Building Consensus with Beth Mercante

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome everyone to episode number 145 of the Insider's Edge to Real Estate Investing. Yes, three shows now in a row. Back from the break launching the now Wall Street Journal bestseller book the Insider's Edge to Real Estate Investing. And wow, what an incredible experience this has been. I have had so much fun getting out there and, and the feedback from you all is what has kept me going. I get a lot of these questions, James, how the heck do you do all this? And well, the easy answer is I have such an incredible team that makes this all possible. But certainly your comments, your posts, your reviews, those all just confirmed to me that this was worth it and that people are getting true benefit. That's the whole point. And certainly a lot of time I've been spending lecturing in the classrooms as well and just getting great feedback. So if you have not done so already, I would greatly appreciate. Please do go to Amazon or wherever you find your books, search for the title and I really look forward to hearing your feedback on that. Okay, so today's show we have Beth Mercante with us from StackSource. StackSource makes it easier and faster to find the right commercial real estate financing. And there she is, a senior Managing Director. Beth talks to us about growing up in a real estate family where her father was an incredibly honest developer. She she talked about what lengths he would go to to make good on a project. Beth has worked in various commercial real estate roles since 1990 after graduating from the University of Washington with a BS in Building Construction. Prior to joining Stackhouse as Senior VP, Beth worked for New York City at Quantum Fund, which was George Soros and Paul Reichman's fund in acquisitions and asset management. He she also spent time at AIG Global Real Estate Investment Corp. In their mortgage, finance and asset management divisions, managing multifamily, office and retail. Previously she was an investment sales broker. She even won the most Ingenious Deal of the Year award with rebny. After a successful career, Beth moved into real estate consulting with Gemini Real Estate Advisors and with her own firm where she most recently sourced senior housing and senior storage projects for a partnership including Columbia Pacific Advisors. Wegman companies and Rembold companies. Beth spoke a lot about building consensus where it is a development deal or financing a deal. She has also talked about the importance to spend time on the front line as you look to build your business. Lastly, she talks about the future of financing by leveraging data to provide the best solutions. I'm sure you're going to enjoy this conversation and as always you can go to jamesnelson.com that's where you can find the show notes. That's where you can find out more about Beth and stacksource and and you can also find the exclusive video series White Papers. And of course you can get a link to order books. If you're not going straight to Amazon, there are still opportunities to order bulk shipments of books. You can reach out to me on that and I'm happy to come speak to your group as well on that. So we're gonna have a brief word from our sponsor and we'll get right into that interview with Beth Mercant. A different approach to putting our clients first. Avis and Young's Tri State Investment Sales Group sells multifamily office, retail, development and specialty sales throughout the New York metro area. As experienced thought leaders in our industry, our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities in the marketplace. Our one unified team is built on an industry unique platform which which promotes unparalleled collaboration and teamwork. We share core values of hard work, integrity and expertise. We put our clients first providing tailor made strategies to achieve superior results. Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc to learn more. And now it's time for our investor spotlight. And with us today we have Beth Mercante who is the senior managing director at StackSource. Beth, welcome. Thank you so much for joining us today.

Thank you so much. I'm happy to be here.

Wonderful. So Beth, maybe tell our audience a little bit about your background, maybe how you got into real estate.

Okay. I actually grew up in the business. My father was a real estate developer. Well, he still is technically. And I grew up in Portland, Oregon. Oregon. He had built high tech, industrial back then, a lot of multifamily condos, office retail, a lot of self storage and single family residential houses. So growing up at the business, I would work in his office every summer and you know, after school lots of times. And I just loved Sunday evenings driving around Looking at all those projects and asking a lot of questions, and I just really got the bug.

That's wonderful to hear. And I have three sons. My oldest just turned 18 and he already says he wants to go into real estate. I said, luke, that's great, but you got a lot of time and go into college, certainly with an open mind, but it's great for you to get that experience early on. Were there any lessons that you can think about that were instilled with you at the time? Maybe it was the way your father operated. Any core values, things, observations that you made that maybe has stuck with you throughout your career?

Absolutely. So much so. And I'm a middle child of three girls, so neither of my sisters were interested in the business growing up. Fast forward to today, though, I just have to say they're both running the company out in Portland. They built a lot of stuff, so they got the bug eventually. But what I really. And when I meet people even today and do business with them who know my father and know his business, they, they always say, you know what? Your father was the most honest real estate developer I have ever met. You knew if he took a loan, he was going to do anything he could to pay it back. He did not give keys back to banks. He worked every deal out. And when the financial crisis of I think it was 92 hit and everything went upside down in commercial real estate, he didn't have a single foreclosure. He worked every deal through. And he always said, beth, the only thing you have in life is your honesty, your integrity and your reputation. And after I moved to New York, that was really hard sometimes to maintain and uphold. But I, I feel like I've done that through, through my career. Whether you, you lose a deal or not, it's, it's how you think about it in the end of the day and how you acted.

Amazing. Yeah, it's one of the, in conclusion and well, it's throughout my book the importance of reputation and how, you know, it's so important to do the right thing. And even when times get harder, it's even more important because that's when I think people can really show their stripes. And you know, look, no matter, you know, you might be operating in a small town or one of the biggest markets in the world like New York, but, you know, people have memories, right? And it's, you know, you know, you want your reputation to always people to know that you do the right thing. So that's fantastic to hear. So I guess so. You said after college you went right out to New York and was real estate something that you studied in school?

Not right afterwards. I, I went to, and I majored in building construction at University of Washington in Seattle, and my father had majored in building construction at different Washington school, Washington state. But I did learn a lot about physical construction of buildings, you know, surveying and also real estate investing and real estate law. So I got a very good, well rounded education. And most of my colleagues went to work for the big construction companies, Turner, you know, some of the other ones. But I ended up working for a developer who was also a contractor, doing site selection for retailers around the northeast and then analyzing the projects, figuring out what we could charge them to lease, and really getting a return calculation at the end. And at the same time, I purchased a house to flip in Seattle and strapped on my tool belt and physically renovated the house myself because I thought, you know what, I'm in building construction, why can't I do this? Um, you know, I had to call on some help a few times, you know, not sure I had the physical strength to do some of the things, but I flipped it and, you know, made a nice profit and then flew to New York about four times to try to get a job. And again, it was in a very difficult period for real estate development. And everyone I interviewed with said, you know what, you got to come back in three years. There are no jobs for you. So finally I interviewed with one of the big accounting firms, Pete Marwick, and got a job in their real estate consulting firm and moved to New York and started my New York career that way.

Fantastic. And I want to get to that. But I've got two questions before about your work on the construction side. So just think about kind of the practical skills. And I bet if we polled our audience, they would probably say, look, I've got a pretty good handle on how to underwrite a deal and what to look for and how to invest. But the whole notion of actually going through doing the construction, repositioning assets, I think that scares a lot of people, probably mostly because they don't really have the knowledge of what goes into it. So kind of what hard skills would you say that you learned through that? I mean, did you really understand that the trade, the actual engineering aspect of it, did you actually understand how these jobs are priced out? Maybe you got some of that from working with your father, but just, you know, if someone really wanted to strengthen their knowledge with the actual construction aspect, what would you say is actually important to know to, to make the best decisions? If you're overseeing a construction project.

Well, if you haven't done a lot of construction before, you know, bidding work is super important because then you can compare them and there can be wild disparities in bids because one contractor may be super busy and so he's just going to price it really high. If you're going to pay him that it'll do the job and other people need the work. So that's kind of a worry too. You know, why aren't they working? And they'll bid it for less. But actual like plumbing and electric and the civil engineering, the mechanical, you know, it's just looking at the plans and trying to look at it at in a way that doesn't make sense. Right. I mean there's a lot of, you know, jargon on there and things. But is the plumbing, are the risers lined up the right way? And you know, if you go on a job site, is that really, you know, where that doorway should be? Or you know, you really have to kind of step back and look at holistically if you're going to be the investor and embark on upon a construction project and know they're a super. There are many, many decisions you're going to have to make. Little ones along the way. What kind of sink do you want in every unit, what materials and this and architects do that. But at the end of the day it's really the developer's decision. Do you want to go with marble? Do you want to go with something man made? And what does that do to your bottom line? And that's a lot of construction knowledge and materials that takes time to build up. But if you're just getting into it, you have to really focus on the details and know you're going to make a couple mistakes and you know, I'm sure I'm not going to kill the deal but you know, just try to be very diligent in every detail.

Yeah. And I would think probably what most investors fear are the cost overruns where you're given a quote and you think this is okay, you have it in your pro forma. And then, you know, depending on what kind of contract that you sign, you know, you might find out after the fact that there was cost overruns, you know, change orders. So, you know, I'm sure understanding what type of contract to do, you know, you hear about, or maybe you could even tell the, you know, the audience what type of contracts you typically look for to, you know, prevent those types of situations.

Yeah, well, that was a good comment. And you know, everyone wants to do a gmp, which is a gross max contract. And you, you want your contractor to stand by their bid and they'll build in a cushion, they'll bid in, build in some contingency. But then you're not responsible for cost overruns. Yes. Change orders. If you change your mind and want something else different, that's. That will cause an overrun. But by and large, if they build exactly what you designed, they need to stand by their pricing. And a lot of the deals that I'm working on financing currently, the lenders require that either you don't have an option.

Good.

Because you can also do a cost plus. Right. They'll do the cost of materials, plus their labor and a little bit of, you know, contractor profit. But those, I haven't seen really, very, very few of those lately.

Got it. Okay. No, that was. I appreciate the background, and I know it's a topic that we actually don't talk a lot about on the show, and certainly if you're doing value add or of course, you know, ground up development, very important to understand that aspect. Okay, so you came to New York, you worked for one of the big accounting firms and you were doing kind of advisory work. So were you working with investors, companies? What was the focus?

It was really a cool experience because I worked on so many different kind of deals. I went up to Boston and was actually sitting in front of all of the loan officers at a big life company because they were writing loans for. People say they would loan $6 million. Well, the property was. It was a piece of land and was maybe worth a million. And so I had to underwrite every single one of their loans. And they were not happy because it was the day of just, oh, you're my buddy here. Here's some money. Well, that was months and months where we were there. And that was great exposure to me about financing and how deals get financed and the different ins and outs of underwriting. And then another client was a REMIC real estate mortgage conduit, and I had to go around Manhattan and the Bronx. Did he own in Brooklyn? I think he owned Brooklyn and underwrite all of his buildings. And it was unfortunate because a lot of the buildings were not maintained very well. So a lot of people asked me if I could fix things, but, you know, that was a whole portfolio I did. And then I was also in Cincinnati for the Bengals when they were going to redo their stadium. They hired us to do the whole economic impact study. So it was such a great exposure. And then we Also were in California looking at a bank's loan portfolio because they were going to have to write off a lot of those loans and take a hit in the market. So it was just a really great experience. I think the team there were very diligent, intelligent people, and I still communicate with a lot of them today. So it was really neat to have that experience and be exposed to a lot of different, you know, types of deals.

Yeah, no, it definitely sounds like you had great frontline experience, which is always good if you're starting off in your career to try to see as many situations as possible. I mean, that's what I love about brokerage is you see so many different types of investments. You see what works, what doesn't work. And, you know, look, we're with rates going up as dramatically as they have, I mean, we're starting to hear, you know, it seems like there's going to be a lot of distress that's coming down the pike. So for those of you listening who are looking for opportunities, I mean, there's certainly going to be a lot of these, you know, whether it's working for a bank or for a consultant to help, you know, go out, check out the collateral, figure out how to take these broken pieces and make them work again. So it sounds like that was really invaluable experience. So where did you end up going next after that job?

I don't know if I went to aig. I was at the hedge fund. I think next I was at the Quantum Fund, which was Paul Reichman and George Soros Fund. And I was in. I started there in acquisitions, which MEANT I worked 24 hours a day, seven days a week, underwriting properties that they didn't end up buying. They did.

I mean, everybody. I mean, Soros, I mean, you know, still one legendary.

Legendary.

Yeah, legendary investor. And Reichman, if I'm not mistaken, was that. And I might be getting confused if he was with, you know, part of the, you know, the birth of Brookfield or if.

No, it was York.

No. What's that?

York. But. Right.

Which was ultimately acquired by. By.

By Brookfield. Yeah, they did the big development in London. I forget, Canary Wharf.

Yes.

That was their claim to fame, basically. But, yeah, so you're right. I mean, George Soros is fabulous and, you know, very intelligent, but so was Paul Reichman. And so when you have two cooks, you know, like legendary chefs in the kitchen, who's. Who's going to decide what to buy what. So it really depended on who was kind of the leader at that week. Who I should talk to, you know, was it Len or was it Paul or somebody else? And what they were really going to underwrite. But that was a great exposure too, because, you know, I would underwrite the largest office building in certain markets and tour them. And, you know, for me, I was in my 20s, I was super experienced me to go down. I was the principal and looking at $100 million deals. But ultimately I asked to be changed into the asset management group because they weren't buying deals. And it was frustrating to me. I mean, I'm a deal person. I want to be effective. So I went into asset management with the properties they had bought before that. And I had office buildings in Dallas and in San Diego and multifamily deals and a mall in San Antonio and deals in Florida. And so it was great experience for me because now I was now doing the budgeting and the underwriting on the management side. So that was a big addition to my portfolio and dealing with the property managers and making decisions on tenant improvements, costs and that kind of thing.

So my first question about this, because we get a lot of students who listen to the show as well. Maybe they're looking for their first opportunity. I mean, this is once again frontline experience. So again, you were still relatively new in your career. How did they entrust you to go and kind of be the point of contact for these massive opportunities? So how were you able to accomplish that?

I think a lot of it was because of my education and then the Pete Marwick experience and, you know, growing up at the business and I just understood properties and, you know, leases and when they're rolling and what you're supposed to do. And because I'd had all the experience then with them in underwriting to buy, I know what you have to achieve to keep them. Because when you underwrite something to buy, it's not just pie in the sky. It's really what you need to achieve. So you got to look at that and what are you going to do to get there? Um, and I have to be honest, I'm looking back at it, I'm like, wow, they really did trust me with a lot. But I never felt over, really overwhelmed or like I didn't. And if I didn't understand something, you just ask, you know. And I've always felt if you're. If you're in it deep enough and you care enough, you're going to figure it out and you're going to do a good job.

Amazing. So talk though about. So they wouldn't. They didn't end up buying anything. So was it. They couldn't get on the same page. It wasn't the right time in the market. I mean, certainly there had to be opportunities that you uncovered where you said, this is an amazing opportunity. I'm sure there was a time when you brought it all the way to the top and said, look, we have to do this. So were they just saying, no, not good enough, keep looking. Or one person would say, yes. The other person, I mean, I don't know how many deals you looked at. Maybe dozens, maybe hundreds. But gotta imagine, out of all that, there had to be one thing or two that that was actionable.

Oh, yes, I felt like many of them were. And then like you said, I would bring it there and then nothing would happen or there, there would be a change of an opinion. And because this person maybe brought that deal in, but now the other person was in charge, they didn't want that deal to happen politically. So. And then they would. It was back in the days of not Excel, it was project, which was really kind of a bear to work with because every screen was separate and then it flowed together. And if you had one number off, you had to go through like 100 screens. But then they'd say, okay, tweak this percent or this vacancy factor to a number. You go back, you'd run the whole thing again, print it out and then go back up. Oh, now go back down and print and do something else. And at some point, like at 3 in the morning, I'm like, either buy the thing or not. I don't know what else to tell you.

Right? Especially when you can make these models tell you anything you want to hear. At the end of the day, you know, there's something to be said for kind of that, that gut feel. So, you know, I'm wondering, in addition to students, I mean, we have plenty of, you know, veterans in the industry listening, but also those who might be acquisition head of acquisition analysts. And I'm sure they could probably relate where, hey, I've found these amazing deals and my principals, for another reason, don't want to do the deal. So, you know, were you thinking at all at the time, like, hey, you know, these are great opportunities. If they don't want to do them, like, maybe I should go bring them somewhere else, or like, maybe I should go find a capital. Like, did that even ever dawn on you that maybe you could do this?

Not at that moment in time because I was really working for them. And to be an asset management was, was great. For me as well. So that was my next move. I didn't jump into brokerage for a while late until later was that after.

So, so aig, the global assets where you're working on their, their mortgage finance and investment management, that was kind of the next step for you when you start really getting heavy into the, the mortgages, right?

Yes. Yeah.

What were you doing for them?

So I was basically loan officer, an originator for them for the global real estate group over there, downtown Manhattan. And I would underwrite tons of deals and you know, do very extensive investment memos and, you know, go to the head of real estate and present why we should do this loan. And you know, it was almost like acquisitions, you know, well, why wouldn't you do this loan? Look at all the metrics work and they're like. But I don't believe the, the buyer's projections. So then you'd have to go back and you'd have to almost do an entire market study like you would if you were buying it. So to me, it was very, very interesting business and I loved it and I would have stayed in that role and completing loans, which was super fun. But the head of asset management left down the hall and so they didn't really want to go hire somebody. So they knew I had done asset management before. So they asked me to move about five, five doors down. So I did. And I also had a very extensive portfolio for them and worked in that capacity for a number of years.

Wonderful. So from there you then moved into brokerage that kind of went into brokerage and you said, look, I. Maybe it was an opportunity that you saw. And it's interesting to me because I feel like a lot of people get into brokerage initially and then maybe they go to the principal route, you know, from there, there you'd already worked on the ownership side, the le. So what was it that compelled you to make the move into brokerage at that stage in your career?

Well, I was at a brunch and one of my best friends was, was getting married and she had a very good friend who was a sales broker in Manhattan, successful woman. And she convinced me to partner with her. I mean, that's it. I was never going to be going to brokerage. That wasn't my thing. I was just going to be a developer and be a principal. And we partnered up and these two females in Manhattan, you know, we'd get in the car and Drive at 8 o' clock Sunday mornings and look at properties, write down the address and then look up who owned Them because you wasn't as electronic back then. And I'd call people and call people and call people. And, you know, our business got super successful. We sold huge office buildings. We won an award for assembling a site on 38th and 6th Avenue. Was assemblage, I think, of five different pieces we put together. And then we negotiated for the air rights over the trimming store because the trimmings guy didn't want to sell his business. He was a garment guy, center guy. And we put this whole development together. Gotham did it. David Pickett. And it was so complicated. I could have been the developer after the end of the day, you know, I mean, I wouldn't have built it, but so it became very lucrative for me. And great, because I could make my own hours a little bit more. And, you know, and she was terrific. She was really terrific. We were very good yin and yang. I was more cerebral and the numbers person. She was just more kind of at the time. Lynette Tolkoff.

Okay, I've heard the name. Yeah. And for our listeners, and Beth is being modest, but, yeah, she won't. The most ingenious deal of the year award from Rebny, which is. I mean, that is one of the highest honors. You know, I've been doing this for 25 years. I have submitted multiple times. I have one award to my name. Hopefully will not be my last. But that is. Yes. I mean, the key there is ingenuity. And, you know, you mentioned the assemblage moving air rights. How much do you think ingenuity plays into your success and the way you approach things? Do you. Are you kind of that creative mind where you look at a situation, you say, well, that's how it's typically done. But, you know, let's look at it this way. Is that. Is that kind of in your. Your DNA?

A little bit. I think more is that I can look at a situation and then explain it and get everyone on the same page in a pretty straightforward manner. I don't overcomplicate things. And when my clients are like, well, we could do this, we could do that, I'm like, let's pick a plan and let's go for it and get it done. And then I can convince everybody to do the plan. But, you know, I think the years of analysis, paralysis at, you know, Quantum Fund and sometimes at AIG just. I can't get into that anymore. Let's just move forward in that way. But in financing, I am very creative now for my clients because of the market and the way things have to happen now. So it's a different dynamic.

Yeah, No, I love the taking a complex situation and distilling it. Right. And yes, we can make some of these deals incredibly complicated, but you kind of go down that rabbit hole and, you know, it only becomes more challenging to bring, you know, all the stakeholders and parties at the table. So, you know, sometimes, you know, the kiss principle is. Is certainly a good way to go. So. So you end up as you're. You're a broker here in New York, very successful career. So tell us what happened after that. Where, you know, at some point did you say, okay, been there, done that. I'm looking for my next challenge. What was. What was after that?

Sort of. I had a baby and I went back into the office. I think it was six days after to work, finalize the underwriting and deal for office building downtown Manhattan that we were in the process of selling. And my partner, who had two children, started to get annoyed at me. And. And then when we closed a few. Couple big deals, she screwed me out of most of my commission, even though we were 50, 50 partners. And at that moment, I was like, I don't care how much money I'm going to make right now. I don't need that bs. So I told her what she could do with herself, and I left. And then two guys from DG Heart had split off into a consulting firm in the Grace Building, and they asked me to come work for them, which was really great because we did some bankrupt retailer, foreclosure for the courts, underwriting. So I'd go around and look at, you know, service merchandise and some Sears buildings, and I forgot Ames. Ames is in the Northeast. So that was really, really great, and it kept me really in the game. But I had a couple kids, and one needed a lot of attention. So consulting was really the way for me to go at that point in my life. So.

And that was with Gemini. That was the name of the.

Yeah, yeah, yeah.

Okay, good. And so how long were you with them? And then was that what ultimately led to stacksource or what was the.

Well, it was five years, probably with them. And then. So my family and my sisters build a lot of multifamily and senior housing, and we have a good, very good relationship with an operator out of Seattle called Leisure Care. And I became very involved in their business. And one of our big equity funds, Columbia Pacific Advisors out of Seattle, said, beth, why don't we develop in the Northeast? And I said, okay. I went and I found five Sites that worked for them. We got them under contract and we're doing all the construction drawings and everything. And Covid hit so they were like, well, you know, they had 26,000 units in the country and they weren't about to develop anymore. They didn't know what Covid was going to do to their population. And, you know, they're based in Seattle and that's where the whole Covid thing started with, in that senior housing project. So we dropped all five sites. But I had already found Stack Source, thank goodness. And the reason I found them was because I'm very techy. I love, you know, anything to do with programming and, you know, anything needing hooked up in our house or Linked or whatever, I'm the one to do it. And so there has to be a game changer in commercial real estate like LoopNet did for, you know, sales Crexi. And so I invest in startup companies, tech companies, on a site called angel co Angellist. And I found this company and I reached out to the CEO and I said, listen, this is fabulous. I love it. Let's meet. And so we met at that time our headquarters were in Newark, so I'm in Long island now. I went all the way across the city to New York, Newark, multiple times a week. But he's just. The way they've developed this platform has allowed me to scale my business in three years. We close 700 million last year. Last year. So, you know, it's. It's been wonders for me.

So I love to hear more about the Stack Source platform and kind of the, the vision and, you know, there's so much, I mean, even in the course of my career, I see it seems like, you know, the technology aspect of our business has just been exponentially growing. So what, what was kind of the presence, what was the thesis behind Stack Source? How do they come across the opportunity? How did they build it out and maybe tell us a little bit about their story?

So the CEO did grow up with. His father was a leasing broker, I think at Cushman Wakefield. So he knew a little, you know, about, a little bit about real estate and so did the chief technology officer. But both of these guys worked at Google and Facebook and they wanted to automate commercial real estate finance. You know, so they built this platform and you could put all the information on your deal in it and then it would, you know, put it into one beautiful package and then it would match using an algorithm they built to a lender list. And I think at that point they had, I don't know two or 300 lenders or capital sources as we call them today. And it would match using the algorithm with the property type, the size, location, the loan amount, everything like that into one list. You click a button and you send the invitation to the lender. And that was great. But what they realized is that commercial real estate is too confusing and complicated. Until AI gets to the point that they know exactly how to underwrite a deal. You need people. So they pivoted very quickly and they started hiring people around the country. And I was one of the, I think the fifth hire. And we're all, actually, all those people are still with us today because we just see the vision with this company. And so, you know, fast forward to today. You know, we have over 20 around the country and we just came out with a whole new front facing platform. It's much more streamlined and we have 2,300 capital providers in our database now. And one of the other reasons I really liked Stack Source and I still like this company so much and believe in it, is because the CEO and the Chief Technology Officer approach it. Like I grew up in the business, you never lie, you do your best and you approach people with honesty and respect. And they do that with all of us and they expect it with us and clients and lenders and you're only as good as your word. So our reputation in the business is that lenders see a package from us and they'll click that green button to go to our platform to look at more because they know what's underwritten correctly, it's how they want to see it. And they can easily just say no to with a red button. And they're not going to be harassed and it's not going to be, you know, information that they can't find. What they're looking for, what the NOI is, what the IRR is, they know where it is and they know that it's coming fully underwritten from us. And so to me that integrity is important because like I mentioned before, I was brought up in that kind of business and to get back into brokerage, I got to be honest, I don't, I wouldn't go back to one of those companies I had worked with before. I. That integrity was not there.

Yeah, no, it's certainly paramount. And I also love the fact that the founders, you know, understood real estate. I mean, there's so many examples of these, you know, prop tech companies where, you know, maybe it sounds good if you're, you know, kind of, you know, in an office with a whiteboard and just thinking about how to solve problems. But if you haven't done it before and it's not really, you know, solving a true need. So, so clearly you all have hit on something here. But we're, you know, the, the question that I'm thinking about is just, you know, knowing. And look, you were a loan officer yourself, right? So this is such a relationship business, right, where you've got mortgage brokers who have those relationships they've built over years. And when that loan officer gets a call from that mortgage broker, they're going to know, you know, hey, this person underwrites the deal properly, or maybe they don't. They're going to bring me, you know, a vetted opportunity with a great sponsor. And that personal connection is super important. But also, and I even, you know, and maybe I'm applying this to my own business, but I'm thinking about like if I just shot a package to one of my investors, you know, that's great, James, but I need you to call me and talk me through this because I'm not going to sit here and look at your 30 page deck. I need to hear from you why I should look at this. And so I don't know, maybe you'll tell me that this just kind of seems like consolidates, it expedites. But I'm assuming that you're there, you are still kind of the human component where you still have to be able to talk them through the portfolio. Or maybe not. Maybe you're telling me that this is completely automated. No, it's a lot of phone calls.

It is not handing the ball off to the computer. And, and it's like you said, you know, they know when they get a package from you or me that they're going to look at it because we, they've seen deals from us before, but I already had that leg up because they know if it's coming from Stack Source, it is the same. They, the metrics are right on the front page. They don't have to go to the table of contents, they don't have to search through a PDF, they don't have to any of that. They go, and we lead them through the metrics on that page and then there are attachments and then there's the return metrics as well that they can review the debt yield. All of that's right there. And lenders always say, oh my God, when I get a deal from you guys, it's so amazing because I know it looks the same, I know where everything is. And then I pick up the phone and call you if I have more questions to the tune of, you know, been invited by my favorite lenders, I guess, to their powwows, you know, their company things. I'm going to be going to the CEO of the lenders and being like, hey, you know, make sure Stack Source is on that radar. You know, all looking at our deal.

I totally get that. And you, you, you make it easy for them and the, the consistency and the uniform package. But haven't some of them also said, well, hey, Beth, that's great, but I know that you also sent this to 2,300 other lenders. So, you know, do you think there's a point where you've become so successful with this outreach that lenders say, you know, Beth, you know, appreciate it, but, you know, we looked at the last 10 deals that you sent us and we didn't even get a shot at it because I'm just competing with so many lenders. I mean, is there a point where you, you actually do almost too good of a job covering the market where those lenders won't take the time to really consider the opportunity?

Well, that's part of the, the issue with, and by, by the way, with the matching algorithm, it would only match people who would look at that specific deal. So if it's a multifamily deal, I'm not going to, I can't send it to retail guys. They're not going to be matched. So it's really only people that are looking at the deal. And there are certain clients that give us a list of people to not go to because they've done deals with them before or whatever reason we put them on there, we don't send it out. And we have to send the invitation one by one. So it can be annoying if you want to send it to 20 lenders, but it's also good because it's going to make you. I look at every lender, their name, I know something about them, I probably had a conversation with them, and then I send it and then I follow up. So we're not a blast. And we weren't set up that way. The CEO would not allow that. He doesn't. He thinks that that will degrade the integrity of the platform and what we do. Because, yes, we will probably find the best deal because of the algorithm and the best lender, but we don't send it to every single thing. And I get some deals from other brokers that, you know, like four bullet points. And I know I'm BCC'd and a sent to 500 people. And I'm like, I'm not gonna look at that. But, you know, we've had to educate. I have to say, James, when we first started, people were like, you know, I'm not gonna be on that because sent to 5,000 lenders and we've had to educate a lot. And that's actually not the case. You know, we may have 20 multifamily ground up lenders and working on a deal in Philly right now that'll do. A $30 million deal, this kind of leverage. And that's a handful, you know. Well, more than a handful, but it's not a hundred. And that's all I said to what.

And what is the profile of your typical sponsor, your borrower? So you said you did. You closed $700 million in deals last year. Is that across 100 transactions? I mean, sounds like you're working on a $30 million deal. Like, what is your kind of, what's your sweet spot? Who's your typical borrower? And you know, what kind of loan are we talking about?

Our typical borrower is either a multifamily value add buyer who has experience and has either syndicated the equity or maybe wants us to do some prep equity and senior debt to very experienced global developers. We closed a deal in St. Louis last two months ago for a big developer to a guy that wants to build a $20 million senior housing project. So it's really across the board. I mean, we have a portfolio of senior housing projects in Florida. That's a pretty big deal, you know, that we're refinancing. But they built them themselves and they're operating themselves. They're not a big conglomerate, you know, probably middle, middle of the road. You're not super, super successful or, you know, just starting out developers, I would say. But that's my partner and I at Stacksource that do that. I would say our average deal size is around 40 million. But the other capital advisors at Stacksource, by and large, work with smaller developers and do a lot of smaller deals. They'll close 20, 30 deals in one year, all more in the maybe five to $10 million range. And that's their bread and butter. We focus a little more on the bigger clients.

Great. And I would imagine that, you know, you've obviously made a lot of headway with the lenders, but I'm sure every time you have a new borrower, you know, there's a little bit of an education process, but once they kind of see it work and on the platform, you know, it's, then it's repeat. Yeah. Yeah. Wow. Well that's fantastic. You know, I, I as a broker and again I, I always, you know, we're always looking at how do we better leverage technology, how do we make our job easier, how do we, you know, make the buyer's experience better? And it's, you know, it's difficult to kind of draw a parallel to what you're doing. I mean, I guess maybe the closest thing from a sale process would be like a 10x or something where you're working with, you know, whether an auction weight just automating having everything online, the whole bidding process. So you know, I think the key to these things though is that I've yet I don't think I'm going to be out of a job for a while because you know, these, you can really perfect and make the process, you know, seamless as it sounds like you have. But you still need that advisor. You still need. And so that's great to hear that you still fulfill that role.

Yeah. And I was going to say, James, you know, there's this new AI, well not new, but there's AI and you can go to this one site and I think it's the same one that everyone's talking about.

Chat GPT.

Yeah, yeah. Meta AI or something like that. Anyway, you can literally put in 150,000 square foot grocery store or you know, shopping center in some town, click return and they will generate an overview for you.

Yes. Yeah, no, I mean we're, we've obviously come so far over just, just the, the advent of you know, data analytics and I mean there is so much information out there and we actually, our company, Malcolm Gladwell come speak to us because you know, he had done some, some work in this space and he talked about, you know, all this data that's out there. But still you need someone who can help first of all choose what is the data that's most relevant, you know, and then make it actionable. So again, I think the theme being leveraging technology to make our job make pro the process more seamless but then also, you know, having that, that, that advisor who, who can help leverage it.

So yeah, because you have a good rep, you know, would have a good reputation and your clients appreciate your advice and opinion. You know, a computer is not going to give an opinion and can't negotiate. So you know, I think that that's where we have, we'll have a job for a while.

Perfect. So Beth, this has been Amazing. And you get a couple questions left in closing. So the title of this podcast, which is also the title of my upcoming book, is called the Insider's Edge to Real Estate Investing. So, you know, be curious what that means to you. You know, if you, you know, clearly you have the insider's edge. What is, you know, what is it about you, your skills that have helped you be successful throughout your career?

Well, that's funny. And when that means. To me, the insider's edge is understanding what markets they're going to be opportunities in what markets, you know, are really going to provide that upward trend in terms of rents and income and also what cap rates you're going to pay. You know, I had so many clients that I did deals with last eight, nine months ago who bring me the same deal and I say, I can't finance that. You guys need to go back to the seller and get a price reduction. You cannot do a deal at a three and a half cap today. You need to be paying a four and a half cap. And they didn't believe me for a while and guess what? They're back. And they actually brought me deals that I can finance and that they won't lose their shirt on. So to me, that knowing what you need to pay in a market is the insider's edge to investing. Because if you think that that same price holds true today, that was three months ago even, you're wrong.

Wonderful. Yeah. No, I talk a lot about that. With understanding a market, with specializing, becoming the expert and knowledge. Right. We're in the information business and having the best information to make decisions is, is crucial. And then what advice would you give to, you know, the aspiring investor out there, you know, or maybe going back if you had to do it all over again or, you know, where, where would you tell people to start off if they wanted to get into investing?

I would say start off with somebody like you or a syndicator who does a good job and maybe get in on a deal as part of an investment team or, you know, as part of a group of investors and really understand the metrics and learn it. And as you're going through that, then you can be the principal and start to underwrite and do your own deals. But in today, it's so easy to get into a syndication today, and there's so many bad ones, so don't get a bad one. But, you know, just, I, that's what I would say, because if there were that many back in the day, I, I would have been involved in a million of them.

Yeah. Also great advice and one of the things I talk about early on in the book is especially if you're new to this, find a great partner, find a great mentor, a trustworthy partner. And you know, because to try to figure out this on your own, to try, you know, and start from scratch is very, very difficult. Much better to find that that great opportunity, bring it to a partner who can help you execute on that you're going to learn along the way. So Beth, this was fantastic. I really appreciate your taking the time. You've got a super interesting story and really exciting to up to at Stack Source now and so we really appreciate you coming on the show today.

Thank you so much for having me. This was fun. And we'll have to get together for lunch or something in Manhattan.

Sounds great. Thank you all for joining. As always. This is your host, James Nelson. I would greatly appreciate if you have not already subscribed to the show or put a rating. That's what helps others find the show. If you've not done so already, you can also go to james nelson.com that's where you can find the other podcasts. You can also find show notes for today and helpful resources for you to help you gain the insider's edge to real estate investing. Until next week. Thank you again.

Thank you for listening to the Insider's Edge to Real Estate Investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at James Nelson NYC on LinkedIn, Instagram and Twitter. Please also visit jamesnelson.com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the insider's edge to real estate investing. Until next week.