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Ep. 7 – The Affect The Private Real Estate Lending Acquisition Trend Has

Dalton

Oh this is cool Welcome to the Real Estate of things podcast I'm your host Dalton Elliot, Kevin Kim one of my favorite attorneys in the whole wide world how are you I'm good my friend I'm good How you doing?

Kevin

I am well I was on your wonderful podcast couple months ago for the recording the lenders lounge

Dalton

I love it so everybody Listen, go check out that podcast always great private lending insights there and you're a partner at Geraci Law Firm right sir I've known about them if I've been in this space one of the preeminent firms in the private lending space you lead their corporate and securities practice that yes sir. You did your homework I get I take notes I stayed up all night I craved for the test nice so what all goes on in the corporate and securities practice what is that? Yeah.

Kevin

So me Everyone knows Rossi law firm as being you know, primarily focused to serve the private lending industry. And so you know, unlike banks, and you know, other financial institutions a lot of our clients need to raise capital and so my primary focus as the department chair for dross is corporate securities team is our fund formation team. So we do a lot of fun formation, other types of securities offerings of all types across the country for lenders, and that's allowed us to really grow our footprint nationally. Most of my clients are no longer in California anymore, I have more clients in Texas, Florida, and Seattle than I do in California combined. And the nice part is that you know, it's pretty across the spectrum. So you can be a brand-new lender, you know, just been done a few deals yourself and want to you know, kind of get more serious and start up a fund or you can be a, you know, a shop likely miwon or other ones and you want to, you know, either clean up improve or upgrade your existing product offering from an investment perspective. And, you know, lately with the industry being on fire, so is the demand. And so a lot of investors have discovered our sector as a really great place to invest. And so, lo and behold, so as I practice growing as well, beyond lending, we also work with real estate investors, developers and family offices on the real estate side of things. And so you know, real estate syndication, your typical multifamily value adds indication all the way up to you know, your, you know, nationally held, you know, wreaths that are meant for holding rental properties. We do all here. And we also do esoteric stuff like opportunity's own work and, and an EB five work because at the end of the day, it's tied to real estate right and so my background is primarily in real estate and finance and banking and my law school you know, I guess three years in law schools exclusively focusing on transactional corporate and security so lo and behold those two melded together when I joined Geraci back in 14 so

Dalton

So you're not the attorney I call if I'm in Vegas gets too rowdy get locked up?

Kevin

I have a friend for that. So if you do happen to be if we have all of our all our friends in the space, right? If you're if you ever get in trouble in Las Vegas, actually one of my really good friends, I just went to his wedding. he's a very, very well-known attorney. This is in Las Vegas and get in get out of hot water. So let me know I'll call him up for you. Hopefully never needed it. But it's always good to know you never know. You never know Vegas is a crazy place. A lot of bad things happen there.

Dalton

That's true. That's true. So you touched on one thing which has been a cornerstone of the last 12 months oddly enough, in the middle of a global pandemic is when all this transaction is happening but it has been buying season for heavy hitters with you if you got money in the pocket and you want to get into this space. Why don't I just buy a lender who's doing hundreds of millions or even a billion and a half a year from by the firm and add them my day job working as director at a private lender company Lehman capital that happen to us right MFA, a publicly traded real estate investment trust they acquired us over the summer. And you know, we do a billion and a half a year. So you have

Kevin

only once past year quarter there were there were like, you know, headline level acquisitions. You guys were the big one for the year. But there were a lot more and we're gonna see a lot more coming and I would say in the next six months, six months, three months by the end of the year, and then first quarter after that, I mean you're right nail and nail on the head. It is buying season and you'd be surprised who the buyers are. right you guys acquisition was kind of like, Okay, that makes sense. We kind of saw it coming, right. And it was a logical expansion of the investment, but man, it, you're starting to see a lot of attention coming from institutions and, you know, even retail operations that it feels like, Oh, they were really sad. They missed the boat three years ago. And this is there opportunity to really jump in. And yeah, it's very fraught, and up and down the spectrum too, right. So like, you know, companies as large as one. Sure, right. Even small companies, even small homies are doing maybe 20 million a month. Nothing crazy, right? They're getting offers for minority acquisition position from pretty large, you know, institutions and hedge funds. And it's pretty frothy right now that the multipliers are not where they used to be even a year ago. So it's definitely very interesting time.

Dalton

Yeah, let's unpack that. So you said, you know, a lot of groups that you wouldn't expect, you know, us getting acquired by a company that had a stake in US previously, their real estate investment trust, we lend on real estate makes complete sense, right? What are some examples of other types of groups that are coming in and, you know, are spaces grabbing their attention, and they're jumping in not names necessarily.

Kevin

name names, or obviously, names? But you know, the interesting part? Well, I mean, I guess I can, I can name this. The Civic acquisition was was kind of a head scratcher at first, but then it's after I interviewed bill, on my podcast, he explained the fact pattern, right, because they had already been buying loans. They already had a pre existing relationship. But that was kind of a head scratcher. At first, when you hear about bank jumping in acquiring a private lender. And that, you know, kind of, for me, I used to be a banker. So I see that I'm like, wow, that's an interesting move from the bank's perspective. But the fact of the matter is that, you know, even banks retail, you know, they actually do depository banking, investment banking are looking at this, but also homebuyers, right, these large, these large eye buyers that we saw back in the back in the 10s, right, yeah, a lot of them have become very institutionalized, how have several billion under management, and you know, this is a natural evolution for their business. And so you'll see a lot of that, trying to make deals happen, trying to make moves, sometimes a little bit too aggressively. I think the next year or so you're gonna start seeing companies backed by Google that. And then at the same time, you're probably going to see some consolidation within the market to so you know, I think there's room for that, I think there's, there are companies that have very similar mandates and perspectives and cultures. And, you know, it oftentimes makes sense, you know, and one group may, you know, dominate one part of the country versus the other. And this could be of all sizes two, but the idea being is consolidation, we will talk about acquisition a lot, we will have a consolidation, I think we're gonna see a lot of consolidation. I mean, a year or so once the valley, you know, valuations kind of calmed down and, and, you know, you're not seeing as much well consider balance sheet risk taking going on, I want once the account calms down, that's kind of probably happened. But on the flip side, what about back to we're talking about, what was very interesting to hear about was, you know, the past year now so we're looking at we're almost 10 months now for this year. 20.1. It's, you know, we saw a lot of bids happening and conversations happening about very, very large companies. You know, the rumor mill is spinning about, you know, Genesis being on the on the docket for sale. And, you know, I don't know who the buyer is, but we'll see in the next few months with that, how that plays out. And other national shops are likely going to be sold or combined in the next year. So it's all going to be kind of one of those. What's that it kind of an interesting result, right? Back in 14, or 15, when Goldman bought Genesis, we were all like, Oh, this is it? Right? Yeah, this is it, the institutions are coming. Right. But then that didn't really, it was kind of too soon. But I think now, I think what you need to have, I think the moves needs to be is the aquas Korean party needs to have a preexisting relationship with the, with a target, that seems to be a prerequisite these days, just like you guys. And then the second thing seems to be they have to be was somewhat ancillary related to residential real estate, right? Whether they're a home builder, an eye buyer, someone who's somewhat touching, touching the space, because otherwise you don't have the proper policies and procedures and infrastructure to build it out. Because this is just such a unique business. So you know, I think that's going to be the trend going forward.

Dalton

That makes sense. This not needing to be it'll be the prudent decision for somebody first, dipping the toe in the water, you at least have bought some long flow from this

Kevin

case. Yeah. Yeah, you've invested somehow in the space right? And or you either now one thing that kind of asked me before that why the home button homebuyers jumping in? Well, the homebuyers not being in this is automatically the next expansion plan for them. Right? Yeah. How else are they gonna get their hands on inventory? But um, you know, by the same time, the question mark is a California Have they been investing in some of these securitizations? how they've been investing in some of these, you know, some of these funds, that that may also be an indicator. So,

Dalton

yeah. So it's been, you know, not just a bunch of companies, like you mentioned getting acquired does. It feels like there's the chance that this is going to cool off sooner than later.

Kevin

Yeah, thanks. I think so. I think it's not I mean, here's the thing. Cool off is a very tricky word from a securities attorney perspective, right? I think it's gonna be a different strategy. Okay, so people say it's gonna be it's gonna cool off, I think it's gonna cool off in the sense that you're going to see fixin flips, shift gears a little bit, right rental is going to be much more dominant for us from when it comes to the loan aggregation model. And securitization model, fixin flip, I think is going to transition to more of a balance sheet move, and I think it's going to transition to more of a, like a, you know, on the commercial side, right, and the commercial sector, you see a lot of life and life companies getting a lot of allocations in the space, I think we're gonna start seeing that type of activity happening. And that's gonna that's gonna change dynamics a little bit. Because you don't I mean, the securitization model for fixin flip and bridge, it's doable, it's possible. But it's not as simple as a dscr model, a product will be. And it requires a lot of exception work and a lot of kind of creative structuring. So, but it's a perfect tool for balance sheets, because it's short term, and it's esoteric, but it has all the features that a fixed income strategy will want. So I think we're gonna see a shifting gears in the next I was a year or two. And that bodes well for the retail lenders who are not necessarily conforming to Wall Street standards, because they can continue to be esoteric and continue to be a little more outside of the box, if you will, but also attract that life money. So yeah.

Dalton

So how does this translate, you know, 1235 years down the road for the investor who's getting loans from local lenders in the space that are getting acquired today, because you look at a lot of the companies that have been acquired and will be acquired in the near future, a lot of them stocked with their original, most of their original founders and executive leadership team, you have just a new parent coming in, which changes inevitably it changes the dynamic, no matter what relationship you had prior, and then the consolidation, you mentioned, that you think will continue to really start happening down the road, which is a bit of common sense, don't have to stretch the imagination too far to see that that's going to happen. So how do these things culminate to affect the end client, folks who are getting

Kevin

at the end of the day is the most important thing, right? the borrower? Right borrower, right. And that's the funny part of the space is that like, you know, when we were talking about multipliers, you know, acquisitions two years ago, and three years ago, I was arguing, he was on a panel actually arguing that you can't use a traditional, even a multiplier in this space, this base is more akin to professional services, right? Like a law firm CPA firm, because at the end of the day, it's the ello that has a relationship, right? At the end of the day, it's that book of business that you're looking for. And so the acquisition model, where you see in private equity, where you acquire, keep the executives on board, got the team, install new people, that doesn't work in this space, and all the successful models you've seen so far. Acquisitions, you've seen so far have kept not just not just the executive team, but a lot of the core employees. And that's important because you can't lose that borrower relationship. If, if you know, you know, your top ello is let go after an acquisition and he moves to competitor, what do you think those bars, the bars don't care about the parent company, they work? They may they like working with that company, because Bob Smith, the ello is taking care of them. The builder, right, the flipper the investor, right? And so I always tell people, listen, if you're going to be if you're going to be acquired, and the term sheet says, you know, there's no discussion about employment, and you know, the executive team and the officers and all the other employees in your company. If you aren't planning for that, at the beginning, the term, term sheet phase, you're gonna you might as well unless you're walking away from the business, or you might, you might as well save another deal because you're gonna your business is gonna, you're just gonna business in a cave, right? Those relationships, those business relationships, especially in fixin flip, right? It's that repeat builder relationship, repeat borrower relationship that everyone wants, right? And so you cannot risk that. I think that with consolidation, the one of the most things that easily easiest things to overlook is going to be that, right? And so it's going to be very important on both the acquiring side and also the selling side to remember to keep those key performers in place. Because if you're a borrower, right now, if you're a borrower, I mean you have every other opportunity to get the best deal possible, right for yourself, what's that, whatever that means that could be speed, it could be price, that could be service, it could be anything, right? Whatever, whatever floats your boat as an investor, right? Well, that, that there's never been so much opportunity on that front, right? So you as the lender need to understand that you need to make it make it easier for your borrower to work with you. And you need to keep them sticky. So if you're going to sell your company, you need to be very cognizant of that to the new level. I've seen so many people overlook that issue. And they don't think about that and they think about this as kind of a view as a private equity play and it's different this is a book of business kind of model you got you cannot devalue that Yeah,

Dalton

yeah, it's become so much I've been in the space six and a half years and so much more commoditize now than it was when I got in six and a half years ago product development we could make, you know, one or two changes to rate or fee or leverage and just be knocking it out of the park and the best best crew in town and you know, it would take a couple months before another group would, would pile on and beat us out in a particular stat, we go back to the drawing board, but now your top lenders all play in the same pool more or less. So yeah, it is. We had a customer experience consultant come in a couple years ago. And her biggest advice if very simple, and something I think easy to forget, though, is you want them to do business with you as the person right? It's easy for somebody to say no to or break up with ABC lending. Yes, company name, but it's a lot harder to look dot and Elliott in the eye. And do that or try to not work it out. Yep. Right?

Kevin

He's right, people do business with who they like and this and the mortgage industry as a whole has forgotten that. The one thing that private lending has, has stuck very, very hard on to and I think this is because we're so fragmented and we have so many different product offerings is we're so obsessed about those business relationships but you see that you see that loses touch a little bit as these companies grow and grow, right? They're there. They're trying to get to a level of scale. Well that doesn't matter anymore in their mind. And that's farthest from the truth You know, so yeah, and all of a sudden all of the successful large companies that we talked to on my show and I'm sure you have as well all talk about that right that sticky borrower relationship that customer service, you cannot forget that this space because you know, Bob Smith the borrower on Bob Jones, the borrower can now just shop your deal everywhere else the second he feels like he's being treated as just another borrower, you know, and the easiest way possible and five minutes on the phone sitting on the couch, you can go Yeah, three quotes from three different lenders and everyone's monitor everyone's optimizing their online presence so they can really get if they can find out Bob Jones is shopping. Yeah, it's, it's you know, it's never been a worst time and that context like you have to be super vigilant when it comes to your customer service and your borrower relationships and you see that and a lot of companies are now really doubling down on account executive level people and really paying a premium for those books of business so

Dalton

yeah, I have never you know, in my experience at least one I've never been busier on the product development side the sales training side the tech side of it meetings every single day of stand ups five days a week, right? Sometimes I want to tear my eyes out but it is you have to keep every single one of those balls moving towards the ends on other because everybody else is right yeah, we're in South Carolina so all of our competition in Florida and New York and Texas and California. You assume that every lender over the fence is doing that if you're not doing it, you're gonna fall apart and to make it easy piece that you talked about I'm director of sales and customer experience and on the CX side of the fence I have 72 font written in my office just make it easy. Yeah, as to be the cornerstone of everything. It's like from a borrower's perspective, make everything as easy as possible every touchpoint reduce the number of total folks that they're working with, because it's so easy for somebody to go somewhere else now. Because such low self up success you

Kevin

know, years ago Nima and I were on a panel we're talking about, you know, Amazon with smart buy with one click, right? Yeah, you can buy something with one click, right? What are we? What are you doing, to make it easier on your borrower right to optimize the underwriting festivals painful process, right the underwriting process, and get him an approval as fast as he needed to be an hour. What are you doing to optimize it with your long term relationships? Right? So that's why it's so challenging because you're right, you know, this hyper competitive world, and there's Also so much of technology out there right now, that's built for the mortgage space, you know, so it, but it also creates an exciting time we all get together and we're all seeing each other is doing it's all it's all pushing us to get better, you know,

Dalton

so yeah, and so much room to try new things and not everything. Of course, not everything you try works out but just push all of us to be more creative and think outside the box. Whereas just tweaking like, oh, we're you know, we're not as competitive as we were two months ago. It's lower rate lower fee, it's on this dimensional space, right? That's how it's done. Right? And it always, always drives me nuts to see those guys like all there's so many of them. And there's so standardized. They're literally selling the same widget, just with one little twist compared to everybody else. Right? And I fear that for our space, thankfully, you know, fixin flip and, and bridge and construction is more commercially oriented. I feel like And so that gives us a little more room. I feel I feel like personally. So I'm not envisioning a mass standardization in the space, unlike some of my colleagues. So

Dalton

I'm with you. I doesn't just doesn't seem the direction we're heading. I hope so I really do. So let's talk about the fun side of the business and the walk me through kind of an elf I've explained to be like, I'm five. What is a fun? How does it work? Yeah. What are the benefits and the downsides? And the treacheries?

Kevin

Yeah, I like the I like the way you put it right? The simplest idea of a fund is essentially if you're an investor, right? Whether you're an investor who's retail and buying a few houses, or you're a seasoned hedge fund manager, right? The idea is that you want to be able to have more buying power. And you personally don't have that much capital, you're limited, right? Well, the idea is, can you go out there and raise, raise and pull money from other investors, right, whether they be you know, your friends and family or other family offices or other institutions pull the capital together and acquire more of the assets that you're pursuing in exchange for rate of return to the investor. Right. And that's what the end of the day as a hedge fund private equity, NPL mortgage, real estate, at the end of the day, the goal here is to create a pool of assets that generate some type of return on capital. And it's funded by pooling investor capital into one vehicle and entity right. And it can be done via MLP LLC structure, it can be done via you know, some kind of creative debt structure, either which way you do it, the idea is to pool the assets together to have more buying power, and to have more, more return right, and also just spread the risk, right. And so in the world of mortgages and the private lending side, you know, the, the market used to not have as much capital, and a lot of investors loved the industry from a return standpoint, and they wanted to get in, but they didn't want to become a lender themself. Lo and behold, the fun model translated over from real estate, and from the conventional side and subprime days, and, you know, it models are very similar to in 20, hedge fund model, nothing crazy. And the idea is that, the sponsor will go out there and raise money from, you know, as many high net worth investors as they can into an LP or an LLC, and then that LP or LLC will go out and either invest in or fund loans and hold them on its balance sheet. And that will generate income, right, and that income is returned to the ambassador on a monthly or quarterly basis. And so the beautiful part about this strategy is from an investor standpoint, and this can also be done for real estate, right? You invest in, you know, we're going to invest in, you know, 10 years, 1010 pieces of multifamily real estate value, add whole stabilized rent, and then eventually sell. And we've been doing that in a larger pool, instead of doing one off assets that are smaller, I can scale up my business, right? And so yeah, at the end of the day, though, it gives you more buying power, it lets you spread risk across the spectrum, but also for you as the investor. From an investor's standpoint, it gets you access to an industry that you normally would not be able to get to, or you'd be stuck to buying stuff that's on wall street that has, you know, loads of leverage, loads of fees, and just really isn't your cup of tea right? You have really no say so what they're doing, whereas a lot of these funds are still even if they're managing a billion dollars, they're still managed private, right? And so there there's, there's that benefit and so the investor can really pick and choose based off of their appetite. On the sponsor side, you get a lot of horsepower by raising the money and not everyone can raise money. I keep telling people like a funds not for everybody, right? The idea of a fun you have to be you have to be committed to going out there and raising money whether it be from retail, friends and family or retail investors or larger investor right. You still have to be able to do it and To commit time to it and commit energy to it, right? And so if you can, you can become, you know, some of these equivalent some of these larger real estate or mortgage operators, much slightly more one, right, and scale and scale and scale, right. And we've been part of that story for some of our many of our clients, and they started up literally just, Hey, I'm new to the space, starting my own lending business, I've been brokering some deals, I want to start a fund, and now they're managing 234 100 million, and originating, you know, sub 1 billion to Wall Street and all that, and they have multiple credit lines and their businesses evolved, right, they have truly a mortgage business. And this one piece of that puzzle. So how has activity in that been through the pandemic through today, I imagine just on fire, like every other part of the industry,

Kevin

you know, the I was on a couple different panels talking about this, the fat, the fat, the fascinating part about people who have discretionary capital and balancing capability, and we're not so reliant on Wall Street. We're the Penhaligon's now, right? March happened to everybody, I feel like march was a reality for everybody, we all kind of like, pop their heads up and be like, Alright, something's wrong, let's take a breath and figure things out. But unlike a lot of our folks who are really dependent upon Wall Street, our balance sheet strategy or discretionary capital fund managers, they were able to get back out there, as soon as end of March, early April, even charge higher rates, lower their risk, and they thrive, one of my clients was on my show, no approach with a capital fund in Arizona, you know, he had a record year. And the nice part about it was, you know, it allowed him to grow the portfolio and attract new masterclasses and grow even more. Now he is, you know, flirting with some really big opportunities, and his colleagues are kind of in the same boat. And so that was the interesting part to see. And also, at the same time, some, you know, interesting tax law that came out in 17. So people were able to take advantage of that. And investors, I mean, don't mean the investor market, you know, the retail investor market was really, really looking for something like this, because you think about what they've been investing in so far. There's just massive volatility all over Wall Street, you know, the s&p is doing just fine, but it's all over the place. It's just what what's going on every core index is just kind of so volatile, I don't know what to do, right? And aside from Bitcoin, you know, what, you know, which is all over the place, you know, like all Bitcoin this Bitcoin that, you know, one of the things that we've been talking about was, well, let's look at real estate, right. And so we saw a lot of the core markets that were not impacted by the pandemic do very well. And our space was one of them. And that allowed the industry to really jump back on its feet with I mean, I would call it just massive fervor in June, July, right. And so here we are, today, the markets ever been hotter on both sides, right, whether you're working with Wall Street, whether your balance sheet, both sides of the business are just doing gangbusters right now. And I think it has to do with confidence in real estate, I think it has to do with confidence and his asset class, right. And I think it's, um, it's, it's just going to get better over the next I would say, two, three years. So

Dalton

I didn't even think about the points you just brought up about, kind of April, May, June. Yeah. If you had a fun model, you were good to go, right, that missionary capital at your women call, right? You can make the fall out there, you don't have to worry about it. You don't have about this on my show, like, you guys weren't that impacted either. Right. And so you have the ability to go out there. And but a lot of folks were 100% reliant on Wall Street. Yeah. Right. And so that, that taught a lot of lessons. And we, I mean, we're a reflection of that, too, right. So my pride is like some reflection of that. We know we had a record year last year, too, we created more funds than we've ever done before. Specifically debt funds. We do a lot of different things, right. Last year was just the year of the debt fund. And, and also the year the mortgage rate, and so many things were set up last year because of that, so yeah.

Dalton

Wild. So, reg, D No, I just dropped the bomb out there. Oh, hard break on the fun talk and hit Yep. It's relevant. It's relevant. Yeah, it is. It's ever relevant. So reg D, you're gonna explain it much better than me. But my basic understanding of it is that it prohibits self-directed IRA investments in real estate is that

Kevin

so reg D is the regulation that we're all using. There is a hashtag going around that Nima and I and my partner Nima and I started called saver ID. And those though, this has to do with the bill back come up with air quotes bill back better act, right without by an administration as part of this joint legislative effort to pass the $1.5 trillion infrastructure bill and the $3.5 billion budget bill. And this is part of the $3.5 trillion budget bill. And so everyone was all at once everyone saw the news 3.5 trillion this right tax raises. We all saw that right. And I can go on and on about the taxes. And you know, I'm pretty conservative myself, and not really that interested in seeing taxes go up. But that's not the focus of the law firms kind of mission is right now, the hashtag save wragby is part of Geraci and the American Association of private lenders, government relation committees, effort to raise awareness and contact our Congress, people about sections 13 8312 and 13 8314 of the bill back better act, right. And these two sections are really, really bad news. Really, really, really bad news. And what they're about, are about, they're specifically tailored to IRAs. Right, they're designed to essentially put a, I would say, ankle bracelet, or handcuff on an IRA, Ira investor. And so take us back to June of this past year. Right. Peter Thiel got in trouble got in the news, because he had some ridiculously large IRA, right, some ridiculously large Roth IRA. And you know, that, that and any other billionaires right, and what the story was that they had invested, you know, the proceeds from one investment, a small amount into a larger investment, they netted a very, very large check, all done via NRI IRA, and so no taxes? Well, you know, apparently Democrats didn't like that too much. And so they proposed as part of the bill, that better act was number one, we're going to prohibit IRA investors to use their IRA to invest in any investment that has a net worth requirement, or offer security that has a net worth requirement or a financial education requirement, which essentially reg D, right, there's no other regulation out there that have a net worth or financial education requirement. So when I read it, I was like, wait a minute, they're going through right now on this and all the IRA custodians were freaking out, my fund manager, clients were freaking out. And I was like, what, we'll read this thing real quick. And it was specifically designed to attack rugby. And rugby, for those of you guys, don't know, I mean, I think some ridiculous like $12 trillion in the past seven years, were raised using reg D. And so you think it's not just for the, you know, the hedge funds and the private equity funds. We use it a lot in the residential mortgage space, but so are our real estate investors, right? Are and borrowers are using reg D, to syndicate these larger pools of real estate or buy multifamily or whatever. And so what this would do, essentially would say, if you're in an IRA, you cannot invest in a reg D investment. And if you are invested, you must divest by the year 2030. You have to get out. So not only is it an outright ban, but it also requires people who have holdings to divest. Yeah, and go somewhere else essentially put its input in the stock market or something like that. Right. And what's frustrating about this law, is that this is a tax bill. Right? We're trying to raise tax revenue. Okay, I get it fine, right? That's fine. What does this do? This is nothing, literally nothing. Not only does it now he hasn't raised any tax revenue, but it's essentially telling people with their hard-earned money where they can and cannot invest and who does it serve as Wall Street? It is counter it's kind of funny because, in my opinion, it's counter to the Obama administration's JOBS Act agenda to democratize and create more means of private investment. So we're really mobilizing hard with AAPL and really trying to get our audience out there so if you're in the state of Arizona especially contact your local congressman contact center cinema and really put it out there if you're interested in learning more go you can go on our website Drosophila from comm we have a big campaign going saver ID because this is not just for the mortgage space this is actually for every private investment you can possibly think of.

Dalton

Yeah, it's such a massive story that's all getting enough attention to the mistake. I think it's so easy for the actual impact of this to get buried and ignored under the billionaire has. I can't remember the number but it was nine maybe 10 figures in the NRA a massive amount of money. So

Kevin

if you guys want to get to checkbook control, or do you guys Wanna get rid of backdoor Roth? Fine? Right? I get it. I don't necessarily agree with that either, right? But this is an outright ban, like, this is stupid like this is you're trying to paint you're trying to penalize that tiny 0.01% population. And the ramifications are going to be massive. I mean, even I have my own, you know, Ira, and I'm, you know, I'm an attorney, there are so many, I mean, how many of our borrowers, right, or our clients, borrowers are holding their real estate holdings in an IRA? Right, yeah, just the rental of the flips that, you know, and how many of our investors across the spectrum, whether you're Wall Street or they're invested to their IRA, this is ridiculous. And this is going to be the worst thing to happen to private investment. I mean, since the 33 Act was installed, in my opinion, but I mean, there's a lot of, we have a lot of things going for us though, this bill is not really likely to pass as it stands right now. So we're telling everyone stick, stick to it, contact your congressman, if you're in Arizona, especially contact your congressman and Senator, because this is not going to go anywhere. It's going to come back in some form. Yeah.

Dalton

The bill in its entirety, the minefield of conversation, but the raggedy part of it, just the implications from it. Ill-conceived and a scorched earth approach. Yeah. Yeah, I think it's so it's so blatantly clear what the knee-jerk objective was. And the massive Fallout, if it passes as is devastating is not a hyperbolic word to attach to what effect so how do you guys think about this? Like, what are the stats that the SEC puts Congress asked for a report, Congress at the SEC put a report to Congress last year, on when they were improving reg D, and they and they found this $12 trillion raised through reg D, a big chunk of that was an in private funds. Right? I mean, but this is also used by startup companies is also used by you know, real estate developers. So this is so counter to and the funny part is that it raises no money, it literally $0 it all it does is ban you from doing something, which is just, it's, it frightens me of where we're going with this. Because clearly, right, it serves the interests of the Wall Street type funds where you can, you're free to invest in that. But, you know, I think it's a dangerous place to be. But thankfully, thankfully, the bill is kind of not moving forward just yet. We've heard that, although the temporary debt ceiling increase, it's not, you know, it's not all one package anymore. So there's a high likelihood that this is gonna go back to the drawing board. They're gonna renegotiate the terms of it. But my fear is that because this is so kind of buried in the bill, in a summary, it's like on the last page of it, it's about something that no one really understands. Right?

Kevin

Yeah, high-risk item, because right, it can be over glossed very easily, right, everyone's gonna pay attention to the capital gains rate and the income tax rate and the penalties and all that kind of stuff. They're not gonna paint this. But if you have any stake in private investment, you know, this is going to be a big game-changer. I have so many clients that have like, most of their offerings are funded through IRA investors self-directed, you know, it's just a huge marketplace. So hashtag a reg D, check out our website. We have a lot of literature there. But more importantly, you know, get that send it over. But if you are in the state of Arizona, or if you're in the state of West Virginia, Senator Manchin and Senator cinema have vocally opposed this bill. And so we encourage you, people, to call and make your voices heard.

Dalton

on it, we'll see if we can get save reg D somewhere in the video here.

Kevin

Yeah, man. I like that quarter. Appreciate that. For sure.

Dalton

So on to some more important business. I hear your favorite films dark night Ode to My Father and the rock. Yeah. So I loved the rock growing up. Oh, man. So beautiful Sean Connery, Nicolas Cage, Ed Harris.

Kevin

Oh, yes. Just some hits you mean, heavy hitters, but it's for me it was like the reloading and there was like, I never watch the action flick where they actually reloaded I'm like, Oh, yeah. This is awesome. So that was the reason why I love that movie. So much. A little details, you know? Yeah. I love it. I love it. Now. I also love Dark Knight one of my favorite movies. Oh yeah. Daniel Craig just wrapped his last bond. the movie I was out at lunch earlier with some colleagues and I was like, Daniel Craig will be our bond forever because, you know, throughout our years as young boys and that was our James Bond, right Pierce Brosnan at the very beginning, but Daniel Craig is our guy and always will be. And in that same vein, even though you know the spectacular Clooney Batman, Michael Chin was so good.

Dalton

Michael Keaton, Val Kilmer, Christian Bale, he's the Batman of my generation. Oh, my

Kevin

God, my opinion. I really do believe that. I mean, this whole DC cinema. You know, Ben Affleck Batman is pretty cool. But you know, you can't you can't beat Christian Bale. I mean, he just can't. He's awesome. He's a great actor, too. So,

Dalton

yeah, I love it. So let's have a couple of quirky questions here. So who's playing Kevin Kim in a movie?

Kevin

Oh, that's a good one. To play, you know, you know, I don't know if you guys have ever seen. Um, man, this is on Netflix. I forget the movies. Now. It's, um, I can't remember. So, the actor's name is Randall Park. He's like he was in a Fresh Off the Boat. He's a dad and Fresh Off the Boat. He's, uh, he was in always be my baby with Ali Wong. And he's actually like, one of the most like, hilarious Korean American actors out there. And he also Yeah, Dad jokes, right. And so I feel like, you know, if anyone were to play me, I'd want him to do it. But beyond that, I mean, I don't know I mean, besides Randall Park, I mean, you know, you know someone told me that I forget what his name was. Um, there's another really well-known actor it's the guy I forget his name. Oh, yeah, so this is the guy who played an odd burly Asian dude. You should be played by an odd job that was the guy that guy but I'm thinking James Bond. Oh yeah, that's probably it.

Dalton

I see that red apart that's a good pic but my aspirational one would be Daniel Craig I Oh yeah because I think I have a little more room to fill out in the sleeve of this by the bicep of this Polo before that actually makes any sense. Dude he has some movies where he's pretty faith anything he thins out and you know, that is Yeah. Pre bond days but since he came out of the ocean and that blue, we'll call it a swimsuit.

Kevin

Like 80 pounds of muscle for that for being able to be up to become Bond right?

Dalton

Man? Yeah, he's a different beast now. So even though he's like 30 years older than me, and then 10 times as good a shape be my pick? You travel a bunch I met you on the road. I think I mentioned Vegas at AAPL many, many, many years ago, many years ago. And what are your travel rituals? Is there something you do? Yeah, yeah, to walk me through your travel a lot of them. Yeah, so I travel a lot, but I have two young children once almost four ones 11 months. So there has to be a whole explanation. You know, where am I? I'm not I'm going to be gone for a couple of days. And the kind of excited because they get mommy all to themselves. Right? So that's, that's the first part. I'm packing up the bags, right? You have to make sure I have to make sure I have. I don't usually wear hair products. Because I just, I'm fear I feel losing my hair, right? So my dad's bald, so I always forget to pack it. I have forgotten a few times. So like I always make sure I have a hair product. I always make sure I have some type of Geraci gear with me a sweater, a golf shirt, a magnetic pen, something right brand. Um, and then if we're going to Las Vegas, which is like 90% of where I go, right? It's I always pack a little it's a little portable humidifier because if you spend more than a day in Vegas, you'll know it's like just the moisture gets sucked out of you because it's so dry. And the air conditioning and the smoke and it's just so it's a little like Bluetooth speaker, you stick a bottle in it. You plug it in, you put an extra bed, it's saved my voice saved my face saved my lives. It's just it's the best thing ever. And then, the last thing that is a must-have is TSA precheck. I will not travel without my TSA precheck because I refuse to stand in line like a regular traveler my shoes off my belt off and yeah that's a must for me so yeah if you're listening and don't have TSA precheck do not go get it because we don't need any longer long, yes the best-kept secret in travel is oh my god like $17 a year in most credit cards pay for it. So like my credit card. Yeah, same it's 85 every five years and I was talking I just got back from a trip last week and I was telling my wife I was like if they charge $100 a year and I flew twice a year. Yeah, I would do it. It's just it's a time saver. Yeah, it's a convenience like you said you don't have to strip down half-naked in the airport and be a cost and for me, I try I pack a lot of stuff in my carry-on, and have to pull your backpack out. I haven't pulled your laptop out and other stuff. It just causes all kinds of things. And you know, the what the worst is when they make it take your belt off. I feel like that's the worst. Yeah, you never know your hands gonna fall down. You've got to hold your pants up. It's just yeah, it's not it's just I'm an adult. I'm just trying to travel and do respect. treated like criminals not doing anything wrong. Exactly.

Kevin

Exactly. You need to have you need especially when you go to Las Vegas because of the McCarran airport. TSA line is like there's nobody in it. Literally nobody in it. You just walk right through. You can get to your flight like 30 minutes before and just walks the gate. It's grad it is a lifesaver Have you had to get back in packing shape? Like Yeah, I was surprised I went to pitbull conference in April of this year is April 2020 2021. And six months ago that was my first work trip and I was there I went down a couple of days earlier with my wife just hanging out in Miami but so I was there for maybe five days. I feel like I packed for a summer in Europe. Yeah, I got the hotel. I was like I have way too much stuff. And every trip I think this last trip I finally got back into bear Central's Yeah, everything went to the laundry because I wore everything didn't have any access, I think had an extra pair of underwear and socks, which is always you know, you always overpack those two essentials. Yeah, it surprised me how there is there's an art that can be forgotten how you fold things. And like, I use the old-fashioned garment bag, like the folding garment back in the 90s. My dad gave it to me. And it's the back of his suit, probably when the suit is the hardest thing, right? It's figuring out how to do that again. Well, I'll tell you this was the worst thing for me was having been at home for a solid year, not on my feet. And then I went to my first conference was actually our show in March and in Newport Beach. And I was in dress shoes all day on my feet. My feet hurt so much. And it made me realize oh my God, I've been sitting down for a solid year. And at work from home I haven't had to do this. So my body forgot how to conference.

Dalton

Same thing we were we were at I am in Miami. And you know how, like if you are sponsored a certain level, you have a private meeting room. Yeah, the ballroom and midday through the first day or mid-afternoon. I went up there and Courtney you know, Courtney, a new sixth employee here, travels all the time, he was plopped down just sprawled out in a chair. What's up? What's going on? I'm dead tired.

Kevin

You don't have the endurance anymore? I lost my voice really, really soon, because like what the hell? And then the one thing that I did gain was the ability to drink.

Dalton

Right? Yes. Yes. Same. Roof guy drinks? Yeah, I usually would just pre COVID I would have no more than two drinks at the networking hour. Because then you know, you had dinner and then you're going to drink split through those. Get back. Let's go. We gotta hit four or five before we get dinner. Exactly.

Kevin

But it's cool, though. I mean, the nice part is well, you know, what I was worried about this year was, you know, how are we all going to react? And I think what we all realize, like we need to get in front of each other and we can't. Yeah, we have to, like this whole idea of being behind a zoom screen to do business is it only go so far? Yeah, yeah. Yeah.

Dalton

I love it. I love it. I Kevin Kim, partner and face of Geraci Always a pleasure chatting with you, my man. Thanks so much for joining us. Thanks for having me on. I really have fun. Absolutely take care of Talk soon. All right.

*Transcript is automatically generated from the interview.