Adam Torres and Vernon Beckford discuss real estate funding.
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Show Notes:
Diversified Lending Solutions (“DLS”) is a real estate capital advisor created to help emerging and middle-market property owners seeking funding of $1 million and up on their residential and commercial projects. In this episode, Adam Torres and Vernon Beckford, Co-Founder & CEO at Diversified Lending Solutions, explore DLS and Vernon’s journey in real estate.
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About Vernon Beckford
A graduate of Columbia University and Harvard Business School, I’ve spent the last twenty years in commercial real estate finance and investing, serving stints at institutions such as Credit Suisse, CWCapital, and Global Atlantic, where I grew and co-managed a $7 billion AUM portfolio.
Leveraging my deal structuring and finance experience, I founded Diversified Lending Solutions to help small real estate owners grow their portfolios by connecting them with new capital sources and creating mutually beneficial partnerships and funding structures.
About Diversified Lending Solutions
Diversified Lending Solutions is a commercial real estate mortgage brokerage that uses cloud-based technology to procure institutional-quality loan products for emerging and middle-market managers in the Residential (Fix-And-Flip, Build-to-Rent, SFR Rental, Vacation Rental), Multi-family, and Commercial investment sectors.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of mission matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to mission matters. com and click on be our guest to apply. All right. So today’s guest is Vernon Beckford and he’s the co founder and CEO over at diversified lending solutions.
Vernon, welcome to the show. Adam. Great to be here. I’ve been looking forward to getting in front of you and your community for a long time. So thanks for having me. Oh man. Well, we’re glad to have you here. And we got, we got a big topic today. So tips on closing real estate deals in volatile markets. So for context, for everybody that’s watching or listening to this in the future, we are recording this or streaming live actually, April 11th on 2014.
- So a lot, lots to go over today. And and I’m interested to get your take on the market overall, Vernon, but just to get us kicked off, we’ll start this episode the way that we start them all with what we like to call our mission matters minute. So Vernon at mission matters, we’re all about bringing on business owners, entrepreneurs, and executives and amplifying their story and amplifying their mission.
That’s what we do. Vernon, what mission matters to you? Adam, the mission that matters to me. Is making sure the communities across this country, all communities have access to prosperity. It’s really that simple. And for me, prosperity translates into taking these real life superheroes, real estate developers, and giving them the powers, i.
e. the capital. To help them complete the transactions that are actually catalytic and transformative for communities that can bring that prosperity to light. That that’s the mission that matters to me. That’s awesome. Love bringing mission based individuals on here to share, you know, why they do what they do, how they’re doing it, and what we can all learn from that.
So again, great having you on. And I guess just to get us kicked off here. I mean real estate, like how did you get in this business? How’d you go down that path? Sure. So it was not a deliberate path. I at the time was a political science major at Columbia University and decided very early that I thought that business could be a more impactful way for me to Make a difference then than in politics went into investment banking was trying to figure out which aspect of investment banking to lean in on was really intrigued by this idea of what made companies tick and stumbled on real estate, got put on the real estate desk and the rest has been history started out structuring transactions to get large commercial transactions finance is all in love with the industry.
Wanted to find a niche within that where I could make an impact and, and have been off to the races for the last I guess it’s 20 years now, man. Time flies. I want to keep you back in those early years a little longer though. That being said, like, what’d you fall in love with? Like what, what drew you?
Cause I mean, obviously you’re a young, you’re exploring different areas of money, banking, finance. What gave you the bug? Sure. Well, the same thing that excited me then as what excites me now. And no matter how much technological change there is, how, how much we change and move our life to the phone or what have you, real estate has been a permanent kind of installation in our lives.
And there’s nothing really that we do. For better or worse. And there’s no community that, that can’t thrive without being really impactful in its use of real estate. I can’t think of something that affects people’s lives more directly. So from, you know, the kid that played Monopoly and said, wow, This is pretty cool.
Were you good at Monopoly? I gotta ask. You know what, my business partner was way better. He would beat me every time in college to the point that it’s still like fighting words if we bring it up, but Yeah, and I was, I’ll tell you what, I was good and everybody would gang up on me every time. I’d be like, that’s cold.
Like, after like halfway in the game, I was whooping. Everybody and then they gang up. I mean, I’m like, this is, and I would, I would still fight him tooth and now I dragged the game out, whatever I had to do, I’m like, oh, I’m going to teach all of you for punishing me. You know? So I can’t, I can’t say I was in that enviable position.
I was maybe one of those guys clawing at you, but how cool is it? To actually be able to live out some form in real time. And, and then when you start looking at a grocery store, when you start looking at a new multifamily building going up and you start thinking about where you’re shopping in the mall, everything looks like an opportunity.
And, and I just got fully engrossed in that. Yeah. Well, so a lot, a lot of different areas you could have went into specifically in real estate, like, like the lending side, like what, what drew you to that piece of it? Well, I think at the time. You know, this was the early 2000s. So Wall Street was kind of everywhere.
And the point that you think about tech right now, and everybody wants to get out and graduate and go work for a Google or Facebook, at that point, everyone wanted to go to Citi and Goldman and, and Morgan Stanley. And so I fell a little bit into that bug of. You know, wanting to be a Titan of industry in some way, shape, or form, not knowing exactly what that meant.
And so that was a big part of it. And then, you know, you spend a few years in the industry and you figure out if you really have your footing and if you enjoy it. And I realized for me someone may find it exciting to be on the property management side of the business or development side for me.
Growing up, I’d never learned about, well, how did these deals actually come together? Who’s doing what to who to make sure that this gets billed. And that part of it intrigued me. And that’s the part of it. I think so many of us have such little exposure to. So once I learned a little bit about that stuff, I really want to soak it up to figure out, okay, like what would it take to build a billion dollar company of real estate?
You know, and if you don’t have a, you know a rich uncle sitting there to pass you the dollars. It started really that simply. And then it grew from there. Talk to me about your approach to deal making and this thought process and how that developed. Cause what I, what I love about real estate and one of the things is I feel like, especially individuals in your shoes that are on the, on the capital side, like their creativity and like their thought process around deals, like no two deals, like look the same ever, it doesn’t matter how many you do, like, talk to me a little bit more about your, your approach to just deal making Yeah.
So, so it’s funny, even though my company really focuses on debt side of the business, we’re quite fungible in thinking that ultimately every deal is kind of starts from the same point. You know, there’s a certain amount of capital that needs to be filled. To fund that transaction that can come from debt.
It can come from equity. It can come from somewhere in between. And given where we are in the cycle today, a lot of just the traditional sources of money that would normally be out. There can’t be taken for granted. So really, I think it has to start from does the deal make sense? And being very ground up oriented, just like you would, if you were looking at a stock or the fundamental sound in the business plan, and then figuring out the optimal sources of capital that could actually bring that fruition, given the current environment that we’re, that we’re sitting in today, what, what’s your sweet spot, whether it’s like a dollar amount, whether it’s a geography property type, like what’s your sweet spot in terms of what, what you’re looking for in deals.
Yes. Sure. So we tend to focus on transactions that are one to 50 million in size. And that’s very much by design. I think there’s a tendency, especially if you live close to a big city or in a big city that you look and see skyscrapers everywhere, and you think every transaction is hundreds of millions of dollars, if not more when that average real estate transaction is only.
3 million or so. So this engine that we call real estate investment is being fued, low fueled locally, small transactions. But those are the folks, the folks that are doing those small transactions that typically have the hardest time getting access to capital. Which is kind of counterintuitive. And so that creates all kinds of challenges, right?
On a entrepreneurial level, how do I get my deal funded? And on a community level, because those small projects down the street from you that should get funded often don’t. And then we ask ourselves, well, why has that building been vacant for so long? Or why, you know, why isn’t there a replacement tenant for this, the Baskin Robbins down the street.
And all of these things all bubble up around access to capital for smaller and mid sized operators. Why do, why do you think that is? Like, why do you think that is? So a big part of it is when you look at the funding sources Mm-Hmm. that would’ve funded real estate 20 years ago versus now. There’s been a tremendous amount of consolidation in the industry.
And so there comes a point where, when capital’s getting raised, if you’re a private equity firm and you’ve raised $5 billion fund mm-hmm. , are you really incentivized to go out and. Fund one to 5 million deals, or you incentivize to fund a hundred, you know, 200 million opportunities because you have so much capital to deploy.
So the, the, the, the most cash flush investors are more oriented towards larger transactions, which means if you’re a smaller investor or operator and looking for partners and investors. It’s a smaller pool. We’re actually going to fund deals of that size. The other thing to think about is that, you know, doing a one or five or 10 million deal is no easier than doing a 50 million deal.
So for many people, there’s just not enough juice quote unquote in the deals to justify doing just as much work. And so a lot of those opportunities get. Passed along because folks are ultimately trying to, you know, get the most bang for, for, for the resources and the time that they have at their disposal.
So those are two of the big reasons. So, so for a company like yours, I mean, that, that seems like a big benefit, right? To be able to help that, that niche in the market. Absolutely. Because there are many deals out here that are quite attractive from an economic basis and should be pursued. If you take, let’s say a small multifamily project, a hundred units.
Yeah. For, for a large investment firm, that’s much too small of a project for a local entrepreneur. Who’s looking to build a portfolio that’s probably more than enough for them to sink their teeth into and, and, and use that as a cornerstone to build something much bigger. And by the way, them being a landlord of a hundred units has massive impact locally in the community that they live in.
So, I mean, there’s so much impact. In what to normal people sound like big numbers, but to the larger, you know, wall street institutional firms, it just, you know, not even a rounding error era to really focus on. Yeah. It’s, it’s interesting when you think about that, like from that consolidation, like just the way that we value money or we look at it and we think about institutional versus what that means now and what makes it even worth their time.
It’s just like, I like to think about it. Think of it as like, this is my favorite example, just thinking about, okay. When, when Warren Buffett was just starting out to move Berkshire Hathaway, right? Like he can make a small acquisition and that made a difference to his investors. But if you read his, like, I mean, a decade on of, of like letters that he wrote in his, in his yearly update, he’s, you know, for him to, for them to move or to have a big win and something is holdings as big as a Berkshire Hathaway, I mean, it’s, it’s astronomical like compared to where it when it’s.
A similar thing on the lending side. It sounds to me like in terms of what’s going on with lending, but the good part is, as you mentioned that that that’s opportunity for companies like yours obviously commercial, but give me a little bit more in terms of what you’re looking for in terms of like deal flow and deals in general.
Sure. So really when it comes to property type, we’re agnostic, we love multifamily. We love all the major food groups, as you’re well aware no one like that. The major food groups. I haven’t heard someone use that one for that. Okay, go ahead. That’s what they are to us, but you know, I would say every, every major asset class is of interest to us.
Obviously, if anyone who’s opened a newspaper in the last couple of years, knows that office is probably. The, the most distressed asset class. And there are very few people that are actively leaning in on the office space. Yeah. But, but, but barring that we love multifamily space. We love the, the bill to rent space.
We love all the major commercial food groups, whether it be self storage, hospitality, and retail. So we’re, we’re, we’re not bound by any one specific asset class. What are you seeing in the market right now? Overall? Like, what are you seeing from your vantage? It’s a it’s a strange time in the market.
And I’ll explain what I mean by that. There’s an incredible amount of capital available, right. To put money into deals, but much of it is sitting on the sidelines for, for a whole host of reasons. One interest rates are dramatically higher today than they were two years ago. And so what that means is that if I’m buying a property.
I’m going to have to incur a higher borrowing cost and I’m going to pay less to acquire that asset. And so if I’m in a position where I’m a seller and my asset, you know was worth X two years ago. And now you’re telling me it’s worth 20 to 30 percent less today, unless I really have to transact, I’m going to do everything in my power, not to sell it to you at that price because I don’t want to.
And so there’s a lot of jam between buyers and sellers that differential in terms of the pricing and what their expectations are has narrowed, but it’s still wide enough, the transaction volume is down dramatically versus it was two years ago. And then in terms of the financing market. Many of the equity investors are saying themselves, well, since we don’t have visibility as to when rates will come down, we don’t want to lean in too heavily without having more confidence about what the Fed is doing, especially given that there’s a cloud around the broader state of the economy.
And so many, and on the debt side, many lenders are saying the same thing, especially banks. Many of whom have been struggling to share up their own balance sheets and have a ton of real estate on their books that have not paid off. And so they’re saying, well, we’re going to take a pause on the sideline.
And so what that translates into a lot of people trying to figure out how to plug holes in their deals. Because so many of the capital sources are now taking a far more conservative stance on putting their money out into any deal at this point. Yeah. And when you see some, like some of the larger companies walking away from deals or walking away from like things that you wouldn’t, wouldn’t expect to see happen, or just walking away from like literally skyscrapers, I’m in downtown LA today.
And I can point at like two where I’m like, what the? They just walked away like that big building, like it’s just done. And they’re like, yep, that’s a, that’s it. So there’s gotta be a little bit of fear there too, just overall. Well, to to, to echo your sentiment, there was news that there was an article on the Wall Street Journal just yesterday about St.
Louis, and it was going through the at and t tower, which I think transacted or in 2004 sold for over $200 million. 205, I believe it traded in two 2022 for 4 million. Mm-Hmm. . And now the company that bought it in 2022 is trying to sell it. And last I heard, it was going to auction and it hadn’t traded a two and a half million.
So when you think about in the span of 20 years, how much value can be created and or destroyed based off of the shifting sentiments it is truly astronomical. I don’t know who would have had a crystal ball 20 years ago to say, yeah, a 200 million asset in a downtown anchor building will now be worth.
Two and a half million dollars. Yeah, that’s a big one. That gives you a sense of, of now. So with that in your mind, if I’m a lender and I have all the office properties on that I have to, that I have loans on. So I contend with that. And I see that obviously that breeds some level of trepidation. And obviously office is an extreme across the market and say that that’s just an indication of the general sentiment of or, or, or tenor.
It just lends itself to more cautious behavior. And so the things I would say is that this is a really exciting time. If you have a very strong conviction. Because there are opportunities to get deals at, or what are probably really great prices if you can just figure out how to finance them. And that’s where we are.
Awesome. I want to jump around here a bit for a moment, Vernon. So something else that you’ve been working on that I’m, I’m with. I seen, I’ve been, I’ve been going through it and I know how, how it’s it’s not easy to run a media outlet as well and to provide a platform for others to tell their story.
So Emerge real estate news. Tell me about this project and how it came about. So excited about this. And I think it’s been a long time coming. So Emerge Real Estate News is a new publication. I appreciate you bringing it up and we created it specifically to serve small emerging and diverse real estate operators in their quest to get access to capital.
And so really we want to address two issues. One issue is that if let’s say you’re a growing diverse or emerging operator, and you’re trying to find partners to fund your deals. One of the biggest, I guess, complaints or issues that large funds have made has been, we don’t know where to find these qualified folks.
Yeah. If you’re saying they’re out there, show us where they are. And if they, and if you showed us where they are, we would invest in them. So one, we want to do everything in our power to dispel the notion that there are not highly qualified emerging diverse operators that are investment worthy.
And we do that by showing their stories and sharing their stories on emerge. The second piece of the puzzle is making sure that folks are educated on what they can be doing to position themselves to get capital and that they’re being put in front of folks that may ultimately want to invest in them one day.
And so for us, giving a shot, a spotlight. To those folks is so necessary because when we go into most mainstream real estate news publications today, those stories simply are not being told. It’s one of my biggest frustrations when I go and read, read up. And I think it’s something that just needs to be addressed.
So we decided to address it ourselves. Yeah. What’s been one of your, one of your favorite things about providing that platform to these operators? Like what’s been one of your, your biggest rewards? So I gotta tell you, we were I wrote an article about one of our our clients and business partners who’s Hotelier.
And is buying his first two extended stay hotel deals. And he just launched a company. He’s a spin out of a large corporation. And he had always told me, Hey, I know I should be out there a little bit more. I haven’t really been telling my story. I’ve just been on the grind trying to get my deals closed.
And we ran an article about him and it caught on like wildfire. LinkedIn engagement was huge. He got messaged by a ton of folks that wanted to understand a little bit more about what he was doing that weren’t aware of it. I got messaged by a ton of, of lenders and equity investors saying. Whoa, this sounds kind of interesting.
Tell me more, tell me more about other folks like him. And that’s exactly what we’re looking to accomplish with this, you know, bringing awareness to folks that are deserving of it and putting them in position where they can accelerate their growth because more people can see and appreciate their narrative.
What’s your vision for the platform overall? Like, like we’re entrepreneurs right now. Let’s dream for a moment, right? Like what’s your vision for the platform overall? Yeah, I view it as a comprehensive news channel right now. We have essentially blog content. I’d love to expand that into podcasting.
Would love to expand that ultimately into a conference of some sort where we can actually pull together the individuals on both sides, the investors and the operators. To help codify those networks and then actually be in a position where we can track dollars that are being invested in the folks that we’re covering by virtue of the fact that we’re giving them exposure, that would be to me, the, the, the, the, the, the summit of the mountain.
Yeah, that’s a big one. I love it. But, but I see it. It’s like, and the way that you’ve built your other business pretty systematically throughout the years, like I can see this too. And there’s no that’s one of my favorite things about mission matters. And what we do is that we’re giving stories, we’re giving a platform and a channel, but For others to tell their stories on.
So when I see what you’re doing in the real estate niche, I’m like, Oh man, this is awesome. Like I saw it and I’m like, Oh, this is great. And it’s going to, I know it’s going to continue to grow. I’m sure that the individuals that you’re, that you’re that you’re covering are getting a ton of value out of it.
So I’m not worried about that. I already saw the content. I’m like, yeah, this is going to be around for a long, long time. So I, I, I’m obviously wish you much more continued success with it. Cause it’s not easy to create platforms to, to, you know, tell the stories of others. I know how difficult that is.
Appreciate that. Well, Vernon it’s been, I’ll tell you, it’s been great having you on the show today. I mean, I know we covered a lot, but I want to, I still want to know like what’s next, what’s next for you. What’s next for your companies. So, so what’s next is we’re always looking for ways to deepen our impact.
So. Yeah, the bread and butter of our business is helping you arrange debt financing, but I’m so excited by the fact that in this market, we found a whole host of other ways to serve our clients. So let me give you a couple of quick examples. We started funding earnest money deposits as loans to, to clients.
Why do we do that? Well, if you’re going out and you’re buying a 50 unit multifamily, but suddenly you’re ready to take the leap to 200 units, the financial requirements are going to grow just like the deal size did, and so you’re going to have to go to contract on that deal and you’re going to have to put up earnest money.
And so for many folks that we deal with, that may mean exhausting all of their liquid. Assets in order to just to get the property under contract. We want to open the path so that people can do more deals. So we started funding their earnest monies. Wow. Next thing they wanted to go to get a bank loan.
Now they’re getting a much bigger loan than they would have gotten before. And the bank saying, I need someone to sign on the net worth and liquidity as a guarantor. They’re saying, well, I don’t have the net worth to now start doing these 20 million deals. So we started bringing guarantors to the ventures.
That can lend their financial strength to the partnership, to, to appease and satisfy the bank’s requirements. So we started doing that again, clearing the path so they can do bigger deals. And then what we did much like on the hotel deal that I just mentioned with the hotelier, we said, listen, we understand you’re coming into this as a new entity.
You don’t have 10 people working for you. You can’t focus on 20 things. Let us step in and handle the capital markets piece, and we’ll help arrange the debt. We’ll help arrange the equity, and we’ll help put that piece of the puzzle so that you can focus on the blocking and tackling involved with the deal itself.
And in that regard, we raised the overwhelming majority of equity on that transaction. Hopefully looking to close later this month and in doing so now that operator can get a check box. He closed that deal and go go fund hopefully a much bigger deal down the road. So for us, what’s next? It’s actually helping people navigate this crazy volatility by helping just address the biggest pain points that small operators face every day.
It’s great. I love to see you innovating and really making deals happen. If somebody is watching this or listening and they want to learn more about diversified lending solutions, how do they do that? Absolutely. So please visit us at our website, DLSloans. com. Also, please check out Emerge. So Emerge dash re.
com. And then if you want to reach me personally, I’m always on LinkedIn. So DM me on LinkedIn and I will respond. Amazing. And for everybody watching, we’ll put all that information in the show notes. So you can just click on the links and head right on over to the website and speaking to everybody watching.
If this is your first time with mission matters, this is a daily show each and every day we’re releasing new episodes. So definitely hit that subscribe button because we have many more mission based individuals coming up and we don’t want you to miss a thing. And Vernon, again, thank you so much for coming on, man.
This has been a lot of fun. Likewise. I had a ton of fun. We could go on for another hour. So thanks for having me.