, construction costs are rising, they will continue to rise, which means rents will continue to go up in conjunction as well. And so nationally, the experts say we're going to see 2.2 to 2.6% rent growth this year. At DLP, we're expecting 3.6% rent growth across our portfolio this year and just under 10% revenue growth this year. So market is very, very strong. The fundamentals of rental housing are very, very strong, which again is good for us as investors. A challenge for the average family and hence why what we do, providing housing that's affordable for working families is in great, great demand. So we do that across four funds. One that does senior secured first position lending. Think the type of lending that banks do, but only to developers, builders, operators of housing communities. We have fund that does mezzanine or subordinate loans, often sitting behind a bank. And then we have two funds that invest equity. All of these funds are evergreen, meaning these funds will be open, we expect for the next five years, 10 years, maybe even the next 20, 30 years. But you have flexibility on when you want to leave the fund, when you want liquidity, which puts us in a better position to maximize the value of our investments while still giving you flexibility. We've been managing private funds now for 13 years. We've run 10 funds. We've generated double digit returns in every fund. We've never missed a fixed return, never missed a preferred return, never had anybody earn under double digit yields across any of our funds. Here's the historical performance across the four funds that are open today and I'll quickly cover each of those funds and then open it up to you. Jim, for questions. DLP Lending Fund is our fund that does senior secured lending. We've been running this fund for 10 plus years. 13% returns net to investors, 8% preferred return in all of our funds. One of the very unique things that we do is that preferred return gets paid to you before we even earn a management fee. If you looked at 100 different private investments, you probably wouldn't find Another that's set up that way that pays the preferred return to you first, then we earn our management fee and then it's an 8020 split. 80 to you, 20 to us. And we've generated double digigit returns distributed every month for 130 months in a row in this fund. We've done over 4,000 loans in this fund over the past 10 years. We've never written off a dollar of interest or principal on a single loan to date. Lending to successful full time operators, mainly in multifamily single family housing, mainly in the southeast in the sunbelt regions. So 100% income distributed monthly. Actually two distributions a month, which is quite unique. Liquidity, all first position mortgages, 1099 tax reporting. And you can redeem out in 90 day notice with no lockout period, no, you know, waiting a year or two. And all of these loans are providing housing to working families that are affordable. Also have a 20% lower tax bracket than you have in ordinary in your ordinary tax, tax or taxable investments. And this fund you can invest via in all of our funds, qualified and non qualified funds. You can invest through Schwab, Fidelity, etc. As well as self directed IRA custodians. Here's an example of a loan we did pretty recently on a $24 million loan to build on 1,000 lots to build the first few phases of finishing these lots to sell to home builders. This was a loan of $24 million at I think it was 13.49% interest rate on lots that were already sold to home builders the time we did the loan. This is a loan we did to buy. These are old pictures of the site. This is what it looked like when we did our loan. It was a rundown movie theater and a couple of buildings to the left and right. Sponsor came to us looking to build this 204 units. This was the groundbreaking after he had removed all the existing buildings and was about to start building the new apartment building. This was the ribbon cutting ceremony a few months ago when they completed construction. This is what the inside of the property looks like today. These are what the apartments look like. This is the, the pool. So those are the types of loans we do each, you know, every day in the lending fund. Then we have the preferred credit fund which does everything I just talked about. But as a 1% higher preferred return, 1% higher target return. Doing subordinate loans to a first position mortgage. I could easily argue if we had the time to do so, that this is even lower risk profile than our lending fund. Give you an idea. We've never even had a delinquency in this fund in our history. One day we will, I'm sure, but I'll keep saying that for as long as I can. Same 90 day liquidity. All the distributions paid out monthly. 9% preferred return to you before we earn anything. And here's an example of a project we did in this fund recently. These gentlemen actually buy hotels and they convert them to affordable apartments. This was a loan for $5.5 million across three hotels in the Dallas and Houston markets. To convert these into affordable apartments. We got paid an 11% current return paid on a monthly basis plus an 8% accrued return. So our total return of 19% on this loan. All right, then we have the DLP housing fund which owns existing housing communities. We have a 17.4% net return to investors over the last now five years of this fund since we launched it. 6% preferred return gets paid the first of every month. 10 to 12% target annually annual liquidity. All of the profits we've distributed so far, 17.4% annual returns have been sheltered from tax while you've been invested with us. For all of our investors who are very, very, very tax efficient. And we own over 13,000 existing housing units that are affordable for working families today. On average about $1,300 a month.

Rents.

Then and then I'll cover here due to time quickly Building community fund. This is our fund that invests equity building brand new housing communities. 8% preferred return paid quarterly. 11 to 13% annual returns. And we're investing equity building brand new housing communities in this fund has some tax efficiencies of unlimited qualified business income deduction. You're taxed at 20% lower tax bracket, has the potential to have some depreciation benefit. Not as tax efficient as the housing fund I just talked about. We're building brand new housing communities in this fund. We've generated a 12.02% net return in this fund since we launched it. Here's an example of a project in right about 30 minutes from where I'm sitting right now. This will be building 194 single story cottages. First homes are just starting to be built I believe this month. And there'll be 194 units. Here's one in Fort Worth, Texas. We just finished the first phase here. 225 units along this water. First phase is in lease up right now. We own two other phases of land yet as well. It's in Fort Worth, Texas. If I didn't say that. Here's some of the inside pictures of this unit. Here's some of the external exterior pictures of this community now completed in lease up. All right, so those are the four funds. We'd love to welcome you. In addition to doing these webinars, events here directly with Jim and team White Coat invite you to join us to the content we put out, the live events. We do. Come and join us. We do content certainly on investments, but we put out just as much content on family and legacy and impact and, and things that really matter why you'd make investments with firms like ours, the things that really matter to you most. So we invite you to go to dlpcapital.com events and learn more and join us for future conversations. And with that said, Jim, I'll turn to you.

Awesome. Great job on the presentation. I think what really comes across more and I've recorded several webinars with you over the years. But every year you are more passionate about your primary mission. You care about building these communities. Nobody, you know, gets up to raise money for a, for, you know, a real estate fund, etc. And spends as much time as you do talking about what you're building, you know, the communities that you're building and what you're hoping for. The residents of those communities and how you're trying to improve their lives. I can tell this is what gets you up in the morning. Is that mission? Do you see any downsides to being so mission focused on that or do you think that's all extra icing on the cake for the investors? You mentioned that treating the residents well is good for business. Can you talk a little bit more about that? Yeah.

It's funny Jim, when I, and you've been with me at the White Coat event, we were just doing this, you know, kind of a live presentation, a little bit sort of deeper dive than we just did right now. And, and you might remember I asked the question, who wants to be a part of investing in housing that's affordable for working families? Right? And I got maybe a third of the hands went up or half the hands went up and that's about normal, right? And I asked another, you know, who wants to, to, to, you know, build an extraordinary family and leave a legacy? And, and you know, and I got maybe a third and a half of hands that went up and, and, and this a room of all, you know, all physicians. I said, who wants double digit returns on your investments with liquidity? And every hand went up, right. And so I fully recognize that when people come and they hear about us, that what they care most about is what's in it for me. Right? And there's nothing wrong with that. Right? To do the hard work of creating wealth and wanting to be great stewards of those resources, that's what we have to do and that's what we're responsible to do, is to make sure you're making sound investments, protecting your resources, generating the kind of returns that are that the risk adjusted returns you're looking for so that you can support a your own family and people you care about, but also maybe the ministries and organization, churches that call on your heart. And so we fully respect that and appreciate that and that's why we have to be great at what we do. Generating double digit returns in all market environments, in this high interest rate environment, we just went through environments like Covid, et cetera. Doing it month into month out, year in and year out is not easy. You have to be excellent to generate the kind of consistency we do at the business you do. And we take that that very, very serious. But the great news is, is that that focusing on, on caring for our residents, simply put, loving our resident, building deep relationships within our communities is good for business. I do a talk on the power of and and having an approach of generating great returns and excellent performance and making an impact. It's harder to do both, don't get me wrong, it's harder to do both. But when done well, they're very, very complimentary. And the very simple note is the things that matter in housing are do you have people living there, do you have occupancy, do people want to live in your community and can they afford to pay their rent or do they want to stay in the community? These are the big questions and factors that generate revenue and then generate profits. And by having a community where people can afford the rent, you're going to have great demand. By people being able to afford the rent, they can pay the rent, but people being able to afford the rent, they want to stay. When people have relationships and are being served well, they want to stay. When people aren't moving out, when they're treating because they live there long term and they love where they live and they feel well taken care of, they take better care of their apartment, they treat it more like their own, which means you have less maintenance issues, less wear and tear. All of these things are good for business. But it's a harder approach, you could say, than just simply focused on getting the highest rent you can at all time and turning over the unit constantly. You could argue that that's an easier way to do it. That's sort of the industry norm way to do it. But we believe it generates lower returns in that approach and certainly doesn't serve the local community and the residents the same way this approach does.

Yeah. Now we've done a few of these and obviously you've done events at WC ICON before. There's not a lot of new information in this presentation for me, but I think some of the things you gloss over a little bit in the presentation really needed to be pointed out in detail to potential investors. So let me just talk for a minute about some of the reasons why I invest with dlp, what I like about it, and you mentioned all of these in your presentation. But I think sometimes it's hard to point out how distinctive some of these things are from other companies. For example, these are evergreen funds, which is my preference for a real estate investment. I don't want to have to sell an investment. I don't want to have to pay capital gains taxes or depreciation recapture until I actually want to spend that money. And the beautiful thing about having an evergreen fund is I can put money in there eight years ago and it's not like you felt like the fund had to have a three year life and you had to sell everything off after three years of value add work and send me all this depreciation recapture and long term capital gains. That's all staying in the fund and I don't have to pay for that. So I like that. But if I want out, I've got liquidity. The two investments I have are the lending fund with 90 day liquidity and the housing fund with annual liquidity. So I'm not tied in for 8 or 10 years or 20 years or 25 years or anything like that. I get the benefits of a long term approach, but I have liquidity if I want to get out. No, it's not daily liquidity. It's not the Vanguard REIT index fund that I can sell every minute of every day the market's open. But it's a reasonable amount of liquidity for those who need the money. It's tax efficient. I just got my K1 a few weeks ago for, for DLP and you know, for the housing fund, again like in past years, all of the real estate income coming to me on that K1 is not taxable. Yeah, there's a little bit of interest income that comes, but basically the taxable income coming off those distributions from dlp, I don't have to pay tax on because it's covered by depreciation. And I appreciate that. Aside from that, and this doesn't matter as much to me as I think it does to a lot of investors because I'm already filing for a, an extension on my taxes. You know, I'm putting them in in October, but I'm not doing it because of my investment in DLP. The DLP K1 comes in early to mid March every year like clockwork. So I think a lot of people appreciate that. But what I particularly appreciate, and then the other fund is, you know, the lending fund's obviously not a particularly tax efficient fund, but the ability to put it in a retirement account makes it that way and DLP makes it really easy to put that into a retirement account. So we actually own the lending fund inside our 401k. But what I really appreciate about it is the stability. These are boring investments. Yes, we're doing some cool things with them over the long term, but it's not exciting. It's not something I need to check in with every week. It's not something that, you know, I have to worry about there being dramatic changes every year. We're doing the same thing every year. We're providing housing to people building apartment complexes. We're renting out apartment complex Texas. We're lending money to established operators. It's, you know, it's a stable, boring investment, which is just the way I like my investments. Right. I don't want them to have any update me on anything because that usually means something bad is going on. And so I appreciate the stability. You know, if I look back at the returns over the time I've owned the Lending Fund, I think they're all within 1% a year of each other. Yes. And I mean it's, it's an incredibly stable return. Not tax efficient. Right. It's all ordinary income and all the income is paid out every year.

It's 20% lower than ordinary income.

Yeah, it's 20%. That's true. He does get the 199A deduction, but you know, but it's the stability that's impressive. I mean, I think people really need to look a little bit more carefully at debt real estate as an asset class for an addition to their portfolio. I mean, who wouldn't want a return of 9 or 10 or 11 or 12% a year every year out of an asset class. Right. That's just an incredibly attractive asset class that I don't think people put enough attention to. But one of the things that I think is particularly unique, and you mentioned this, Don, is that you don't take your fees until we get our preferred return as the limited partners in the investment. And I've looked at a lot of different companies over the years. I haven't seen another one yet that does that. So I think those are some of the reasons that we invest and continue to invest with dlp. But let's talk for a few minutes about some questions people may have. Let's talk about the liquidity you mentioned. For the lending fund, it's 90 days. The housing fund, it's annual. What is it for the other two funds?

Yep. So the lending fund and the preferred credit fund is both 90 days and that's no lockout. So very often you'll get a fund that says, hey, you can't redeem the first year, the first two years we have no lockout period. It's not like you have to wait to the first of a quarter. It's whatever day you submit your redemption. We have a 90 day target redemption. Nobody has ever waited 90 days. So, you know, past performance doesn't guarantee future. We do have appropriate structures if there was a situation of lack of liquidity, but never had it. We've been doing this a long time. So we've always provided under 90 day liquidity. And then on the two ownership funds, the housing fund, the building community fund, both have the same redemptions. Annual redemption. We have a redemption window which is end of February to end of April every year where we take any redemptions. And then the documents say that we will make best efforts to redeem out within 120 days. Most years, including, I know the last couple years we've redeemed within 30 days of the end of that window. I know last year was the third week of May, so we're just closing out those redemption that window over the next couple weeks right now and have every expectation we'll honor those redemptions pretty quickly from the end of that window.

Now let's talk about the two newer funds, the preferred credit fund and the building communities Fund. These were introduced what, two or three years ago?

Yeah, late 2021.

Yeah. Let's talk about how those have grown compared to kind of, I don't know, the flagship is the right way to refer to the housing fund or the lending fund. But some of the older, more established funds, what kind of growth have you seen in those? Are they getting to be similarly sized or how do they look?

Yeah. So right now our lending fund is a little over a billion dollars today. And assets. And the housing fund is in total assets, it's over $2 billion. But both have similar amounts of equity in them from investors like you and I. And then the two newer funds, which are both a little over three years old now, are pretty similar. They're both. Don't hold me this exactly, but they're both around 150 million of equity. They both roughly doubled last year. And then this year we're expecting the lending fund to have the largest amount of growth, followed very closely behind the other three funds all around the same. So we're expecting each fund to grow by over $100 million in increased amount of equity under management this year. So at this point, it's pretty close to sort of even across the funds, they're all pretty comparable, like you said, in terms of returns and liquidity and evergreen structure, each with slightly different tax efficiency or return schedule or so forth, but close enough together that people can pick and choose between them based on their individual situations, whether it's retirement accounts or whatnot, whether they need all the income monthly or not. And all are doing about the same in terms of pace of growth right now.

Now investing is less about seeking returns than it is about controlling risk. Let's talk for a minute about the risks of investing in each of these funds. What sort of terrible thing could happen that investors could be exposed to? Let's say we go through a 2008 style scenario or something like that. What kind of risk are we talking about running when investing in these funds?

Yeah, it's a great question and I'll just take a quick step back and then I'll answer it maybe more directly. But what I think about it is there's lots of volatility. Right. It seems like over the last. Since COVID you could say we're facing an unprecedented kind of type of volatility we've never experienced before every week. Right. And there's lots of things, right. Nobody predicted Covid to happen. Nobody predicted the government to say, you know, tell renters they didn't have to pay rent. Right. As an example. Right. Nobody, you know, predicted, you know, interest rates to go up by five and a quarter percent in just a few months. Right. You know, even the predictions people had, we've had a lot more extreme situations than what were sort of expected. And so I just think about it. Whenever there's major times of volatility, there's going to be, you know, it's going to affect, you know, all asset classes to different degrees. And I believe Housing, affordable housing for working families is going to be in great demand. It's an essential need. And I think it's going to have less volatility than most other places you can invest. And then when you look at, if you narrow down to say investing in housing is one of the safer, more secure, stable ways or places to invest, even in recessionary environments, even in times of volatility, any asset class, any type of investment you make, my belief is that the best managers, the best leadership teams are going to perform better than most companies. And it's in the times of stress and volatility where the manager you invest in matters most and in times of volatility, in times of COVID We saw lots of managers out there go into forbearances on their mortgages, stop paying mortgage payments, kind of hide under the tables and not know what to do. And we generated same kind of double digit returns through that time of volatility and increased the frequency of our communication and transparency and clarity to our investors by doing webinars twice a week during that time, telling how we're doing with rent collection, telling how we're doing with interest payment collections from our borrowers, et cetera. And so I just think when you're thinking about making investment, you need to trust in, in the management team, the leadership team. I'm not saying just the CEO or the founder, but who's the leadership team making decisions? Are you confident they're going to make strong, positive decisions, make the right decisions in times of stress and volatility? Have they built a business and done the hard work before the distress comes to be able to weather those times of volatility? I often lead on my first slide about myself as Inc. 5000 now, 13 years in a row. And I'm more proud that we've been on the list 13 times than I am that we've been on the list. Because you're more likely once you've made that list to be out of business in five years than to ever make the list again. Because generating consistent returns, boring even returns, as you said Jim, year over year over year is hard. And we built that discipline in doing so. I would just say those are really important things to think about because there's other fund managers out there investing in real estate, there's other syndication opportunities, but who do you feel most confident is going to be able to weather times of volatility and be able to look that management team straight in the eye and be confident in the people you're investing in, but specifically to the risks and what you're saying, what could happen? I think when you look at, hey, if we go into a heavy recession as the example, we go into a 2008 scenario, again, first and foremost, I think people get confused. The 2008 scenario was quite different than today in terms of a lot of the fundamentals in the marketplace. Not likely to have a repeat of 2008, even though that's what people think about. The next form of volatility is likely going to look quite different. But the way I think about it, the biggest challenge that could happen for investors is property values drop a ton, nobody's buying real estate and we become less, less liquid in that there's not as much opportunity to sell. Properties or loans aren't paying off as fast because sort of the capital markets world stops. But fundamentally what we're invested in is income producing housing. And I think the fundamentals of people still needing a place to live, still having occupancy, still being able to generate consistent returns and distributions are going to be there even in times of extreme volatility. But, but maybe we're less liquid. But in that environment, if sort of the world is falling apart and there's lots of distress, we're in a major recession. I'm very confident we're going to weather that environment better than most other asset classes and certainly better than most other managers in our asset class.

Now there's a lot of investors out there that have stuck with, for lack of a better term, traditional investments, liquid publicly traded investments, stocks, bonds, perhaps some publicly traded REITs make the case, if you will, for putting some portion of their money into a private investment, such as with a DLP capital fund.

Yeah, I'll start with comparing it to maybe the public alternatives to us. Right. Public REITs and such, because that's the most comparable, you could say, in the public markets to what we do. So when you're investing in the public markets, your value of your investment is as much tied to market confidence as it is to the underlying value of the assets. Right. So there's a ton more volatility that can be good, in certain times it can be bad and other times to the value of investment less than the value of the fundamental performance of the assets, but as much to kind of market. So example, in public REITs, they trade at a discount to what the value of the real estate is. At times they sell at a premium to the value of the real estate. We don't, we're worth the value of the underlying investments. But I think the More important thing to think about is the big giant organization, big public organizations and the Blackstones and such of the world, plain and simple. They're not, they're not as integrated in the ground, doing the day to day execution as organizations like ours. They're the types of groups we want to sell to because they will tend to overpay. As an example, they're not in the markets finding the undervalued opportunities, they're not able to move as quickly, they're not able to get the same kind of deals as a smaller integrated sponsor is whether that's us in some cases directly or those that we've built deep relationships with and we're lending and deploying our money with. And then they have significant capital raising and compliance costs. So we've looked over the years as an example a couple times over the years that hey, should we go, you know, have a public fund, should we go to the broker dealer markets and pay for people to raise capital? And every time we've come back with no, because there's no way we could generate the kind of returns we generate if we were paying out 4, 5, 6, 7% commissions, which we don't pay any commissions. We've never paid out dollar commissions, no commissions ever paid out of our fund return. If we had the heavy compliance costs of a public entity and reporting requirements and regulatory costs, we don't deal with any of that. So plain and simple, we're able to run a lot leaner, a lot less cost, not paying for capital raise, which fundamentally all those costs have to come from somewhere and they come from the investor, in my opinion. So I think, you know, the, the, there's lots of data to show that private non traded investment funds outperform the public market, specifically in real estate. But also if you look at, you know, even private equity versus public equities. But what you're trading is liquidity, right? Is your point? You know, we don't have same day liquidity. We have, you know, the kind of closest thing to that in the, the private side of 90 day or annual liquidity. But you likely don't need all of your assets to be liquid tomorrow, right? Some of your assets you probably do and those should be in a same day liquid investment. But my guess is a large percentage or a decent percentage of your assets don't need same day or same week liquidity. And that's when you trade some liquidity for higher potential returns and less volatility than what the public markets provide.

All right, thank you very much. Well, I think our time is short, so let's wrap this up. For those looking for more information about investing with DLP, you can go to whitecoatinvestor.com DLP. You can learn about their four funds and how they might have a place in your portfolio and your long term investing plan. And Don, thank you so much for your time today.

Thank you Jim. Thanks everybody for listening. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.