Kevin Kim: You are listening to Lender Lounge with Kevin Kim, a podcast dedicated to helping those in the private lending industry grow, improve, and streamline their business. I’m Kevin Kim, Partner at Geraci LLP, the nation’s largest private lending law firm. Join me as we chat with the best and brightest in private lending, who are eager to share their years of wisdom and best practices with lenders, borrowers, brokers, investors, and more. Subscribe to Lender Lounge on your favourite podcast platform and learn more about Geraci and how we can work with you at geracilawfirm.com. Check out the episode summary for other valuable resources.
Kevin Kim: Hey, everyone. Welcome to a very special episode of Lender Lounge with yours truly, Kevin Kim. We are here on location in Los Angeles with two folks, not from California. We are at a lovely hotel called the 1 West Hollywood, in West Hollywood, celebrating Renovo’s top 100, or Top Gun event?
Kevin Werner: Top gun.
Kevin Kim: Top gun event. We have our two guests today. It’s a special episode. I had the privilege to come down and shoot this episode today. Thank you, guys, for coming out. Thank you, guys, for letting us come down and shoot. I’m really excited for you guys to join us today. Tell us who you are, tell our audience who you are, who you’re with, and why we’re all gathered here today. Paul?
Paul Shaughnessy: Paul Shaughnessy. I’m an originator at Renovo Financial, and we’re here to celebrate our 2024 performances across our entire organization. There’s a lot of executives here, salespeople, marketing, everyone who really makes it happen.
Kevin Werner: Kevin, thank you for coming. We’re really excited to do a Lender Lounge live from a Renovo event. We’re honoured and proud that you came. This is the fifth Renovo Top Gun event that we’ve done. Top Gun for us is our annual top performer event. If you’re an originator on the team and you do 50 million or more per year, then you’re invited to Renovo Top Gun.
Kevin Kim: 50 million a year.
Kevin Werner: You have to do 50 million a year to be at Renovo Top Gun.
Kevin Kim: Damn. That’s impressive, my friend. That’s impressive. I’m guessing, it’s not just Paul here. We all know Paul. We all love Paul. Who else is here from the team?
Kevin Werner: We’ve got a lot of team members here today. I’m not going to name names of all –
Kevin Kim: All good. All good.
Kevin Werner: But I believe there was 12 or 13 total people on the team that qualified this year.
Kevin Kim: Wow.
Kevin Werner: Yup. This is the biggest Top Gun we’ve had yet. We come here, first of all, we travel around every year. Every year, we pick a cool place that we want to go. Typically, it’s a market that we’re in, and we can spend a day or two in the market that we’re in and have a great time with the team. It’s a combination of a little bit of learning and a lot of fun.
Paul Shaughnessy: For those audience members that don’t know, Renovo is famous for doing really, really cool things for their employees. We talked about this when you’re on the show last time with Greg at Arixa. This is a great opportunity for us to get deeper into this culture building of Renovo. I’m just fascinated by it. I don’t know many companies that invest this much into the happiness and reward other people.
Kevin Kim: Give us an idea, like big picture, for the entire year, what is Renovo doing when it comes to, I would say, culture building and appreciating and rewarding its team members, internal events? Because I’m sure you guys spend a lot of time and energy externally. You come to our events, you go to all the different shows out there. You guys seem to spend a lot of energy internally. Tell me more about that and we can expand on it.
Kevin Werner: Yeah, and we also throw a lot of client events, which is a whole another thing –
Kevin Kim: I want to get into.
Kevin Werner: Look, first of all, when we started the company 15 years ago, and for us, the whole idea was we want to be at a company that we want to be at to ourselves. We believe in people that can come to work every day, be happy, be excited, and build a career. Private money used to be hard money, and it used to be a under the radar, back-alley industry. I think 15 years ago, we thought, hey, let’s do this professionally. Let’s build a culture where people can come and grow personally, professionally, and build a career. It’s one thing to have fun, which we love having fun. But it’s equally as much about investing in the growth of our team. We do a lot of development. How do I want to say it? We do a lot of personal development at Renovo.
Kevin Kim: Okay. Such as, give me an example.
Kevin Werner: We do tons of coaching. We have a sales coaching company on retainer that we’ve had on retainer for many, many, many years, that the woman from the training company is a part of our organization.
Paul Shaughnessy: I mean, she’s been to a Top Gun event.
Kevin Werner: She’s been to a Top Gun event. That kind of coaching to our team – We talked this morning a little bit about one of the other leaders at the company that we have a culture of Renovo of constantly learning. We’ve figured out that there’s way more we don’t know than we know. If we’re going to try to be good at this business, we got a lot of things we still got to work on knowing. Culture comes down to it, in our opinion of constantly learning, allowing our team to grow.
The other part of this is when you have amazing people on your team, like I get the privilege to work with this guy every day. This guy wants to grow, right? If we want to be a company that has people in it that want to grow, well, then we have to grow, well, then we have going to outgrow us, which would stink, because happens a lot.
Paul Shaughnessy: I don’t like being alone.
Kevin Werner: Happen a lot on our space. Happens a lot. Yeah.
Paul Shaughnessy: Executives outgrow the company, they go out and open their own shingle, or they join forces with a bigger shop, or whatever happens.
Kevin Kim: You guys have been fortunate enough to bring on immense talent in the past few years. This man included. We were commiserating. We were talking about the old days when I first met this guy when he was here in California.
Paul Shaughnessy: Many years ago.
Kevin Kim: Got his start in the space. I know several folks have joined the organization at Renovo. Tell me about that, because growing the company involves sales, involves origination volume, or it involves people, but attracting the talent. Because it must have been hard to bring someone on like Paul.
Kevin Werner: Oh, God. This guy had me on Zooms for weeks and weeks and weeks and drilling me with every question. Why? Oh, yeah.
Kevin Kim: I mean, you have to make the case to him, hey, believe in us and give us a shot, because when he joined you guys, I mean, you guys are trying to break into larger markets, break open new markets and –
Paul Shaughnessy: Being very impressive.
Kevin Kim: And convincing top originators in local markets to join you. It takes a lot.
Kevin Werner: It takes a lot of energy and it’s look, yes, it’s origination. But you have to have a platform that can grow. One thing we did, Renovo has been around, next year, it’s going to be our 15th year. We were building this thing brick by brick, piece by piece for a decade before Paul would ever talk to us, right? We were trying to put the pieces together, so we can give people the ability to come here and build the biggest business they want. At this point, someone can join Renovo and build the biggest business they could possibly imagine. But it’s not like you’re building a weird net branch and arrangement, like you see in a wholesale mortgage, where they’re on their own loan zone.
Well, look, we’re a portfolio lender. That model, I don’t think works well for us, because we care about the performance of our loans. Our whole model was based on local leadership that could lead a local office, a local market. We live where we lend as a company. We do not lend where we don’t live. If someone called in the Renovo office tomorrow and said, “I’m the greatest developer in Nevada,” we would not lend to them. We don’t have anyone in Nevada. We take a market-first approach and that takes time and energy.
Kevin Kim: That goes to the client-facing component. I mean, we’re here celebrating your Top Gun originators as we’re calling them. For me, that requires a lot of head of local infrastructure. Talk to me about when you first joined the team and then the infrastructure that you had to build in conjunction with the support of them, like what’s that look like and what are you doing with clients as part of your endeavours? Because a lot of folks don’t know, Paul here is probably doing the, I would say, one of – It’s basically, he’s put you guys on the map in the state, and then you’re in the top three or top two.
Paul Shaughnessy: In where?
Kevin Kim: In Massachusetts from a volume standpoint.
Paul Shaughnessy: Oh, no, no, no, no. You mean, one, Kevin. Maybe one. It’s not maybe. It’s not maybe. There’s no maybe there.
Kevin Werner: I’m trying to be diplomatic.
Paul Shaughnessy: Diplomatic. I’m not going to be diplomatic. It’s actually very factual.
Kevin Kim: Right. I was telling Paul, I have a very long following in the state of watching the Boston Market, mass market. It’s like, it’s just been awesome to see your guys’ growth there, and you guys take hold of it and also see what you’re doing on the ground. Talk to me about that. This is you and plus how many people? I don’t understand how it works over there.
Paul Shaughnessy: On the origination side, it’s me. We just promoted somebody from a sales development representative role up into an originator role. He’s two months in at this point. I mean, early on, it’s challenging, right? Because I think at the time, Renovo just launched in Texas, right? Then we’re headquartered in Chicago, launched in Texas.
Kevin Kim: Another great story in Texas. Similar story. Yeah.
Paul Shaughnessy: Very similar. Decided to launch in Boston. Thinking about the, the interview process, like going back to what you mentioned, I don’t think they had to convince me of anything. It’s abundantly clear of how well put together the organization is and how foundationally strong it is as a company. The culture really bleeds down from Kevin, Daniel and the rest of the executive team to everyone. It’s just abundantly clear. It was more of a, hey, I just want to make sure this is the right fit, because I’m making a long-term decision. I’m not looking at it just for money. I want to build a long-term career as exactly alluded to earlier, right?
It was really important to me in how thoughtful and patient Kevin was on his Zoom calls. I probably drove him – He’s not lying. I drove him for about 150 questions, right? I had a long list of questions.
Kevin Werner: Every day for an hour. Then I’m like, “All right, I got to go. Can we do it again tomorrow? Tomorrow?” Then tomorrow, tomorrow.
Paul Shaughnessy: Yeah. It was a long process. But I’m happy it worked out. Early on, I think we didn’t really have any presence here. Well, I say here in –
Kevin Werner: In Boston.
Paul Shaughnessy: Right. I took a lot of really just, I mean, I had just moved back to the time to from San Diego, as I was living in California. I moved back to Boston to build that business. It was extremely trying and challenging, because there’s a lot. Boston is purely local, right? You want to really build a meaningful market share percentage overall. You have to be there. Otherwise, it’s just not going to work. There’s a lot of institutionally back lenders that are larger nationally that have tried and they’ve come and they’ve gone. I think being local was one part of it, a big part of it. I guess, the other part is just effort, right? Believing in what you’re growing.
When you compare a Renovo against most institutionally backed lenders, most institutionally backed lenders, they sell their loans to third parties, and they’re required to service things through third party, and same thing with facet management and fund control, right? When you have all that in house and you have the ability to have some level of control, without conflicting interests, it’s powerful. When you believe in that and you’re selling that and you’re selling the Renovo culture, because at the end of the day, there’s a client culture aspect to it all as well. It’s not just company culture.
Kevin Werner: This is something Paul mentioned to me earlier that I was like, oh, that’s a great way to say it, because your bar for the clientele you’ll work with is pretty high. That’s also the key to your success, I would say, of really having a high bar of who he’ll deal with. Yeah, I probably made 120 cold calls a day for a long time, until I couldn’t make them anymore, because the book got started getting larger and larger and then then the team infrastructure really came into play
Early on, I mean, I was in the office calling for 10 hours, 12 hours a day and trying to set meetings. I’d go out on job sites all the time. I did my own construction draws early on before we had a asset manager on the ground. It was definitely a tough time, but we worked through it and build the right relationship with the right people. I think it’s important in general just from a relationship building aspect to understand their story and really get a good feel for their background, so you can have an understanding of what makes them tick. If you don’t really know that, then you can’t really add a tremendous amounts of value.
Yeah, everybody wants to find good quality deals. But at the end of the day, they’re building a specific business. You need to understand what makes them tick, understand why that business is being built, that way you can keep them on the right track. I have deep enough relationship with clients, where I understand that at a very deep level to where I can conversate with them and steer them in the right direction if they’re going off path. We’re having a good conversation surrounding that, why are you making this?
Kevin Kim: You’re playing consultant.
Paul Shaughnessy: Exactly. We take a consultative approach. It’s very important in this business, because most people have a deal-oriented mindset, and they’re looking at it like, “I need to close this loan so I can make money.” I’m like, I want relationships, because money is a by-product of the relationships. If you just focus on that, the rest follow, it’s not an issue.
Kevin Kim: I told Paul, we were going to expand on this issue, because we talked about this before when you were on the podcast. I have a lot of clients and a lot of guests on the show that have honed in on this concept of relationship lending, relationship building as the foundation of their lending business, because unlike conventional mortgage, we are in the repeat business model, right? The same borrower was going to come back to the table three, five, 10, 20 times a year. At the same time, the same lenders will complain that they’re losing opportunity to more widget-driven private lenders that are product oriented, deal-oriented, not borrower oriented. Oh, they may claim that they are.
You see that, man, I’m getting my ass kicked, because XYZ is killing me on leverage or price. I can’t reconcile the two, right? Which is it? Because, is it both? Two things can be equal at the same time.
Kevin Werner: It’s got to be both.
Kevin Kim: I mean, it’s got to be both. From your –
Kevin Werner: Well, it’s more dynamic than that, but I think it’s got to be both.
Kevin Kim: Yeah. Let’s break it apart, because one of the things to me is you don’t get to where you guys are at without the relationship game, but also, managing some level of competitive edge.
Kevin Werner: You have to from a product standpoint.
Kevin Kim: From a product standpoint.
Kevin Werner: It’s the guys that fell away, overly conservative and overly inflexible, too. All the other guys are chasers.
Kevin Kim: They thought the relationship was going to mean that that borrower was going to just go along with their terms.
Paul Shaughnessy: Correct.
Kevin Kim: Over relying on borrower loyalty.
Paul Shaughnessy: Correct.
Kevin Kim: How do we reconcile the two in the real world, right? How are we building those relationships that are so meaningful that it trumps price and leverage?
Paul Shaughnessy: Well, it doesn’t matter.
Kevin Kim: Yeah. Expand on that. Yeah.
Kevin Werner: Well, my point of view, we’ve been doing it long enough now that we’ve seen cycles, and relationships and cycles have a little bit to do with each other, I think. Because you want to have a great relationship. That’s fundamental. You also, as a borrower, they’re not dumb. I mean, look, they’re economically driven and they need to make money. They’re in a competitive business. Inventory is tight. They have to be competitive. The way we think about it is if we’re in a market, when we’re in a local market, we are there to be a number one, or maybe number two player in the space. Not in Boston.
Kevin Kim: It really sticks.
Kevin Werner: Yeah, it does stick.
Kevin Kim: I love it.
Kevin Werner: We’re there to be a meaningful player in that market. What we are constantly doing, there’s a couple of people on our team that they spend their entire day analyzing the competitive product set in that local market. We’re looking at, let’s not use Boston, because Paul. Let’s just use another market. Let’s just say, Charlotte. We are looking at that Charlotte market all the time and we’re looking at what is the competitive set there. It’s more dynamic, because now we have a lot of products in the industry. You have to look at what’s the fix and flip doing, what’s grown-up single asset doing, what is DSCR doing, what’s multi-family doing, and what are the competitors in that market doing? What do we need to be?
Then the relationship should be icing on the cake, kind of. I mean, I think you have to do both. Now, the reason I said before about the cyclicality is because look, the tide does go out, right? When that happens, relationships do really, really matter. Because we know which borrowers left us for 20 BPS. We know who they are, and it’s fine. We get it. Are we going to answer their call right away when the tide goes out? Probably not. Are we going to answer the call for the borrower who didn’t beat us up over every nickel and dime? By the way, then we’re not going to beat them up over every nickel and dime the other way. The pendulum swings both ways.
You do right by me, we’ll do right by you, ish, right? I’m not asking you to just use – I’m not asking you to pay us hundreds of basis points more. We’re not asking for that. But don’t nickel and dime us on the way down, or on the way up, maybe call someone else. We call it reverse recruiting. Go over there.
Kevin Kim: What are you doing specifically on that? Because we talk about – I hear this from, I guess, I can call them chief loan officers, or head of credit on this issue of relationship management and relationship building, but they never really get granular on it. We got granular the last time on what you’re doing internally to build that call culture of accountability and that culture of customer service and ending a lot of folks really learned a lot from it. I learned first-hand, clients told me, “Man, that’s a really great idea. We started doing it.”
On this customer facing component, everyone has these different ideas and we struggle with this all the time. How are we going to make sure that we’re out there in front of them, but also, taking care of the ones that matter the most, there are ups and downs. We’re going to briefly have on this, you give me some things that you do. Give me some granular stuff, like what are you doing to really make that meaningful difference for your relationships?
Paul Shaughnessy: Well, I think 90% of what we all do in the space is the same stuff, right? We all have the similar rates, similar LTVs, similar processes to close along. Post-closing experience is a huge driver of retention, right? In order to get to that point, you have to really build, cement the trust and build the rapport. I think it’s important in general to understand, again, I’m going to go back to their story, right? Because at the end of the day, they’re doing this for a reason. If you have a good understanding of their background, whenever I start a relationship with a new client, it’s, A, it’s got to be a mutual fit.
I shouldn’t have to want to have to sell them on product and rates, right? It should be a much more natural conversation. I think you need to understand what their background is, understand what their business currently looks like, learn about what they’re looking to accomplish, that way, you can be a good partner in the long term. Then, you also need to dive into challenges, right? Because I don’t think anybody in this space is 100% satisfied with anything. There’s always something that could get better. If you don’t really know those things, then you can’t really add value. If you can’t add value, well, then there’s probably not a real relationship to begin with, and then it is more product and rate-driven. You need to extract the why. That’s a huge part of it.
Then if you can understand all those things, then you have the ability and opportunity to go out and add more value. I think a lot of people get that wrong. They look at it, “I have the best rates in the market, I have the best leverage, I’m going to win.” I hate to say it, but the numbers show, it doesn’t always work like that.
Kevin Kim: Yeah, and you also have the opposite phenomenon happening. It is what it is. It’s like, there’s our rate sheet, whatever. I don’t really care. I’m busy. I’ve seen that a lot.
Kevin Werner: What do you mean?
Kevin Kim: Well, you see this goes to the whole commoditization of our asset class, right? You’re already seeing a phenomenon of LOs, and even larger outfits saying, “All right, these are the terms. That’s it. I’m not willing to work with you at all. I’m not going to help you. I’m going to help you. I’m going to change you. I’m going to add value to you. I’m going to show you.” It’s been fascinating of like, almost to the extreme version of what you see in non-QM and conventional. It’s, well, guys, at a certain point, that business does not correlate to ours at all.
Paul Shaughnessy: Yeah, I don’t think.
Kevin Kim: Yeah. I mean, like I said, the same borrower is doing 10, 20 full yields.
Kevin Werner: We’re in small business lending, right? This is B2B. There’s no B2C happening here.
Kevin Kim: Exactly. The consumer is going to you once every 10, 15 years. That’s not the case in the space. But I’ve seen it. Even at the institutional migration level, we’re like, hey, this is it. Sorry. It’s frustrating to see, because the value component is easy to add, my perspective. What kind of value, as we’re talking about here? Is it helping them with their projects, showing them how to maybe research the ordeal? What are we doing here, specifically, when it comes to that little extra oomph that really makes you an attractive option in mass?
Paul Shaughnessy: Well, we have a lot of local, really. I mean, we have hundreds of clients locally. When you have that big of a client base, you have a big referral opportunity. There may be someone who needs a contractor and needs a real estate agent, or broker, or an attorney. That’s just one small component. That’s almost given.
Kevin Kim: Right. For all things helping.
Paul Shaughnessy: Right. Then, I think doing the type of volume that myself and my team does every month, I mean, there’s, at any given time, there’s 70 deals, 75, 85 deals going on. I look at every single deal that comes in. I comp out every single deal on my own. I think most people will say, “Hey, we can do the deal. It checks the boxes.” But if the appraisal comes in low, you have to bring more cash to the table, right? That’s the easy route. The hard route is to manage expectations appropriately, so that they know what a worst-case scenario is. When you’re local, you understand the differences between block one and block two.
Kevin Kim: You can predict it.
Paul Shaughnessy: Correct. You know why something five blocks down the road is that comp that was five blocks down the road was 150 grand higher and why the bar was looking at that as a comp. Maybe they’re a direct mail type of borrower, where they’ll buy anywhere where they think they can get a discount on it. But when you know the local market in the neighbourhood, you can advise against that, if they run into a situation where they have a comp that’s exorbitantly higher and they’re trying to hit that number. You talk them out of a deal like that. You don’t just do the deal to do the deal. You try to save the borrower’s career, because one bad deal can ruin a borrower’s career.
Kevin Kim: Oh, yeah.
Paul Shaughnessy: At the end of the day, they need to put food on the table for their family. It’s important to really have some level of humanity involved in this business. I think most people are so hyper transactional to where it’s removed. They don’t look at it like, hey, this one investor is providing jobs for so many other people economically, like subcontractors, general contractors, real estate brokers, right? All these people are in business, because of this investor.
Kevin Kim: Correct.
Paul Shaughnessy: Because they decided to put their money on the table and take that financial risk. I don’t think people think of it like that.
Kevin Werner: For him, listening, it’s about delivering for the clients each and every day a predictable, reliable –
Kevin Kim: Make the experience as positive as possible.
Kevin Werner: Well, and predictable and reliable. It may be telling things that are – tell a client, “Hey, I’ve done a bunch of deals in this area. The exit you think is going to happen, with all due respect, I don’t think is going to actually happen.”
Kevin Kim: Yeah, because you’re looking out for them.
Kevin Werner: Because you’re looking out for the client, right? It’s not all about trying to put another deal on the board. Because there’s plenty of opportunity as a lender to lend a client into a bad situation. That is not hard to do. That’s pretty easy to do.
Kevin Kim: I agree. That seems to be where there are inklings of that in the market, where it’s so commoditized, or just a matter of getting the deal. But getting the volume in the door, because at the end of the day, they don’t really have to worry about the risk as much, because that loan is not sitting on their books for very long. That phenomenon is a newer phenomenon. It’s getting worse and worse. Thankfully, our counter-parties in the secondary market, because of securization are saying, “Well, hold on. We’re being much more concerned –”
Kevin Werner: Yeah, because we can’t mess this up. We better as an industry, not mess this up.
Kevin Kim: Correct.
Kevin Werner: We have an amazing thing going. We have a lot of global investors now that want to put billions and billions of dollars. I mean, the biggest challenge we have as an industry is there’s not enough qualified lenders out there to take the billions of dollars that there is.
Kevin Kim: That actually raises an interesting question, because Massachusetts is a famous market for this. Actually, Illinois, also. You have a lot of what I would call legacy, not even hard money. I would just call it, whatever existed before hard money existed.
Kevin Werner: 2.0.
Kevin Kim: Yeah.
Kevin Werner: I think we’re in 3.0 right now. I think that was a 2.0 vintage.
Kevin Kim: Maybe 1.5, maybe.
Kevin Werner: Fine. 1.5 vintage.
Kevin Kim: Some of the old school guys that have been doing it for 30, 40 years, and you can call them cowboys, you can call them legacy, you can call them whatever you want, and these guys create a different dynamic in your market. In today’s market, it feels like, they are the disruptor of sorts, because they’re pushing risk like you wouldn’t believe.
Kevin Werner: In what way? You mean the local lenders?
Kevin Kim: Local lenders. The hardcore –
Kevin Werner: The local balance sheet guy.
Kevin Kim: Old school guys. Yeah. The old school hard money guys that will push leverages beyond what any institutional shop will do. Their rationale is basically, cash for keys. You see a lot of that still in the market. Reconciling that with what we’re trying to achieve and what you guys are doing. There are a lot of shops that look like you guys that are really trying to build a much more –
Kevin Werner: Sorry. Sorry. Sorry.
Kevin Kim: No, that’s great. That’s very humble. No, that’s great. When I say like, companies that really are looking inwards and also doing what’s right for the industry and building strong teams. But then there also, there’s also this subset of the market. We’re talking about this. They’re actually in Massachusetts. They’re just so legacy characters out there that are really aggressive, hyper aggressive, don’t do things the right way by any stretch of the imagination. What are you guys, because now you’re in multiple markets. Texas also has the same problem.
Kevin Werner: Yeah. Over in 25 major cities. Today, we have boots on the ground, we have people in 25 major cities today.
Kevin Kim: Right. Some of these markets, I mean, man, the legacy –
Kevin Werner: You’re saying the risks of competing with that local –
Kevin Kim: Or, what are you guys dealing? How do you guys reconcile just operating your businesses in those markets when you have companies like that? Just we don’t do that stuff and just –
Kevin Werner: Well, we’re trying to take a really long-term perspective. As I said before, the tide goes in, the tide comes out, rates go up, rates come down. Securization markets open, it’s closed. Stuff happens. I think at the end of the day, we’re trying to remain fairly consistent. Our delinquency rate has been very good for a very, very, very long time. We stress about that every single day, even though it’s – I don’t think you could be in this business with big losses, right? That’s the fear for the industry is that if this industry starts to have big losses, some of these big investors might go look elsewhere. That would be a terrible outcome.
Kevin Kim: We’re trying to see inklings of it, too. Like, really bad cases in our industry happen. We heard of two cases recently of principles, foreign principles in our space getting arrested. I mean –
Kevin Werner: Oh, wow.
Kevin Kim: I’ll tell you more about it after.
Kevin Werner: All right. We have to talk about that later.
Kevin Kim: It’s really scary about how much, I would call it cowboy action is out there.
Kevin Werner: Yeah. I mean, the broader private credit market, which is what we’re a part of is a really great institutionally run industry, right? I mean, we are a tiny little nugget of us now.
Kevin Kim: Subset. Small.
Kevin Werner: But I think if we can all think about that world and don’t worry about the underworld that we’re referring to, the hard money guys. I don’t know what to say about them to be honest, because I think in markets, where do you see them mostly? Where do you see those kind of lawyers?
Kevin Kim: They’re all over. I mean, California is famous for it, too. We’re a hyper regulated market here in California, but you still see folks.
Kevin Werner: You still see them.
Kevin Kim: They’re licensed, but that’s really as far as –
Kevin Werner: Well, I think that comes down to what Paul was saying. You got to decide as a company, what is your borrower culture? We don’t want to lend just anybody. The story that we tell sometimes is if a borrower calls the office and goes, “What’s your rates?” They’re not going to get an answer.
Kevin Kim: Let’s get deeper on that. What is the borrower qualification process look like, and who is your average borrower? Let’s look at Mass. Mass is an interesting market, because I see the volume.
Kevin Werner: It’s very interesting. Yeah.
Kevin Kim: There are large deals getting done by professional, very professional, institutional grade developers that used to borrow from banks. But then, you also have this large swath of market that’s super hardcore, old school hard money type borrowers. There are speculators at best. How are you guys figuring that out as a process for yourselves? You’re a well-known commodity now in the market. You guys must be getting calls left and right. I mean –
Paul Shaughnessy: Well, I think it’s one thing to measure financials. It’s probably an easy thing to do.
Kevin Kim: They’re resistant to providing that as a no-go for you.
Paul Shaughnessy: What’s that?
Kevin Kim: If they’re resistant to providing financials.
Paul Shaughnessy: Right.
Kevin Kim: You want it more.
Paul Shaughnessy: Yeah. You want to borrow money, but you don’t me to show what your financial –
Kevin Werner: Yeah. Well, so and so isn’t asking for anything. You should go there.
Paul Shaughnessy: Yeah. Right. You should absolutely do that. Yeah. I think measuring their financial wherewithal is one thing. Measuring character is a hard thing to do. You need to be a very good listener. There’s certain keywords that people will say, or do that may rub you the wrong way and then you just flat out not interested.
Kevin Kim: Now you guys can do that, but when you’re hustling –
Kevin Werner: We’ve always done that.
Paul Shaughnessy: We’ve always done that.
Kevin Werner: Even when I was hustling. This isn’t a new thing. Because our belief is whatever got you successful, you should probably keep doing that. When we first started, Daniel and I would sit in a room and we would go meet with clients and we would seek to understand from those clients, why would they be looking for a new lender? At that time, we needed every nickel and dime, but we thought, “Hey, let’s make sure we’re very selective. Let’s try to find the best borrowers who have our best interests in mind, that we can grow with.”
Kevin Kim: That you want to work with.
Kevin Werner: Yeah. Yeah. That’s the other thing. We throw Renovo events. You’ve got to come to some of our client events. When Paul throws a client event in Mass, you go to that event, the room are all business people that you’d want to do business with. You’re like, wow, this is a top-notch group of people. These are business people. These are not the same people. That group of people would likely not borrow from the groups that you were talking about. Because they’re like, “I want to go meet that guy at that weird donut place again.”
Paul Shaughnessy: They’re also not taking care of the clients that you guys are either, right?
Kevin Kim: They’re taking meetings in weird locations as one thing, but they’re not doing the thing that you guys are doing by your clients. The advisory component that I’m hearing about, not just that, but also the quality of event, the quality of experience.
Kevin Werner: Well, you’d be able to offer a lot of products. Hopefully, that’s another element.
Kevin Kim: Yes, that’s also another thing. In Mass, that’s not a very common thing. I mean, most folks only do construction, for example. The resistance to the DSCR in that market has been fascinating. That’s definitely an interesting phenomena out there.
Paul Shaughnessy: For sure. I mean, if you have the ability to do a single investor, maybe from our standards, like a tier-two investor is trying to grow into doing multi-family condo development, you have the opportunity to grow with them.
Kevin Kim: Right. They’re teaching you hoops.
Paul Shaughnessy: You don’t have to go to look for the money. Yeah, teaching those as well, and provide resources to help them take on those types of things.
Kevin Kim: That goes far.
Paul Shaughnessy: Right. That’s the type of value that we get back to, right? It’s very unique in our industry.
Kevin Kim: Based on what I’m hearing, that means that you’re basically not sleeping.
Paul Shaughnessy: No. Look, I have a great team. We’re 13 strong now. We just doubled down on the support staff, just because of the amount of units that we’re doing. Yeah, I’m behind my desk probably 90% of the time.
Kevin Werner: Got new office space in Boston. It’s really nice.
Kevin Kim: Oh, your new office. Great.
Kevin Werner: Got a new beautiful office space.
Kevin Kim: Oh, yeah. I like it.
Paul Shaughnessy: Just finished up renovation.
Kevin Kim: That’s awesome. That’s awesome. Now, it’s very true, you guys have jumped into the markets that you’re in within specific intention. You’re not doing the whole, hey, why cast that kind of thing. How are you guys, how are you on the talent standpoint? At this point now, because you guys have grown and brought on talent like Paul, like our friends in Texas and other markets. Are you guys following the same formula, or are they changing a little bit? How are we attacking new markets?
Kevin Werner: Pretty much always the same formula. There’s a lot of markets we’re in today that we actually met the individual first and went, “Whoa, they’re awesome. We really would love to have them as part of our team and we would love to back them.” We never thought about that market, but whoa. You know what? We’d rather go to a, let’s say, a tier two market. I’m making that up. Or a market that really wasn’t on our list with a really great individual. That formula’s worked for us. We found great people in some markets who weren’t going to go.
Now, there’s some markets we really want to be in. The funny thing is when we try to force it, it doesn’t work, if that makes sense. We’ve wanted to be in certain markets, I’m not going to name the markets, because I don’t want other people thinking about it. But there’s some markets we really want to be in. Honestly, when we try to force it, it doesn’t work. We’re constantly spending time just out and about, trying to meet great people. Just like life. If you meet great people you want to work with, try to see if you can work with them. Same thing with a borrower, right? You’re not trying to force that either. If you try to force it, weird things probably happen.
Kevin Kim: Beyond local originators to build new market presence, you’ve also brought on people like Andy Pollock, right? Those are really great pickups, by the way. I mean, I love those guys.
Kevin Kim: I love those guys. I’ve had many a drink with Andy and just talk about what he’s been doing in markets. I’ve known him for years. Jewett and I go back and we’re talking about his perspective on the market. The quality of people, too. You see a lot of good qualities in them. They’re not originators in a particular market. You’re also attracting executive staff that get support. Is it the same psychology and picking those people up? Or is it more of a bigger picture perspective?
Kevin Werner: There’s a lot to do. There’s a lot to do. This is a big industry. The housing market is very big. You got all housing needs in this country. We have –
Kevin Kim: There?
Paul Shaughnessy: Someone’s knocking on the door. Santa Claus?
Kevin Kim: I guess, we got a guest. Oh. We’re going longer than I expected. He’s walking around with something. We have a surprise guest right here.
Kevin Werner: Surprise guest here. What’s happening?
Male: Special delivery.
Kevin Werner: Kevin, we know you’re doing a fundraiser for the fires that happened in California. We wanted to just play a little part and contribute to the effort that you’re doing.
Kevin Kim: Thank you so much.
Paul Shaughnessy: This is for you. This is from the Renovo team.
Kevin Kim: That’s amazing. Thank you so much. Oh, my God.
Male: We thought it would be hilarious to deliver it on an oversized check.
Kevin Werner: A giant check. We got you a giant check.
Male: I know you’re well enough to know you like giant checks.
Kevin Kim: I love giant checks. Let’s do that. What is this? We get a photo? This is awesome. Thank you so much. I mean, it really means a lot. We are in the height of the aftermath of the fires. I mean, I want to put it up back here, so everyone can see.
Paul Shaughnessy: Awesome.
Male: Hopefully, I didn’t interrupt.
Kevin Kim: No. We’re just having a great conversation about your efforts in finding great people. I know what you’re doing for the team.
Male: Well, listen, it’s a team effort for sure. We’re excited and thank you very much for doing what you’re doing for the wildfire.
Kevin Kim: Thank you so much for the support. It means a lot. I’ll make sure to walk into the benefit tonight with that.
Male: I love it. All right, I’ll let you guys get back to it.
Kevin Kim: Okay. Should we keep going?
Kevin Werner: Let’s keep going.
Kevin Kim: Okay, cool.
Kevin Werner: I mean, we’re really having fun with this one, I think.
Paul Shaughnessy: It’s great.
Kevin Werner: There’s a lot to do. The thought is that, yes, I mean, obviously, we need local leadership that can build local lending offices and local teams and there’s origination to do. There is loan servicing to do. There is marketing to do. There’s data analytics. There’s capital markets. There’s finance accounting, HR. Wow, right? Really, it does come back to that unique talent and amazing people. If you can really find unique talent and amazing people that get along, you’re supposed to get them on the team. California, for us in particular, is a market that we’re barely in today, okay? But we have a very large mission now to be in California in a very meaningful way.
We entered slowly about four years ago in San Diego, and we were active in San Diego the last couple of years. We’ve made maybe about 500 million dollars on the loans in the San Diego market over the last four years. We decided that California is such a gigantic market, right? It’s like its own country.
Kevin Kim: I mean, each area, right? It’s comparatively.
Kevin Werner: We think there’s eight markets in California. In our mind, it’s eight of our other markets, one. When the opportunity came up to work with Andy, for example, Pollock, it was a no-brainer. Wait a second. This is a seasoned executive.
Kevin Kim: He knows California like the back of his hand. He knows it so well.
Kevin Werner: Who knows California like the back of his hand. He’s a driven, successful, wonderful guy. When the opportunity came up, him and I actually met at a conference and we hit it off. We went ahead breakfast and we just were two lone guys just talking shop and we just can talk shop all day long. One thing led to the other and it was like, hey, what if you came to Renovo and with a lot of things to do. But one of them is help us make a meaningful impact in growing California. That’s the main –
[0:40:23] Kevin Kim: You had a mission. It’s just so happened, you met a really high-quality person and you made it happen, because you could have done it without him if you wanted to. But you found a high-quality person you wanted to attract for sure.
Paul Shaughnessy: Yes.
Kevin Kim: That’s amazing. At the conferences, too. That’s great.
Kevin Werner: I will say, he was at your conference.
Kevin Kim: Hey.
Kevin Werner: It was at your conference.
Paul Shaughnessy: Shout out to Ruby.
Kevin Werner: It was at your conference. Shout out, Ruby. It was at your conference. yeah, great things happen at the conferences. Everyone should go and build quality relationships and get to know each other.
Kevin Kim: Let’s look at it big picture now. We’re almost, how many people now?
Kevin Werner: It’s about 250 team members today.
Kevin Kim: Wow. 250. This is back office, front office, all of it.
Kevin Werner: Yeah.
Kevin Kim: I want to go back to these events, because you guys are very – I don’t know many companies that do this. Because you guys are all over the country.
Kevin Werner: 25 cities. Yeah.
Kevin Kim: Yeah. They’re there. They’re local.
Kevin Werner: We’re local.
Kevin Kim: You don’t have folks in Illinois working in Texas, or in Mass.
Kevin Werner: No. Why would they?
Kevin Kim: Right. Not only the effort it takes to throw an event like this, and this is a smaller event for you guys, right?
Paul Shaughnessy: Which one? Right now, what we’re at talking to that.
Kevin Werner: Yeah, this is a smaller event. There’s about 30 or 40 Renovo people will be here at this event. Typically, when we do client events, we have a whole events team at Renovo, and we’re typically doing an event every other week.
Kevin Kim: Every other week.
Kevin Werner: Across the United States.
Kevin Kim: Are they going all?
Kevin Werner: They go to a lot of them.
Kevin Kim: Wow.
Kevin Werner: Our events range from a 10-person group of people going to a basketball game, going to a NBA game, to a 100-person casino night that we may organize for our client base in a particular market.
Kevin Kim: Then internally, you have that what you call the Renovo Palooza every summer.
Kevin Werner: I love that you remember that. Thank you very much. Well, because our team is fairly spread out around the country. Because of COVID, a lot of us are just not in the office together every day. Really, what we struggled with is how do we make sure our culture feels alive? How do we make sure everybody knows each other? We can build connectivity with each other and build a culture, build a camaraderie. What we’ve done is a couple of things. One is we call it now Renovo Palooza, where we bring our entire team to Chicago, which is the greatest city in the world, in case anyone was wondering. We bring everyone there in about, late August, or early September, which is, I was trying –
Kevin Kim: Best time to come to Chicago.
Kevin Werner: We throw a three-day just fun event. We took a boat this year. We rented a huge yacht. We all went out into the water. It was amazing. That’s one thing. We throw a three-day event where the whole team gets together. The other thing we do now is we do departmental retreats quite often. We’ll do a retreat of just the credit analysts. We’ll say, bring all the credit analysts. Let’s say, there’s 20 or 30 credit analysts, let’s bring them to an inn in Southwest Michigan, which is an hour away from Chicago. We rent a bus, we have all the credit analysts from around the country fly to Chicago. We bring them on a bus to a little campsite, basically, and we throw a two to three-day retreat. It’s a combination of some training, again, going back to that career development earlier on.
You’ve got to be pouring into your team, in terms of learning, development, but also having a good time. That team gets to go together, gets to know each other. That’s an outcome of COVID. How do you create experiences where people can get to know each other? All those credit analysts for the most part live in other parts of the country. They get together, and we do that for all the departments in the company.
Kevin Kim: Now, that’s a massive endeavour. I mean, your events team must be just –
Kevin Werner: They’re amazing. 10 out of 10, they’re amazing.
Kevin Kim: But the resource drag on not just the cost of doing this, and the cost alone is substantial, but the time and energy to pull this off from all the people, including the executive team, I mean –
Kevin Werner: It’s a lot.
Kevin Kim: A significant investment in time and resources. I have to ask about this, because I’ve struggled with this. I see companies that do a lot of this. Not to this level, by any means. I don’t think I know a single shot that does as many.
Kevin Werner: We feel we have a lot more to do. I’m glad to hear that, because we’ve got a lot more to do.
Kevin Kim: That’s a beautiful thing, because you’re really investing in your people. It’s not just about outward-facing, promotional events to get more business, but you’re really in teaching your people things that they need to know to be good at their jobs, but also –
Kevin Werner: Yeah. We’re going to keep growing. We need people to do great things, right?
Kevin Kim: Juxtapose that against the lenders that we talked about earlier, the commoditization of the industry, who are working on very lean budgets, intentionally, right? Profitability and all that. It could be a product of the fact that they’re owned by an institution. It could be a product of the fact that they’re just culturally driven to maximize profitability for the executive team, whatever the rationale is. We have the opposite models out there. There are some who are doing it at national leadership levels that are remarkably, remarkably lean teams, compared to companies like yours that are really a lot bigger, invests significantly in their team members, right?
You’re all vying for the top spot in the nation, right? How do you keep pushing for this stuff, even though profitability affects profitability, it affects time and energy for you and your team members. How do you balance it?
Kevin Werner: Well, what we said earlier is two things could be true at the same time. I think it’s true for this, too. I think what I’ve learned in my 25 years of running specialty lenders is these things are extremely hard to turn around when they start not doing well. I would argue, almost impossible. When one of these businesses gets in trouble, stops performing so great, delinquencies around arise, culture starts to be crappy, it’s hard to turn these things around. That’s why we focus. It’s like, if you get extremely out of shape, right? If you get extremely out of shape, it’s freaking hard to get back in shape. But if you stay in shape, to some extent, and you focus on it and you do it, you know what? You’re more energetic, you’re more productive, you’re more efficient. I would argue, without getting on a soapbox here, our profitability has not suffered at all. Zero. In some ways, it’s the opposite.
Kevin Kim: You’ve grown through all this.
Kevin Werner: We’ve grown through it. It’s the same thing, as I said, with companies going downward, if you have a high turnover rate, that’s really expensive.
Kevin Kim: No more expensive than throwing some events, for sure.
Kevin Werner: I think so. I don’t spend a ton of time looking at that difference, but just intuitively, I think, that’s a big piece of it. Also, we have to work here, right? Meaning, we got to show up every day and why not have it be fun? Why not have it be competitive? Why not have it be people want to grow? It’s like, that’s the way we think about it. It’s not a zero – Both things can be true at the same time. Now, it doesn’t mean that I think it’s a leadership philosophy mentality. I don’t think our way is the only way. I think someone could absolutely run a different style, whatever that might be, and be very successful, as long as it’s authentic to them.
I’ll tell you, this style is authentic to us. Does that make sense? If someone tries to do it, and it’s not authentic to them, it’s going to come off weird. I mean, but it’s authentic to us, and this is the way we think, that we think this is a winning formula, and that’s why we keep doing it.
Kevin Kim: It’s proven to work. I mean, there’s a lot of companies that have this type of energy about them, and that’s been about – mentality about them, and internal investment mentality about them. We’re seeing proof, right?
Kevin Werner: I’ll tell you, we spend a lot of time looking at companies outside of the industry. Expand.
Kevin Kim: Yeah. I want to know more. Yeah, yeah, yeah, yeah.
Kevin Werner: Well, when we were starting Renovo, I went to Quicken Loans all the time. I literally went to Detroit a couple times a year. I got to know people at the top tier of Quicken Loans, because I always admired their culture. I said, these guys have gotten to be the number one player in the mortgage business, and have a cool culture, and people like working there, and it’s a positive place, and they’ve made it through a bunch of cycles. It must be something that they’re doing, right? I spent a lot of time there.
Still to this day, when their quarterly financials come out, I’m reading those things. I’m like, what are they doing? How are they performing? I’m also looking at how did they perform, versus the other publicly traded that I know don’t have that same culture. Others, right? You can actually look at the profitability and the market cap, dwarfs it. We spend a lot of time actually looking at companies like CBRE, Walker Dunlop. I’ll use those, for example.
Kevin Kim: Great. In commercial real estate.
Kevin Werner: We start thinking about, how do we be more like that? How do we be more Walker Dunlop, CBRE, others?
Kevin Kim: Yeah, and a lot of folks haven’t really thought about – they deal with CBRE on the brokerage side. They haven’t thought about their internal culture, which is quite impressive. They’ve invested. Walker’s even more impressive.
Kevin Werner: If you look at just their profitability and their earnings, their market cap, and their longevity. When Walker Dunlop went public, they were a fraction of the size of Renovo today, when they IPO’d.
Kevin Kim: Right. That’s true.
Kevin Werner: They were. Our industry has such potential. We all got to think big and just –
Kevin Kim: Right. Let me ask you this, because this is a claim from the CEO, right? Now, you’re one of the Top Guns, you’re doing amazing, and congratulations, by the way. I mean, we’ve known each other for a while now, seeing your success over here. Also, transforming the Massachusetts market for Renovo. Amazing efforts. As a team member, how much of this is like, okay, or is it all real? Because I’ll go on the [inaudible 0:51:08].
Paul Shaughnessy: You should, because I’m going to say exactly what I’m going to say right now. I hear this a lot, and I see it, but I’ve always wondered what people like his position think, you know? I embody the culture that Kevin bleeds.
Kevin Kim: What about it makes you embody it?
Paul Shaughnessy: The patience, the thoughtfulness. I mean, I don’t think he’s ever blatantly turned down any idea, no matter how landish it’s ever been, because he cares deeply about his business and the evolution of the business. I think most leaders would, nope, we need to stay on track, and this is what it is, right? If there’s an idea that he feels will work within, I mean, he’s going to do whatever he can to make sure that it improves the company.
It goes back to the maximizing profitability conversation. I’d venture out to say that most of those people are very close minded. They’re focused on one thing. It’s not the thousand details that make Renovo great. I think that’s very rare in any company. Never mind just the –
Kevin Kim: It fills anything into the dynamism of the market, which is, it’s a very dynamic market.
Paul Shaughnessy: Yeah. It’s real. Like everything, it’s all real. I mean, I definitely wouldn’t be sitting here talking to you today as confidently as I am if it wasn’t.
Kevin Kim: That’s why I was excited that you were joining us today, because you get to see it on both sides of the coins. On the show, it’s almost always the CEO and always want to make sure that, okay, I don’t know. Right? Cause I heard some things, you know? You guys, I haven’t heard much, but I just –
Paul Shaughnessy: I’m sure first spot. Everyone’s got their stuff. We got stuff out there.
Kevin Kim: I’m sure you do. You have haters. Everyone’s got haters. But at the end of the day, you see success and you always wonder how much of it is the culture, the client facing value, all that stuff we talked about today. Also, and I would like to ask you this, what about, is about Paul and the other top guns that are that, that, it factor that extra 1% that’s really making it work for you guys in your local markets. Cause it’s fascinating how it gets better.
Kevin Werner: Well, you, you mentioned early on about convincing people to join. Yes, there is absolute commitment that we want to bring people onto the team. It’s a high selection process.
Kevin Kim: For sure.
Kevin Werner: This is not a place for everybody. If you want to work a little bit and let’s say, work part time-ish and you want to not really care necessarily about the performance of your loans after you make the loan, if you want that, which is okay, cause there’s a lot of shops that don’t care at all what happens once the loan’s originated, that you will hate working at Renovo.
Kevin Kim: That goes, that level of accountability you guys have, that survey you guys send out.
Kevin Werner: Yeah. The net promoter score survey.
Kevin Kim: On everything.
Kevin Werner: Well, which goes out to every client.
Kevin Kim: Everybody, right?
Kevin Werner: Which then gets emailed to every Renovo employee all day.
Kevin Kim: Everyone sees it, right?
Kevin Werner: Everyone sees it all day long. There’s an accountability. If you’re a team member at Renovo when you log into our dashboard, which everyone does every morning, you will see all the offices are on there. Meaning, you’ll see the performance of all 25 offices, including down to the delinquency rates of each of every one of those offices. If you’re running an office and your delinquency rate is high, you feel hopefully like shit.
Paul Shaughnessy: You take it personal.
Kevin Werner: Well, you should. But if you’re someone that doesn’t want that, shouldn’t be here.
Kevin Kim: It’s not a lifestyle firm.
Kevin Werner: This is not a lifestyle. Well, it is a lifestyle.
Kevin Kim: When I say lifestyle, from like, it’s one of those – it’s a lot from the thing. We say like, lifestyle law firms are – it’s 9 to 5. Clock out.
Kevin Werner: No, I agree with you. This is not a lifestyle business. This is hopefully a sport in a professional sport that is in it to win it. We are not in this to not win. We are in this to absolutely win. Hopefully, win for 20 to 30 years is the goal.
Kevin Kim: To need that level of hunger and that level of drive.
Kevin Werner: Yeah. There’s a little saying we use. Humble, hungry, and smart. That describes Paul.
Kevin Kim: What book is that from? It’s the interviewing book, right? I think I read that book before.
Paul Shaughnessy: Actually, didn’t know it came from a book.
Kevin Werner: Is that right? We don’t know that.
Kevin Kim: We know that too, because we’re learning how to interview people and that is, if you distil that book down, those are the three characteristics that you’re looking for in a top quality candidate. It’s all I care about.
Kevin Werner: People ask me about Paul all the time, because he sets records and he’s very known in the industry. People do ask me about like, “Hey, what, what makes him?” Paul is one of the smartest people I know. Absolutely one of the hardest people, working people I’ve ever met. Is humble as could be, and has the rare combination of the most drive you’ve ever seen and the most detail oriented you’ve ever seen.
Kevin Kim: Very hard to do.
Kevin Werner: Which is hard to be him, right? Because those are very conflicting –
Kevin Kim: Oh, my goodness. Yeah.
Kevin Werner: Those are very conflicting skill sets. Paul has both of those skill sets. I would argue that that’s what makes him extremely successful. I think he’s just getting started. Paul’s future is way bigger than where he’s at today and where he’s been. I think those characteristics of him and more. But to me, those are –
Kevin Kim: Attracting, we talked about. Last question about this. I want to ask about retaining them now. Because this is, once you build this top calibre list of people, it is challenging to keep them.
Kevin Werner: We have handcuffs that we –
Kevin Kim: Ball and chain.
Kevin Werner: We have balls and chain. You can’t see it because it’s under here. We got them, we got them. Yeah. Remember A Bronx Tale, and locks the door? Now you just can’t leave.
Kevin Kim: Proximity alarms. Electric collars, all that.
Kevin Werner: That’s a great question. Look, that’s a great question.
Kevin Kim: It’s hard.
Kevin Werner: There’s no easy question. It’s hard. Everything worth doing is hard. We as a company, I think about this, like I have to earn every single day the right for these people to want to be on this team. We have to earn that every single day. We have to earn that by being competitive. We have to earn that by listening and understanding what we are doing right or wrong. We’ve grown a lot over the last couple of years and we’ve had our own growing pains. There’s certain parts of the company, let’s say, that maybe grew a lot and service slipped a little bit.
Kevin Kim: Natural, yeah.
Kevin Werner: Look, I spend a lot of time out traveling to see the offices and I hear this stuff and man, I’ve got to go back to the office and be like, “Guys, we’ve got to lock ourselves in our room. We’ve got to fix these things.” There’s an old saying, constant, never-ending improvement. Can I? I think it’s the company’s responsibility to earn every day the loyalty, hopefully, and have a platform where the future is bright. I mean, I think that’s a lot of what it comes down to, right? I mean, the future, if you have A players on your team, these darn people want bright futures. It’s amazing.
Kevin Kim: They’re not taking the line down.
Kevin Werner: They shouldn’t, right? It’s like any sport, if you want to have a winning team, you got to – the future has to be bright and it’s hard work. Hopefully, we got to earn it every day. That’s the way we think about it.
Kevin Kim: Now that you have a team underneath you, one of the questions that I’ve always had is it’s challenging enough as a leader to do that at your ring, but to distil that down to middle management, it’s quite challenging. How are you doing, stilling these types of characteristics of the company into your daily life with your team members?
Paul Shaughnessy: I mean, I’ve learned a lot over the years, and I take everything I’ve learned and instil it to the team. Like he said, you do everything. If it works, you keep doing it. I’ve absorbed a lot of things that I’ve learned over the years, and I just implement those things on a daily basis. It’s challenging. Because when you’re doing 45 or 50 deals a month, and you’re still doing it. I’m still in most of them. I mean, I would say, a lot of the stuff’s off my plate as far as processing, and I mean, typical appraisal ordering, title, insurance, things like that. I’m still very much in the weeds on a lot of things and I oversee everything and we have pipeline meetings three times a week, where we dive into things that are very densely run meetings, where they go an hour, sometimes hour and a half every other day. It’s a lot of work.
You need to help the people, I would say, on the team embody that as well and implement those things in their businesses, because ideally, these things just – the businesses just keep growing. They get wider and they elevate, right? That’s what you want. It’s a challenging thing to do. It’s not easy. The culture in general, right? You talk about lifestyle, and these are businesses within a big business, right?
Kevin Kim: Yeah. Some business unit is its own business. It’s own P&L.
Paul Shaughnessy: Right. Last year, our team, we did just under 500 loans for 365 million, so a million a day. It’s what we funded, which was great. It’s very challenging, because then you have other originators that I’m responsible for that also do their own, have their own business. I mean, yeah. It’s a lot of work. Lots to do.
Kevin Kim: Last question for the show. We just started 2025, what a year so far. It’s been a crazy year so far. We’re heading into March. Q1 is almost over. What does the rest of the year look like for you guys? What’s moving your guys’ needle for this year?
Kevin Werner: We’re fired up. Our team, I would say more of the same. I mean, our team is firing, knock on wood, on pretty much all cylinders. Our plan is to grow, hopefully, somewhere between 25% and 40% this year, I would say. That’s our goal.
Kevin Kim: Wow. I like it.
Kevin Werner: Last year, we grew 45%.
Kevin Kim: Whoa.
Kevin Werner: We’re hoping to this year, we’re looking like that 25% to 40% again.
Kevin Kim: Okay. Okay.
Kevin Werner: 45% for real, but I’m not going to say it. We’re just going to do it. Then, there’s new geographies, like California is as I mentioned, with Andy is a very critical office. But there’s a lot of offices that we’re in, there’s a lot of markets we’re in that just plenty to do. Our product suite continues to grow. There’s ground up construction happening. There’s a lot of housing needs in this country. We feel there’s a lot of growth to still do. Look, it’s not lost on us. I personally went through the GFC. We went through COVID, the rate hikes. There’s another thing coming, right? It’s not going to be all rainbows and sunshine.
As positive as we are, hopefully, we’re realists, too, that like, who knows what the heck’s going to happen, right? We got a new president. He’s doing some wild things. I’m not saying good or bad, but that could cause some crazy stuff in six months or nine months. Who knows how this is going to go?
Kevin Kim: Well, that goes back to the resilience that you built, right? Hopefully.
Kevin Werner: Hopefully. Yeah. Look, this is a fragile business. Life is fragile. We’re in a fragile business, but that’s why we like it.
Kevin Kim: Anything to say, expand on for your local business in Mass?
Paul Shaughnessy: Yeah. We just want to go a lot deeper than we have right now. I mean, if you look at the forecasted data, I think we have – we’re the number one lender, but we have 8% market share. There’s 92% left. That goes back to what he said. We can’t do a lot more in our local markets that we’re already in. That’s a huge focus is just to continue to build the team locally. There’s also a handful of other markets that we’re looking to grow. I’m looking to grow and recruit other originators and other team members to come on and embody our culture and continue to build the way that we have. Hopefully, this is just the beginning. Like he said, he thinks the future is bright on my side, it’s because it’s planned and we’re looking to do quite a bit.
We sit in meetings every year in January. I fly out to Chicago where it’s a three-day deep business planning session, where we map out organizational charts. We’re going deeper on our goals and how to hit those things and put an action, putting action plans in place to ensure that we hit those things. We haven’t missed yet. Like you said, you never know, things can change, the environment can change, the macro environment, micro environment can shift. Hopefully, if we keep doing what we’re doing, then things are just looking up.
Kevin Kim: I like it. All right. Well, that’s all the time we have for this episode. We went a little bit long. But what a great gift. What a great donation.
Kevin Werner: Well, thank you for doing that.
Kevin Kim: Oh, of course.
Kevin Werner: Thank you for doing that, Kevin.
Kevin Kim: Of course. Shout out to Ruby for putting that together. Shout out to TMO for putting that together. Really appreciate. We’ll be doing that later tonight. Thank you, guys, for having us here at your Top Gun event. Hopefully, we’ll do another episode sometime soon.
Kevin Werner: We love it.
Kevin Kim: All right. This is Kevin Kim from Lender Lounge, signing off. Thank you very much.
[OUTRO]
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