You’re listening to Lender Lounge with Kevin Kim, a podcast dedicated to the private lending industry. I’m Kevin Kim. And my goal is sit down with key figures in the private lending industry to talk about their business and their personal lives. We’ll get their takes on market conditions, the industry at large, and their personal stories. Overall, I really want to learn more about how they started and grew their businesses. So whether you’re a lender, a borrower, be a vendor, an investor, or anyone just interested in learning more about private lending, this podcast is definitely for you. Thanks for tuning in and enjoy this week’s episode of Lender Lounge with Kevin Kim.
Kevin Kim:
All right guys, welcome to another episode of Lender Lounge with yours truly, Kevin Kim. We are here with another special guest, Renee Lewis with Bloomfield Capital. Renee’s coming to us live from Maine, right Renee? You’re [crosstalk 00:00:58]
Renee Lewis:
Correct.
Kevin Kim:
In Maine right now, right?
Renee Lewis:
Correct. Right, Portland, Maine.
Kevin Kim:
Portland, Maine and to get us started, tell us a little bit about yourself and about Bloomfield Capital and we’ll go from there.
Renee Lewis:
Sure. So I’m Renee Lewis and I’m one of the partners at Bloomfield Capital. I’ve been in the business for a long time working for a variety of funds. I started my career on the investment side… and quickly found that due diligence was an interesting field that allowed me to combine my interest in real estate along with analytics. And I became one of the early people practicing due diligence and underwriting. So I got my teeth sharpened underwriting large loan portfolios back in the 90s and through the 2000s. I’ve been with a couple of independent, flexible, fast moving fund managers over the years, as well as working with some of the larger institutions and I really enjoy working in the smaller loan space, which is where Bloomfield lives.
Renee Lewis:
We’re commercial real estate primarily. Lenders, bridge lenders in the two to 20 million dollar loan size. And we find that it’s interesting and fun. It’s an area that has a little bit less competition and some of the really, really large loan sizes and we are able to find transactions and make the returns that our investors would like in that space.
Kevin Kim:
Fantastic. And for those who you guys who guys [inaudible 00:02:44] listeners who don’t know who that Bloomfield is one of the larger, I would consider CRE bridge shops in the country and you guys are pretty much in most markets now, right? You guys are… how many markets now?
Renee Lewis:
We’re in almost 40 states.
Kevin Kim:
Fantastic.
Renee Lewis:
Transactions.
Kevin Kim:
And you have offices… I know you’re in Maine-
Renee Lewis:
I’m in Maine. Headquarters is outside of Detroit and we have offices in New York, Los Angeles, Chicago and Denver.
Kevin Kim:
Fantastic. So there you go. Country, nationwide access. Good choice of headquarters. My family’s originally from Detroit.
Renee Lewis:
That must be why we’re there.
Kevin Kim:
And when it comes to commercial bridge, a lot of our listeners either dabble or have done it in the past and lately, in the private lending sector, a lot of our clients have shifted their attention to residential because it’s so hot. I wanted to make sure we brought you on Renee because commercial real estate, at this point in time, in 2021, it’s August right now, this will kind of air probably in September or October, is in between this generic time right now, right? We’re kind of in a post-COVID-
Renee Lewis:
We hope.
Kevin Kim:
World, right? Tell us about Bloomfield’s approach when it comes to… basically the food groups you guys lend on first. Because you guys are pretty open minded when it comes to asset class, but-
Renee Lewis:
Right.
Kevin Kim:
You have a very, very distinct mandate because you specifically said you do loans from two to 20 million, you do commercial bridge, but talk about the specifics a little bit. So what type of asset classes are we typically lending on at Bloomfield?
Renee Lewis:
We are lending on a variety of asset types. So we will do residential, retail office, industrial. We do not do a lot of land. We do not do a lot of ground up construction. We often will step into transactions that are partially completed, properties that are undergoing some sort of transition, change in use, lease up strategy. People might call us because there is a change in partnership and they need a new loan to help effectuate that type of requirement. It varies, but most of our deals are fairly complex. They’re usually quite fast moving and there’s something that we have to solve for.
Kevin Kim:
Yeah, usually a specific non-financial… issue that you’re solving for as well, right?
Renee Lewis:
Probably. Right, usually that is it and so we are making sure that we understand the markets, the properties, the credit, the sponsorship. We dig deeply but quickly. We have a lot of experience on the team, which is helpful and then structure accordingly. All of our deals, we don’t use some form of document that’s just a take it or leave it. All of these deals are unique and individual and they need to be handled as such.
Kevin Kim:
Right and that seems to be kind of the story across the board when it comes to commercial bridge, especially in traditionary loans and these types of… this type of marketplace. And it was growing by leaps and bounds from my… I would say from 17 to 20 and then the COVID happened, and there were some adjustments that happened, but you guys weathered through last year’s chaos, right? I mean, I spoke with you privately about it. You said it really didn’t affect you guys that much, because you hadn’t taken that much risk that you would… we weren’t comfortable with and your balance sheet plans with that.
Renee Lewis:
We felt pretty good with where our positions were and we worked out what we needed to.
Kevin Kim:
Right.
Renee Lewis:
Again, I think with any bridge lender, you’re in these assets or these positions for a short period of time. So there is never a time where you’re originating something and sticking it on the shelf. We’re always in contact with our borrowers and our sponsorship and understanding what’s going on, and making sure we’re clear on what’s happening with the business plan, the properties are moving forward. So that’s not so different than having to do a little bit of additional hand holding.
Kevin Kim:
Right. You’re so entrenched with the borrower that this is just another day at the office essentially.
Renee Lewis:
Close to it, right.
Kevin Kim:
And that raises another question for me is Bloomfield’s… I mean, how long has Bloomfield been around now? You guys celebrated an anniversary recently, didn’t you guys?
Renee Lewis:
Yeah. We are 14?
Kevin Kim:
14 years old?
Renee Lewis:
I believe. Yeah.
Kevin Kim:
Fantastic. Tell me about the story, how long have you been with the company?
Renee Lewis:
I’ve been with the company since 17. I had a firm that I merged with Bloomfield and became one of the partners.
Kevin Kim:
Okay.
Renee Lewis:
Bloomfield was founded originally by Nick Coburn. Jason Jarjosa joined him as well as Brent Truscott, so the four of us are the partners of the company. We are a fund manager. We raise money and have our funds raised. We do not syndicate out our deals, we’re not out raising money to close our transaction. We have several funds that we have raised and then we utilize those for the opportunities that we see.
Kevin Kim:
And unlike some of the other markets that we serve like the RESI space, we haven’t seen as much disruption caused by Wall Street on the bridge side, at least on the origination front. But there’s whispers of it happening. I mean, I’m hearing of essentially institutions taking on origination themselves, right? That seems to be the trend. What are you guys doing to make sure you’re staying competitive and staying in front of those guys?
Renee Lewis:
In front of larger banks and other-
Kevin Kim:
I mean, not just the banks, but Wall Street type companies, right? I’m hearing about hedge funds and asset managers who would normally allocate capital, right?
Renee Lewis:
Yeah.
Kevin Kim:
On origination position themselves and-
Renee Lewis:
We don’t have a lot of capital from those groups.
Kevin Kim:
Okay.
Renee Lewis:
The money that we raise may be coming from pension funds, that sort of thing. And we don’t co-invest with any hedge funds. We don’t have-
Kevin Kim:
So you’re just truly independent.
Renee Lewis:
Conditions like that. We are truly fund managers simply managing for the LPs.
Kevin Kim:
Right. And has that been kind of like a temptation to combat over the years, right? Because Wall Street jumped into the bridge sector as well pretty heavily, probably… I would say about four to five years ago, maybe six years ago.
Renee Lewis:
Right and everybody was levering up their portfolios and [crosstalk 00:10:00]
Kevin Kim:
Massively, right? And you don’t see [crosstalk 00:10:01] happening and nonconforming securitizations and it started becoming a very frothy marketplace, but risk was going through the roof too, right?
Renee Lewis:
That is correct and so we maintained discipline during that period, which we’re very thankful for. There were other things to be sleepless over during COVID, that was not on our list.
Kevin Kim:
That’s fantastic. And tell me about the… is there a decision making process internally? How did you guys combat those impatience? Because it’s very easy for an operator to kind of say, “Well there’s massive opportunity for us to take this on.” Is there past experience? What keeps you from-
Renee Lewis:
Past experience. We are a very experienced group. I’ve been doing this for a better part of 30 years. My partners have been doing it for a long time as well. So I think that we really tried to keep our eyes open, and we try to be very communicative in every respect. The company, when you… actually going back to how did we operate during COVID, more communication internally. Externally, we just… we made sure that our team was understanding where we were. Everybody was onboard, that we, as a company and as lenders, were very much thinking about and talking about and making sure that it was understood where we were going and how we were able to grow and maintain during that period.
Kevin Kim:
And you guys grew, right? You guys grew during 2020, right?
Renee Lewis:
A bit, yeah. Not from a closed deal perspective, we watched the market. We didn’t want… again, back to we’re very risk attuned. I think we wanted to make sure that we were understanding a little bit about where the opportunities were. We thought that there might have been more of a distressed opportunity to jump into, which hasn’t quite manifested itself the way that we expected, and we were prepared for that. But there was a lot of… looking and testing, making sure that our portfolio was in good shape, and then getting back into the lending [crosstalk 00:12:23]
Kevin Kim:
Right. And give us a little bit of an idea like timeline wise. A lot of [inaudible 00:12:27] folks say March was kind of the chaotic months and then May or June was kind of when they came out of it, but how about you guys?
Renee Lewis:
Well I think that’s probably… I don’t know if it was chaotic, but we certainly were watching our positions. Again, because we beholden only to ourselves. That was a nice spot to be, so it wasn’t chaotic, but [crosstalk 00:12:52]
Kevin Kim:
We had reliable capital sources that you [crosstalk 00:12:54]
Renee Lewis:
Right. So we were working with our sponsors and borrowers through the summer. We did see some distressed opportunities that we jumped on.
Kevin Kim:
Nice.
Renee Lewis:
So from an underwriting and closing standpoint, that kept us fresh. We tested out a couple of new ideas. But then I would say that by fall, we were back to originations and ended up being quite a good year and then this year, it’s already surpassed last year.
Kevin Kim:
And tell me about that. So where are you seeing the growth verticals in 21? What’s been [crosstalk 00:13:34]
Renee Lewis:
It’s been interesting. There are some areas that we weren’t seeing before. We’ve seen multifamily, which for the cost of our funds, we weren’t seeing previously. We’re seeing industrial. We’re doing a little bit more where there’s-
Kevin Kim:
Industrial’s on fire.
Renee Lewis:
Yeah, industrial’s on fire. We’re seeing some deals. We’re seeing opportunities where there is some relationship between the ownership of some level of owner occupancy. So that’s a-
Kevin Kim:
Like single tenant stuff? Or more like owner operator of one part of the property?
Renee Lewis:
Might be both.
Kevin Kim:
Okay.
Renee Lewis:
It’s happening in both and we do have some mezzanine preferred equity in equity positions as well and some of our equity is on the-
Kevin Kim:
It’s logical for a… I mean, to be… those opportunities are bound. Is there still a heavy appetite for the junior position stuff?
Renee Lewis:
Sure there is because all of us in the industry have appetite for return also. So I think-
Kevin Kim:
Is it mostly a yield driven calculation?
Renee Lewis:
It’s a yield driven calculation that gets mitigated by structure.
Kevin Kim:
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Kevin Kim:
And let’s talk about multifamily, because that has been a topic on my mind a lot with eviction moratoriums and various different policies that are coming up protecting tenants. We thought multifamily was going to be significantly at risk, right? But turns out not too bad. How about you? How do you guys feel about it? How did you guys feel about it back last year and going into now, this year?
Renee Lewis:
We looked hard at what was happening, in terms of delinquency at the various properties that we had the opportunity to underwrite, and really you all saw a lot of best in class operators coming up with creative solutions for their tenants. We wanted to see even more recently… are the operators finding the government programs? Are they helping their tenants if there are payment issues to access those programs. What are they doing to make sure they’re not just sitting passively and hoping for the best? But really trying to make sure that [crosstalk 00:16:40]
Kevin Kim:
So you’re looking beyond the financial lens again, at the operator level and assessing risk from that standpoint. And [crosstalk 00:16:47]
Renee Lewis:
Because so much of what we do is about can you effectuate the business plan? We can all write down what we would like to have happen.
Kevin Kim:
Right.
Renee Lewis:
But we want to test as much as we can, and make sure that we’re understanding what the real plan is for the property and-
Kevin Kim:
Right. Operationally speaking, what are you doing on a day to day basis as a sponsor?
Renee Lewis:
Right, because-
Kevin Kim:
There is a question for you though, what were they doing that made feel comfortable? Were they doing rent deferment plans? Were they doing… were they getting other financing from the government? Or what was the… [crosstalk 00:17:26]
Renee Lewis:
It might have been rent deferment. I wanted to make sure they understood what their tenants really were up against. Were they actually doing door knocking? Or were they doing everything they could to understand where their particular tenants were. What were they doing to ensure… you know, for new tenants. That they were really understanding where they were working, that sort of thing. What were doing to make sure that programs that were available were being accessed by their tenants to [crosstalk 00:17:58]
Kevin Kim:
Were you helping them in those situations for the ones that didn’t understand it that well?
Renee Lewis:
We are lenders, we’re not the equity partner, but we can certainly note that we’re observing and seeing that they’re… the state of Ohio has an X, the state of Illinois has a Y, you know?
Kevin Kim:
Right.
Renee Lewis:
And asks what do you think of those and what are you doing about it? And so sometimes that would be helpful in general to the management company.
Kevin Kim:
So I want to ask you about industrial now because industrial… it is on fire, right? I mean, my clients can’t… I mean my builder clients can’t get enough of it, right? They can’t find it. They want it, they can’t find it.
Renee Lewis:
Yeah.
Kevin Kim:
And they’re building more of it. Co-clients that build industrial and the interesting part of it is it’s being used for multiple business types. I mean, but the analysis changes from an NSA standpoint. Because you’re not building mass industrial. Like in California here, you’re not building the suburbs, you’re building in an area that’s meant for industrial, right?
Renee Lewis:
Yeah.
Kevin Kim:
How does that change your underwriting when you’re looking at new locales that may not necessarily be ideal from a lending standpoint?
Renee Lewis:
Well I think one of the important things in underwriting is to let the market talk to you, and make sure that you’re talking… we are in 40 states, but it is important… it is critically important that we don’t rely on mass data. My team speaks with people in every market. We try to understand the importance of that corner, that location, that right turn in, that whatever it might be and that sub market and then the market, and then the MSA. So you want to make sure that what you’re doing is investing in a property that’s appropriate, and therefore, the business plan is logical and can succeed.
Kevin Kim:
Going back to beyond financials, right? Making sure that [crosstalk 00:19:55]
Renee Lewis:
Yeah. Yeah. And beyond… you can’t mitigate risk if you only stick with big data.
Kevin Kim:
Right. But that raises an interesting question because it’s a challenge to balance as a bridge lender especially, because you have to move quickly, right? And gathering data when it comes to… especially local data, for a quick bridge lender can be challenging, right? So how are you guys… I mean, do you literally have employees in every locale? Or are you working with local brokers? What are you doing to get that local level information?
Renee Lewis:
I would rather have my people speaking with local brokers and management companies and municipal officials so they know what they’re asking. We don’t…
Kevin Kim:
You don’t outsource it. You have intel-
Renee Lewis:
Right, right. So that’s super important to us. We talk to a lot of people in a market as we’re underwriting something.
Kevin Kim:
And we talk about expansion. When you guys started… I mean, your headquarters are in Detroit. Were they always focus… were they always in Detroit? Or where did you guys start?
Renee Lewis:
We started in Detroit.
Kevin Kim:
Started in Michigan and then as you guys expanded, what was the process like when you’re evaluating a new market? Because I mean, you guys are now in 40 states. I’m guessing it’s going to continue to expand.
Renee Lewis:
Yeah.
Kevin Kim:
When you enter a new market, what’s the process like for you guys?
Renee Lewis:
Well at this point, I run the deal team and I’ve been to an awful lot of markets.
Kevin Kim:
You’re flying around a lot, huh?
Renee Lewis:
So far too often… so I’ll be somewhere and I’ll think, “Oh my goodness. I’m in east [inaudible 00:21:40] I’ve been here before.”
Kevin Kim:
Right.
Renee Lewis:
But yeah, a lot… it’s not that difficult if we’re asking the right questions of the right people to consider a new market. We get most of our deals through mortgage brokers. We are very protective of brokers. We think that they are very important to us. And so they’ll bring us a deal, particularly if they have a geographic region that they are working, they’re usually very helpful. And then we have a great network of brokers or attorneys and accountants and others who can help us find the right people to talk to.
Kevin Kim:
So the boots on the ground relationships are really helping you find the data sources? But you said something interesting earlier, not just the real estate type data sources or boots on the ground people, you’re also talking to the municipal government agencies.
Renee Lewis:
Right.
Kevin Kim:
Local government, you asked… and what are you talking to the local government guys about? Like their zoning [crosstalk 00:22:49]
Renee Lewis:
We’re trying to understand the economic development side, which [crosstalk 00:22:54] We also really want to understand supply that’s coming. So you were just speaking about industrial. There’s so much industrial under development. You certainly would want to know what’s coming. We were just working on a property recently in Pennsylvania and talking to the economic development folks. We learned about some highways that are planned that will dramatically affect, positively in that case, this particular building. It’s going to open up a lot of new markets to it and if we hadn’t been asking the questions, it wasn’t something that was obvious from [inaudible 00:23:34]
Kevin Kim:
These types of analysis seem a little bit more for a conventional banker than a bridge lender. I mean, I don’t see many of your colleagues taking this level of, I guess data and this level of information at a local level. I mean, it’s fascinating because what you’re talking about reminds of what loan officers used to do when I was a banker, right? The senior guys I used to work for would do that stuff and… but I worked for a bank, right? So it was understandable, but my clients from the commercial bridge side, I don’t hear them talking about this very often. This kind of level of information. I mean, is this basically just experience? Your 30 years that you-
Renee Lewis:
I think so. I think so. Our job is to identify risks and mitigate them so the successful deals are done.
Kevin Kim:
Sure.
Renee Lewis:
And I think because of our experience and dedication of the team, because I have really, really good people, we’re able to still move quickly while we’re being as thorough as… it’s the only way my partners and I know how to be.
Kevin Kim:
Right, right. Are the majority of you guys all from a banking background? A mortgage banking background or some other folks?
Renee Lewis:
No, we have lawyer, developer… note buyer, investment banker. I’m thinking… I’m going through our list. We’re, all real estate industry but varied.
Kevin Kim:
But varied, different parts of the house, if you will.
Renee Lewis:
Yeah.
Kevin Kim:
Okay.
Renee Lewis:
Which is also helpful. So we’re-
Kevin Kim:
[crosstalk 00:25:15] that mitigate risk? They understand how risk works and how to mitigate.
Renee Lewis:
Right.
Kevin Kim:
That’s fantastic. Well I want… well the team now. I mean, the team… I mean, you guys are in 40 markets, in offices all over the country, how many employees now?
Renee Lewis:
It’s still a tight knit team. It’s just in the low 20s.
Kevin Kim:
20s? Fantastic. I mean, I love lean teams, right? Lean and mean teams that-
Renee Lewis:
That we are.
Kevin Kim:
Functional, right? I mean, so in all the different offices, it’s just… are these small satellite offices in some locales [crosstalk 00:25:51]
Renee Lewis:
Right, some are and then… so the two that have the most people are Detroit and here.
Kevin Kim:
Okay. Okay. And as you guys… I mean, you guys have multiple funds and you’re a true balance sheet lender. We’re not talking about mass securitizations or anything like that with you guys, but the need to manage that many… that type of institutional or pension type funds, or whatever type of investors you guys have, it’s a pretty heavy lift. But with 20 employees, seems like it’s a… you have a lot of what do you call it? Swiss Army Knives, right? A lot of multi-talented people.
Renee Lewis:
I agree. Yeah, since… and others who specialize, but yes, we’re very serious about making sure that all the pieces fit together well. Obviously, I’m concentrating my efforts on transactions and asset management and others, my partners are spending time on that, but spending a lot of time on investor relations and the various reporting requirements that we have. And on company growth.
Kevin Kim:
Right. So when you guys are… I mean, are you guys hiring right now? Everyone seems to be hiring in general. Are you guys hiring right now? When you guys are hiring, because you always have to tighten the team, what are you guys looking for? What is your company looking for? What is the culture like at Bloomfield when you’re hiring?
Renee Lewis:
I think… and I’m always exciting when people ask other people besides me what the culture’s like. I think it’s a very flat organization.
Kevin Kim:
Okay.
Renee Lewis:
Again, it’s very communicative and I think that it’s a pretty fun, tight knit group. We run it as a single company, not as a bunch of offices. So teams are put together across offices. The deal team has an open Zoom all day long. That we all just hop in and out of.
Kevin Kim:
Oh, just running all day long?
Renee Lewis:
All day long.
Kevin Kim:
And this is not a COVID product? This has been a thing?
Renee Lewis:
No. It did start during COVID, but it’s over a year old now and we’re just keeping it. It’s really worked very well when you have people in different offices.
Kevin Kim:
Yeah, I bet.
Renee Lewis:
Say, “Hey Matt, hey Mike, what about…” and so you can just get a nice conversation going about any transaction or whatever is happening. And [crosstalk 00:28:22]
Kevin Kim:
Virtual meeting room you guys just pop into at any time of the day?
Renee Lewis:
Yeah.
Kevin Kim:
That’s awesome.
Renee Lewis:
Yeah. So I think that the culture’s really quite friendly and positive. It’s very hardworking. A deal is a Bloomfield deal. They are not some persons deal. We all pitch in and it’s all very supportive.
Kevin Kim:
Okay. I want to kind of dig into-
Renee Lewis:
Although I wonder if I should call over to other people and “Would you agree?”
Kevin Kim:
I hope so.
Renee Lewis:
He says yeah.
Kevin Kim:
All right. And that’s interesting because you see a lot of commercial mortgage bankers and commercial in the bridge side, they kind of follow… you see a lot of them structured like banks, right? You see a lot of them follow the bank model and tell me about you guys’ credit process. Do you have a… I mean, is it more of a team driven process? Or is there a specific person who has to make the final decision? How does that look like?
Renee Lewis:
No, there are four people on the investment committee. Our votes are unanimous. We have at least two calls a week on our pipeline and again, a lot of communication about them. So by the time any transaction is going to investment committee, it has already been discussed. Everybody’s really quite familiar with it. But we do a very thorough investment memo and there is a formal committee and committee approval.
Kevin Kim:
I like how you guys call it an investment, right? Because that’s important because you’re investing… you’re putting your investors first.
Renee Lewis:
Right, it’s not a loan committee. It’s investing.
Kevin Kim:
Right, right, right. It changes the paradigm almost like, “This is an investment. Not…” and that makes risk mitigation even more important, right? And so…
Renee Lewis:
We also underwrite any equity deal the same as any dead deal. There’s not a difference.
Kevin Kim:
The same process?
Renee Lewis:
Same process.
Kevin Kim:
Wow. Wow. Well the equity stuff and then the pref equity stuff, is it the same asset classes? Or are they kind of more of a narrow framework in which you’ll operate under?
Renee Lewis:
It’s generally the same asset classes, but there has to be… a compelling reason to take that initial step and we have to have structuring that we’re comfortable with.
Kevin Kim:
Okay.
Renee Lewis:
And I will say that one of… some of our equity we have some industrial platforms that we don’t really see much debt in that exact same space. They tend to be smaller bites that we build into a portfolio, so those individual assets would have been too small.
Kevin Kim:
Right.
Renee Lewis:
To really do a lot of debt on.
Kevin Kim:
And speaking of industrial, the word around town when it comes to commercial and industrial is cannabis. And it’s one of the primary drivers, in our area at least, California, I’m sure in different markets across the country. What’s Bloomfield’s position on cannabis? Are you guys actively involved? Are you looking at it? Are you still considering it?
Renee Lewis:
We are not in on cannabis.
Kevin Kim:
Okay. And no good, bad or indifference [crosstalk 00:31:41]
Renee Lewis:
No, it’s… fortunately, lots of people are and we’re able to steer transactions to them.
Kevin Kim:
Okay. Okay. Has there been a particular… is it a risk issue? Is it a government issue of the objection to it?
Renee Lewis:
That’s a big part of it. Until very recently and the lack of title insurance, and that [crosstalk 00:32:04]
Kevin Kim:
Very recently, right? I mean, that’s a pilot program too.
Renee Lewis:
Right. So that’s among the reasons, but we’re able to find a lot of other opportunities.
Kevin Kim:
Sure.
Renee Lewis:
So it’s just not something that we’re…
Kevin Kim:
And balancing with eCommerce, I feel like gives plenty opportunities on industrial. Most of it’s being swallowed up by a lot of… I have a lot of friends who are in eCommerce and we’re all in that running space. It’s amazing how much is out there.
Renee Lewis:
Yeah, it’s incredible and… then in some markets, here.
Kevin Kim:
Oh yeah. Oil breweries, distilleries, they’re not… you can… yeah, there’s a lot of… this trend of microbreweries really taking up a lot of the industrial space as well. Here in Southern California, so many breweries. I mean, it’s a fascinating marketplace that industrial asset class. I mean-
Renee Lewis:
Our recent industrial deals have included everything from heavy industrial in Houston to food oriented industrial in Ohio, to more eCommerce oriented in Pennsylvania, to… so it’s varied, you know? Florida. It’s just general warehouse distribution.
Kevin Kim:
Right, right. [crosstalk 00:33:24] warehouse.
Renee Lewis:
Closed in the past couple of months.
Kevin Kim:
Right and that raises another question about asset classes and the counter to the… of industrial as retail, right? I mean, how has retail treated you guys over the past few years with COVID? That was one of the biggest pain points I feel like, retail, hospitality were one of the biggest pain points from COVID. How’d you guys fare when… are you guys not in those asset classes as much?
Renee Lewis:
We’ve been in those asset classes. I think there’s a flight to quality and so… we fared okay because of that. We’ve been in some decent assets. Hospitality prices every night. So the first to be affected when the market is falling and hopefully we are seeing or will continue to see, it seems like it’s dipped a little bit. Recovery from COVID, hopefully this delta variant, again, who knows what the situation will be when this airs, but right now, we are in the middle of that and hopeful that it… the recovery continues.
Kevin Kim:
Okay.
Renee Lewis:
Basically.
Kevin Kim:
And are you seeing pockets of the country that are not as impacted by this stuff? I’ve noticed some clients of mine telling me like, “We’re fine where we are, but our counterparties over in LA seem to be suffering a lot.” You guys are in 40 states, I mean, what’s… have you seen [crosstalk 00:34:54]
Renee Lewis:
It varies. It varies tremendously. I mean, hospitality being a good example of you can take a look at different types of sub markets. The drive to resort market came back first. While other markets, the convention markets are still suffering pretty significantly and it’ll be interesting to see how comfortable people are about having huge gatherings. Seems to be gaining momentum and then dropping back, and then gaining momentum.
Kevin Kim:
Right, yeah. Exactly. Yeah. I mean, we plan events and it’s interesting to see how the hotels react and how they respond, and what they’re going to do about it. Another question I want to ask you Renee is going to the idea… we’ve been talking about beyond the balance sheet almost, beyond the data points and looking at the operator. What are some intangibles that you’re looking for when you’re looking at a borrower? Because it sounds like… I mean, it’s very uncommon for bridge lenders to underwrite the borrower. It’s very asset driven, right? But it sounds like you guys are not an asset driven lender in most regards. What are some intangibles you’re looking for when you’re evaluating a borrower?
Renee Lewis:
It’s important to us that the sponsorship, the borrower and our interests are aligned as much as possible. So we want to make sure that they have some money in the game. We want to make sure that they either have a really good idea, experience, some combination thereof. We want to… again, this is about doing everything that we can to ensure that there’s a successful business plan, because a successful business plan means a take out loan because we are bridge lenders. We are not here forever.
Kevin Kim:
Right.
Renee Lewis:
You don’t want us here forever, it’s not good for your project. So we want to make sure that we are understanding what’s going to be done, how much it’s going to cost, that there’s enough money, that we have structured it to make sure that all falls into place, and that therefore, we can help usher the loan through to the next take out.
Kevin Kim:
Right. From my perspective, it’s kind of interesting, back to the whole idea of that’s normally what bankers do and there’s time there, right? The bankers are notoriously slow, right? As a bridge lender, you got to… it’s quick.
Renee Lewis:
Fast. We’re quick.
Kevin Kim:
What’s your normal close period look like? How fast do you guys usually-
Renee Lewis:
About four weeks.
Kevin Kim:
Four weeks? So you’re doing all this in three weeks then really.
Renee Lewis:
Pretty much.
Kevin Kim:
And is that just kind of you guys have built the systems and processes for this?
Renee Lewis:
And we don’t sleep.
Kevin Kim:
You live on the phone, right?
Renee Lewis:
That’s right. On the road.
Kevin Kim:
I get that. I get that. I mean, it’s dedication to the process and to the business. I mean, that’s… and that raises another question, majority of your key members, how long have… I mean, stickiness, to be able to do this, you need people to have been around, to been with the company for some time, right?
Renee Lewis:
Right.
Kevin Kim:
You’ve been with the company since 17.
Renee Lewis:
And we have some people who have recently joined us who are terrific and we have… I’d say the… person with whom I do… who does a lot of the underwriting… that I was just talking to has been with us for seven years. Generally a long time. The people on the underwriting team.
Kevin Kim:
Very cool. Well I want to get your thoughts on where we’re headed, right? Because like you mentioned, the hospitality markets with this delta thing going on, it’s very unpredictable and multifamily was something that you didn’t see it. You thought it’d be worse than it really was and all this other stuff. Where we’re going, right? And there’s an interesting question that’s coming up a lot is… the shift into residential, right? Even in commercial real estate, I’ve been talking to developer clients of mine who’ve been doing a lot of conversions and switching to a residential strategy, and getting away… they used to do a lot of retail. Industrial is doing a lot of this conversion work. Where do you see things going? Because that’s just input from them.
Renee Lewis:
Right.
Kevin Kim:
Where do you guys see things going when it comes to the bridge space for the market.
Renee Lewis:
Again, we try to let every market tell us. There are places where we’d be thrilled to be looking at apartments and other places… well most anywhere, you’d be thrilled to be looking at apartments.
Kevin Kim:
Sure.
Renee Lewis:
You know, I think retail, the jury is out. I think that we’re quite… we’re a lot more interested in grocery anchor than we are in some of the other types. You go back to what are people going to use? Does it make sense to us? And there are new tools that we all have available to us to… they’re kind of fun to start to use to hone some of those thoughts, you know?
Renee Lewis:
We used to all use ESRI data. Now there’s Placer also where you want to see what the traffic actually is. It’s just fascinating to watch how the industry changes over time. But yeah, so we’re careful when it comes to things like office and retail. Others, hospitality, depends on where you are, what the price point is. Generally speaking, a lot of hospitality should be in a discount market right now. Things are getting so highly priced. Then somebody’s coming to us and they want a new loan, we want to understand what the basis really is, who’s taking a hair cut, are they getting something, is this a DPO that’s being financed? As opposed to just more dollars going after-
Kevin Kim:
Right.
Renee Lewis:
Old dollars. That sort of thing. So I guess one of the things that I’ve learned over the years is… while we develop vision, we see parts of the country that we really like. We see some property types that we really like, but you try not to be so steadfast in your position that you don’t have an open mind to the data that is developing.
Kevin Kim:
And that, those data points inform you, as opposed to kind of following the trends, if you will. You’re being informed by the local data. And local data, not just… we [inaudible 00:41:56] earlier, the idea of… and you say you’re tracking traffic, what kind of traffic? Actual car traffic, driving by traffic? Or like-
Renee Lewis:
Oh I’m sorry, one of the tools that we used recently is something called Placer AI, which is tracking phone-
Kevin Kim:
Oh.
Renee Lewis:
Tracking actual traffic into a particular store or shopping center based on cell phone data.
Kevin Kim:
Like foot traffic using cell phone… really? Well there you go. Now inform you the usefulness of… I mean, that right away will tell you whether retail is worth-
Renee Lewis:
Right. Well it’s really interesting. You can watch month by month during COVID.
Kevin Kim:
Right.
Renee Lewis:
To what was happening [inaudible 00:42:37]
Kevin Kim:
Right. Right.
Renee Lewis:
Back up.
Kevin Kim:
Do you see your sponsors kind of following suit with this kind of stuff? Because I’m still seeing people building retail centers. It’s fascinating. Why is this stuff being built right now?
Renee Lewis:
Oh right, and we still see some of it, but a lot of it depends on if you are a sponsor who has a relationship with one of the major tenants and they’re signing a 10, 15 year lease and saying, “Please go build on that corner.” Then that’s different than if I build it, they will come.
Kevin Kim:
True.
Renee Lewis:
Very different approach-
Kevin Kim:
And then again, to the same point you made earlier, a lot of them are grocery anchors, so that makes more sense.
Renee Lewis:
Right. You do have to be careful as you’re looking at older properties that have old credit tenants in them, or old high rates and again, back to the municipality and really thinking about how growth has gone in that community. How likely is the tenant to sign? Again, to resign and stay at a high rate, or is that old 32 dollar a foot drugstore going to be vacated and you’re only going to get 14 dollars a foot.
Kevin Kim:
Right. I mean, we’re starting to see parts of Southern California become ghost towns, mostly in LA County and that kind of formed this trend. Like you see old former drug stores, fast food chains, things that would normally do well but with today’s current climate, it’s not as attractive. And that raises another question for you is office, and this has been kind of a debated point and a lot of it’s non-real estate conditions. It’s really more work conditions. Where do you land with the whole… a lot of lenders have taken a position based off of oh, work from home is now a thing. But then other people say, “Well no one’s working from home where we are.” Right? How have has that informed you guys? The whole work from home trend post… I guess we’re still in COVID. I mean, with the-
Renee Lewis:
We know a lot of people who work from home or a lot of people who are returning to a hybrid model. Where they’ll be in part of the time and out.
Kevin Kim:
Right.
Renee Lewis:
And we’re seeing that in lots and lots of markets. I think that the question… and I don’t have an answer for it yet, and so we’re still watching is what does that do to the cost of productivity?
Kevin Kim:
Right.
Renee Lewis:
How much is your space worth if it is now supporting only half as many people? Or is it two thirds as many people, or is it three quarters, you know? And I don’t think we all know that yet. So I think-
Kevin Kim:
We’re still figuring it out.
Renee Lewis:
We’re still figuring it out and I had high hopes that this fall would be sort of a point of reckoning on it, especially as kids went back to school and parents could go… to work in whatever the long term setup was going to be now.
Kevin Kim:
Right.
Renee Lewis:
Now with… I’m not sure if everybody’s gone back to school.
Kevin Kim:
Yeah, I don’t think schools are fully reopened yet. But the question mark as to are… I mean, these multinational companies with offices across the world, right? It’s like are they bringing their employees back to work? The big employers in the country, I don’t necessarily know.
Renee Lewis:
They were planning to.
Kevin Kim:
Right.
Renee Lewis:
You know? I think some of them are wondering, a lot of them were planning on September.
Kevin Kim:
Good to know. I mean, it’s interesting. Small businesses, you see a lot of people back in the office and that reflects the pricing with office space, it’s always… and it’s a lot of office… I mean, here in Irvine, California, there’s office towers being built still to this day and it makes me wonder, “What are they going to do with all this stuff?” I mean-
Renee Lewis:
I know. Then there’s a flight to quality, right?
Kevin Kim:
Right.
Renee Lewis:
So then your question really is what happens to the old office towers? There was some of that that we were seeing on the distressed side a year ago in some of the-
Kevin Kim:
Oh yeah.
Renee Lewis:
[crosstalk 00:46:53] corridor and some of those areas. So it’ll be interesting to see. I don’t… the book is not totally written on that.
Kevin Kim:
Fair enough. All right. I mean, are there other pocket industries that you guys are excited about? Like markets… I guess asset classes and markets are your [crosstalk 00:47:12]
Renee Lewis:
Yeah, and I think that there are a lot of really interesting types. Some of the life sciences, manufactured housing I think is a great one and one that we spend a fair amount of time in. I think that industrial has so many subcategories.
Kevin Kim:
They do. Yeah, it does.
Renee Lewis:
There are parts of it, the last mile, cold storage, small cold, I think are really, really interesting spaces. I think that some of the creative reuses of big boxes I think are fascinating. Where the shared kitchen-
Kevin Kim:
Oh yeah.
Renee Lewis:
Question is going. I think that again-
Kevin Kim:
We have a whole park in Newport Beach dedicated to that is just a series of kitchens being used by various caterers and they do fantastic.
Renee Lewis:
Yep.
Kevin Kim:
It’s industrial, yeah.
Renee Lewis:
Yeah. So we’ve lent on… properties like that. There are also the ghost kitchens, which is sort of a cousin. So it’s fascinating to see… what’s coming and then again, to just try to figure out their… therefore, what opportunity is there and how do you balance that is upside and downside risk.
Kevin Kim:
I guess, looking forward now and commercial bridge has really taken a large piece of what… 15, 20 years of loans that my colleagues at the bank would have done, my father would have done when he was a banker and it’s interesting to see the role of private independent lenders on the bridge side. And as Bloomfield continues to grow, where do you guys see the role of private independent lenders, non-agency in the world of finance when it comes to commercial real estate? Because the rules are ever evolving, right? What used to be just bridge is now also pref, MAS and also equity, also doing construction, also doing stuff that they wouldn’t normally do because banks have tightened and done what they’ve done.
Renee Lewis:
Right.
Kevin Kim:
Where do you guys… what are your thoughts on that?
Renee Lewis:
I think that you put it well. I mean, we… started as straight first mortgage bridge. That is where we will spend most of our time and most of our treasure, but finding other opportunities and making sure that we’re getting the yield that we desire. It’ll go up the capital… up and down the capital stack a bit. I think that role of bridge lenders is going to continue, because I don’t think the banks are going to get any broader.
Kevin Kim:
And they’re not coming in, right? They’re not trying to compete?
Renee Lewis:
No, they can take us out.
Kevin Kim:
But they’re not trying to… you’re not seeing banks, smaller banks trying to come in and compete with you?
Renee Lewis:
No.
Kevin Kim:
Okay.
Renee Lewis:
No. But a lot of the people or the opportunities that we’re seeing aren’t ready for a bank yet. So we may be helping somebody to get to a bank take out. So yeah, they have to be careful. The banks have to be careful about the risks that they’re taking and the ratios that they’re having to adhere to.
Kevin Kim:
Oh yeah.
Renee Lewis:
So they often are a take out for us.
Kevin Kim:
Okay. That’s good. I’m excited about the continued evolution for commercial, because when I started here, Geraci… I come from a family of lender… bankers and when I say commercial take off, I was just shocked. I’m like, “Wow, what are the… wow.” Because it was amazing to me because those were the ones I would have done at the bank when I was a banker, loan officer.
Renee Lewis:
You would have banked or you wouldn’t have banked?
Kevin Kim:
I would’ve.
Renee Lewis:
Yeah.
Kevin Kim:
When I was a loan officer, this was pre… this is 2002, right? 2000 to 2002, this is pre-crisis and these are the ones that we would’ve done, and then since then, the banks have changed their position on everything, right? And I talked to my dad about this a lot. He was a loan officer, he was a banker for 30 years and he’s like, “You wouldn’t believe what they say yes to right now.” It’s this tiny sliver of what we used to do 20 years ago. And it continues to get smaller and smaller. It’s an interesting dynamic right now for… opportunity for you guys, but dynamic because… the funny part is, is there’s more and more banks being opened. To me, that’s kind of-
Renee Lewis:
Well as an industry, they’re rushed. It’s a much smaller industry. There are only, whatever it is, 5,000 banks now. I have that number wrong, so I’m sure somebody will fact check it, but it’s far, far fewer than there were 10 years ago.
Kevin Kim:
Interesting. Okay.
Renee Lewis:
Years ago.
Kevin Kim:
Okay.
Renee Lewis:
So it is interesting, and I think another area for us that we see as an opportunity, maybe this is going back to an old bank mentality as well, is we like repeat business, which is how banks used to work as well. You wanted a relationship. So nothing makes us happier than somebody coming back for their second, third, fourth loan. Even if it’s only going to be a year or two years, and then we’ll be moving onto the next opp. Yeah.
Kevin Kim:
Right.
Renee Lewis:
There are opportunities.
Kevin Kim:
But the nice part about the bridge space has become standardized from that standpoint. If you’re a developer, builder, you’re not going to a bank start. Right now, the move is to go to a bridge lender now. It’s-
Renee Lewis:
Yeah.
Kevin Kim:
Which wasn’t that-
Renee Lewis:
Or you might need… you got a little bit of MAS or pref to talk-
Kevin Kim:
That too.
Renee Lewis:
About their equity need.
Kevin Kim:
That too. Yeah. Well very good. All right. Well I’d like to close with one final question for you and we always ask on the podcast is bullish or bearish, looking to the next two years. 22 and 23, we’re going-
Renee Lewis:
Oh man. Okay.
Kevin Kim:
[crosstalk 00:53:33] so someone who’s a good person at risk, I always want to [crosstalk 00:53:36]
Renee Lewis:
So I lived bearish, that’s just me.
Kevin Kim:
Right.
Renee Lewis:
But I think there’s so much money right now chasing the markets. So for some people, they say that’s great. There’s so much money chasing the markets that’s bullish. For me, there’s so much money chasing the markets that I am a little bit more conservative to make sure that we’re getting good deeds. So I think that we’re going to be very busy. I think that we are going to have a lot of success with a lot of transactions, but we will continue to keep our radar up and make sure they’re safe.
Kevin Kim:
So cautiously, cautiously.
Renee Lewis:
I’m cautiously bullish.
Kevin Kim:
Okay. Well that’s what it’s all about, right? From a person who understands risk, right? Cautiously bullish is pretty common throughout-
Renee Lewis:
That’s pretty good for me. That’s pretty good for me.
Kevin Kim:
Yeah. Yeah. And you’re right, I mean, I think there’s an indecent amount of capital in this space right now, and we’ll see what happens. I mean, it’s causing excess risk being taken. I think we’ll see some adjustments. I agree with you.
Renee Lewis:
Right and then bearing in mind that we also are positioned so that there is distress.
Kevin Kim:
Right.
Renee Lewis:
We’re happy to jump on it. So for us, that’s another reason to… we have a lot of debt in my experience.
Kevin Kim:
So distress is an opportunity for you guys? Definitely.
Renee Lewis:
Yeah.
Kevin Kim:
Definitely. Well that’s a good place to close this show out, this episode out. Renee, thank you so much for joining us-
Renee Lewis:
Thank you Kevin.
Kevin Kim:
On the show. It’s been a fun one and we rarely get to talk CRE on the show, so I love the fact that we did. I got to turn my old banker hat on and I really appreciate the time.
Renee Lewis:
You can do underwriting on the side if you want. [crosstalk 00:55:24]
Kevin Kim:
I haven’t written up a loan file in about 20 years, but… hopefully we’ll be able to connect soon in person and we’ll do another one of these. This is all for Lender Lounge. This episode with Bloomfield Capital. Thank you very much for listening in.
Thanks for listening to Lender Lounge with Kevin Kim. I hope you enjoyed this episode as much as I did. If you did enjoy, please leave us a five star review on your podcast platform. And be sure to follow our show to be notified of new episodes here on YouTube. Don’t forget to smash that like button and hit subscribe for more content from all of us here at Geraci. Lender Lounge with Kevin Kim is available on all podcast platforms. Referrals really help us spread the world, so please send this over to someone you think might enjoy it. See you next time, this is Kevin Kim signing off.
