The Greatest Asset | Ryan Craft, Saluda Grade

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*NOTE: This episode was recorded in May 2022.*

For this episode, Kevin interviewed Ryan Craft, Founder and CEO of Saluda Grade. He learned about Saluda’s investment philosophies when it comes to private lenders, their criteria when selecting portfolio companies, and Ryan’s perspectives on where things are going and should go in the private lending space. His views on future success in private lending was especially enjoyable. Ryan stressed that diversification in strategy, obsession with customer service, and entrepreneurialism will be some of the key features of the private lenders that dominate in the coming years.

Ryan Craft is the Founder and CEO of Saluda Grade and has spent his entire career focused on mortgage-backed securities and securitized products. Most recently, Ryan was the Head of Securitized Product Sales at Baird, where he built out a fully bolstered sales and trading division by hiring over 25 new salespeople and adding multiple new trading and banking businesses. Mr. Craft began his career at Merrill Lynch as a Non Agency and Subprime RMBS trader through the 2008 financial crisis. After the BofA acquisition, he traded the ABX and CMBX credit default swap indices mapping Subprime and Commercial mortgages. After transitioning to Securitized Product sales, he was recruited to join Royal Bank of Canada after becoming a top producer across Bank of America’s Global Fixed Income division. Mr. Craft earned a BS in Finance & Management from Georgetown University, where he captained the Hoyas baseball team and earned First Team All-BIG EAST honors.

Episode Transcript

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Episode Transcript:

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:
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, 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:
Hey guys, welcome to season three of Lender Lounge with yours truly, Kevin Kim. Today we are interviewing a good friend and client, friend Ryan over here from Saluda Grade and we’re really excited to do this. We’re doing it via Zoom, but it’s going to be a really great episode. So first of all, Ryan, why don’t you give us a little bit of a intro for our audience and tell us all about Saluda Grade and we’ll go from there?

Ryan Craft:
Ryan Craft, Founder and CEO of Saluda Grade. Saluda Grade is a alternative asset vertically integrated advisory and asset management firm. So we focus on non-traditional, inefficiently financed, under optimized real estate related or asset-backed asset classes. And we work to bring cheaper, more scalable institutional capital to those asset classes while betting on operating companies that operate inside of those asset classes. So one of the reason why we’ve become big clients in partners with Geraci is we’re heavily focused on the private lending space in, what we call the transitional mortgage lending world, which is rehab, fix and flip construction for both single family and multi-family housing.

Kevin Kim:
Yeah. And I remember when you guys, we started seeing you guys at the shows and clients started mentioning you guys back in, I think it was like 2019. And then you guys made a big splash in 2020 with your first securitization, it was very interesting because at the time, we had a lot of folks that were effectively, I would call it proxies for institutions, a lot of aggregators that were already in the space, but you guys came with a different perspective. And one of the key things that you guys were doing when we first met you was you were investing in your origination counterparties, you weren’t acting as a pure aggregator. Like you said, betting on different groups and I’ve interviewed some of your, I guess, I don’t know how I put this, clients?

Ryan Craft:
Portfolio companies.

Kevin Kim:
Exactly. Portfolio company, we’ve interviewed some of your portfolio companies we had, and so it’s all on your website so it’s public record. We interviewed your friends over at Renovo and your friends over at Builders, and talk about that really quick, because that’s a very different perspective or strategy in our industry, starting to become more of a common theme now, but back in ’19 and ’20, it really wasn’t thought through by a lot of, I would say your colleagues and competitors, but you guys started very early with doing that, right?

Ryan Craft:
Yeah. So my background is mortgage-backed securities trader. I was a subprime non-agency mortgage-backed securities trader. I was an ABX and CMBX trader. I was at Merrill Lynch, Bank of America, Royal Bank of Canada, and most recently prior to Saluda Grade, Baird, and the things that we were focusing on were trying to find esoteric interesting higher yielding real estate related asset backed related assets for all of our client base in the institutional capital landscape. So money managers, banks, hedge funds, pension funds, mutual funds, et cetera, were dying to find higher yielding assets and interesting ways that they could find yield.

Ryan Craft:
So 2017, 2018, we started venturing into the fix and flip and transitional mortgage landscape. And we started meeting incredible entrepreneurs. Kevin Warner was one of the first, and Renovo Financial was one of the first, really talented lending operations that we met in the private lending world. And it became so clear to me that asset managers, many years down the road, 2019, ’20, ’21 would be so desperate for collateral, so desperate to access the yield that was inherent in the private lending world, that they would need to move further and further up the chain to own their asset origination channels.

Ryan Craft:
So, we’ve always been, or me particularly, I’ve always been interested in investing in early stage, mid stage growth equity into private companies. And that was a more of a personal passion and hobby of mine, doing it on the side outside of my sales and trading and banking career in fixed income. So when I saw the opportunity to start to back some of these small to mid-sized platforms and I saw the clarity of the obviousness of being able to deliver them institutional capital at scale via institutional partners like insurance, mutual fund, money managers, but really where I knew that the whole equation would end up and really start to get very big was securitization, which is what our bread and butter was. And my partners, Tim Carr and Brian Brennan, really the DNA of our whole institution and our whole company is the securitization market.

Ryan Craft:
So we knew that was where everything would end up and where everything would want to go. So in 2017, 2018, we started creating a lot of those types of relationships and really through the lens of being able to bring our partners, our clients on the banking and trading side to these companies like Renovo Financial, when I kind of realized we could spin out and do this ourselves, we launched Saluda Grade, I launched Saluda Grade January 2019, eventually brought Tim and Brian, and now we’re a team of 26, to Saluda Grade. And we really started building upon relationships that we were creating with amazing entrepreneurs, like Kurt, I’m sorry, Kurt Altig over at Builders, Kevin Warner over at Renovo, those are the two that you mentioned that you’ve interviewed. But when we realized that we could both back them on the equity side and bring them cheaper and more scalable, better capital markets, debt capital market solutions on the asset side, we saw a perfect partnership and that’s really what the DNA of Saluda Grade is.

Kevin Kim:
Yeah. It was such an interesting approach to things, because until then it had primarily been aggregation and securitization as the primary avenues. There wasn’t much of a conversation of, “We’re going to also put our money where our mouth is and be on the cap table with you guys as a partner.” We’d heard of different acquisitions, but we hadn’t heard of the same party that was helping them scale on the capital market side was actually putting their, I guess money where their mouth is, when it came to the sponsor, because you guys were investing directly into the company, you guys were really betting on the sponsor.

Kevin Kim:
I guess, what were some criteria? Because what’s funny was when we interviewed Kevin and Kurt, they had talked about scale at multiple stages in their company’s life cycle and it was right about when they had started working with you that they kind of hit that critical mass, but what were you looking for specifically in these counterparties while you were planning this, I guess, new venture for yourself and your partners?

Ryan Craft:
So Jay Ford, Head of our Origination Sales has been instrumental in helping us build all of these relationships. We’ve probably gone out and met 400+, 500+ private lenders and we’ve done transactions and helped probably 40 to 60 of them either somehow access cheaper capital through loan sales or we’re buying loans from them. So we’ve met a ton of the players in the private lending space and very much through our partnership with you, either us sending them to you for needs on the legal side or vice versa.

Ryan Craft:
So the things that we’re looking for when we make an equity investment in a portfolio company in this space is generally a five to 10 year track record of great lending, great performance on the loans that they’ve been lending, but the biggest thing I think that we really looked for is a risk-taking mentality, that they’re either lending their own money or on behalf of their own investors of capital that they’ve raised. I think that’s a DNA that’s infused inside of their underwriting and the fear of losing a dollar of their own money or an institutional, I’m sorry, another investors that they’ve brought into their platform. That fear has driven them to a higher level of standards on the underwriting side and a better credit quality in their loans.

Ryan Craft:
Versus what I think, there’s a lot of participants in the market that are kind of originate to sell and we work with a lot of those lenders too. So I think that we’ve seen that the lenders that have been really, in a longer duration in the market raising capital on their own behalf to lend out to their clients, those are generally the type of lenders that we are trying to look to back and invest into. Inherently those were also-

Kevin Kim:
A really good point though, a interesting perspective because not everyone talks about that the way you’ve just put it, is you’re looking at their perspective. You’re equating the fact that they’re lending out “their own money” and that equates to a higher credit standard. I’d like you to expand on that a little bit more, because that’s something that I’m very passionate about. We represent a lot of balance sheet lenders. I represent a lot of clients with funds. Can you expand on that a little bit more? Because I know all of them, all your portfolio companies have that in their toolkit, but talk about what specifically about that are you evaluating? Because it’s really important to talk about.

Ryan Craft:
Right. If you think about the evolution of the industry starting 2010, right? Post financial crisis, shut down of banks, and all of them, Renovo, Builders, Pacific Private Money, all of them get started around 2009 to 2011. Right. And they see, they’re all entrepreneurs, Mark Hanf, incredible entrepreneur CEO of Pacific Private Money, Kurt and Kevin Warner, those are our three portfolio companies now in this space and we’re currently doing other things with a significant number of others. But all of them kind of get started around that same timeframe, see the opportunity from an entrepreneurial perspective. They immediately start to raise capital, take advantage of that opportunity, and then that begins a 10-year journey to be able to build a firm that is looking through the lens of the private lending market, through the lens of post-financial crisis and saying, “Hey, we understand the risks. We know what we’re going to be able to try to avoid and we have to protect our capital, protect our investors’ capital during that time period.”

Ryan Craft:
So what we’re looking for businesses that evolved with that underwriting mindset, but there’s always that trick, there’s always that balance point of, how do you scale a business with retail capital, with balance sheet capital as you call it? But at the end of the day, the vast majority of those evolving business models through the 2010 to 2020 really reach a point, a catalyst point where you’re saying, “Hey, they have to start to take institutional money.”

Ryan Craft:
So, what we generally look for when we’re trying to make a portfolio investment or a private equity investment is somebody with that underwriting DNA that they were always trying to identify risks, because what that did was that also trained their borrowers, right? Business purpose lending is so different than owner occupied lending. So the majority of institutional investors, mortgage backed securities investors that are coming to the business purpose, RTL, transitional lending, private lending, whatever moniker that we all call it, they’re all coming from an owner-occupied landscape previously where they’re usually trading and buying mortgage backed securities that were backed by owner-occupied loans. Business purpose loans are exactly that. Business purpose loans to business minded entities that are using that capital to transition a real estate property.

Ryan Craft:
And at the end of the day, there’s so much underwriting that goes on the personal level of that borrower, on the experience level of that borrower that’s, I would say, that you can’t find on a loan tape, that it’s far more qualitative than quantitative, right? So as quantitative mortgage backed securities investors come into the space, the underwriting has to be done at the originator level because then it goes down to the borrower level. So we love to find originators that have 60%, 70%, 75% repeat borrower rates. And even as they grow, maybe that drops because of new volume and new borrowers coming into the system, maybe it drops to 55 to 65, but we’re really trying to target those people that have been training their borrowers and also learning from their borrowers to be able to deliver them a first-class lending experience and be able to facilitate their business that they keep coming back.

Ryan Craft:
But it’s that synergistic relationship between the originator and the borrower that they’ve grown together during that 10 year period of the company and the lending that we’re trying to get a feel for during our underwriting of the firm and the platform and to understand how they underwrite on the asset level and really more so on the borrower and the real estate investor developer level-

Kevin Kim:
So it ultimately does boil down, because this is a good transition to ask you about the securitization product that you guys are offering doing, but that translates ultimately, it boils down to the quality of the loans. The quality of business, quality of the loans, quality of the borrowers ultimately also helps and adds that value to… And I’m guessing part of the conversation that’s being had with these portfolio companies, as you evaluate them from investment standpoint, is also to talk about securitizations.

Kevin Kim:
And so I want to talk about that because when you guys came on the scene, it was interesting. I mean, to me, I was very kind of, “Wow, you guys have really turned the concept of securitization on its head,” in the sense that you don’t have to… The first few that you guys did especially, you guys gave access to folks that normally weren’t, well first of all, weren’t even about it and didn’t think that they were a eligible candidate, but also made it relatively, I mean it made it easy for them. The way I talked to them about it was like, I mean there were some challenges, but still the fact that they were able to access that with a lot less red tape compared to what they had explored previously or what their friends and colleagues had gone through was fascinating.

Kevin Kim:
And when you guys put out the press releases on it, I kind of talked to you guys and your team members about it and learned more about it and read some of the documents and it was very interesting because it wasn’t your average securitization that you see in either RTL or DSCR, it was a little bit different, a little bit unique. And so can you expand on that? Your kind of your journey in offering those products to your clients and your counterparties in this space and how you guys have influenced the market when it comes to the securitization products that you’re putting out there.

Ryan Craft:
So like I said, our team has been doing securitizations, and Tim Carr, our CIO has been investing in securitizations for 20+ years, structuring residual tranches, equity tranches, building a whole capital stack. And all of us have been trading and transacting trading, selling all these different types of structures. So when we moved into the private lending world, we were very much a fish out of water. It was like Tim Carr is Michael Jordan playing basketball, wins three titles, goes in the private lending world and he’s playing single minor league baseball. So when we got to the point where we were raising our own proprietary capital inside of our asset management business and we had the ability to go back to what we do, it was like bringing Tim Carr and all of us back to the securitization market was like, “All right, we know this. This is what we know what to do.”

Ryan Craft:
So since then, we launched our asset management business in April 1st of 2020, it brought our first securitization in July of 2020 with PAC1, which is Pacific Private Money, and we’ve since rattled off 15 securitizations for over $3 billion of issuance.

Kevin Kim:
Fantastic.

Ryan Craft:
And almost every single one of those securitizations had a first time element, first time type of collateral, first time structure. And so what we were doing was really using all of our past experience, which is vast in the securitization world, to say, “Okay, let’s go solve the problems of our clients, of our partners, and really of our portfolio companies. Let’s go solve the problems and adapt it to a new market that we know so well.” The same way, very much by the way, say the same way that a ton of the private lending world goes and solves the problems of their borrowers and their clients. Trying to solve…

Ryan Craft:
And so what we were identifying was no banks really are currently… So the traditional way that people bring securitizations are you aggregate loans with a lending line, right? That lending line is generally very restrictive and Toorak started doing this, and John Beecham, give a ton of credit to John to the success that he’s been institutionalizing this as an asset class inside of the bond market. He had a ton of help obviously from KKR to be able to help bring the banks that they brought to Toorak. They gave Toorak backed by KKR a decent amount of aggregation lines. So KKR backed Toorak starts buying fix and flip loans, and that’s where the start of the securitization market in this asset class really got off on a great foot, really led by John.

Ryan Craft:
What we were trying to do was adapt the progress that they had made to really what we have a couple of different business models, right? Pacific Private Money, for example, does business purpose transitional loans, but they also have a very extremely useful owner occupied bridge loan that helps Metro owners, LA, San Francisco Metro owners buy their next home before they sell the first home. So that’s a totally different owner occupied loan that’s just very different from anything that had been securitized previously. It’s usually a four to seven month duration loan, so we were able to marry that along with a business purpose loan inside of two year evolving structure. So we brought that in July of 2020 with our partners at Raymond James were very helpful for us.

Ryan Craft:
So that was a very innovative thing that kind of kicked it off. And then from there, once we all had that aha moment at Saluda Grade that we can start pushing this forward, we’ve rattled off 15 different securitizations. The next one in the private lending space… Oh, and by the way, we were talking about lenders before, but the other one that’s highly involved and extremely embedded in the private lending world is AlphaFlow. Ray Sturm there and Noah Martin are two great partners of ours that have been, I think really pushing the envelope and trying to change how the smaller size lenders, small and big size lenders in this landscape access institutional capital, and they do that through a highly accredited tech-enabled platform that AlphaFlow delivers.

Ryan Craft:
So in January of 2021, we brought a very interesting, unique first time ever warehouse line securitization for AlphaFlow, got them $100 million warehouse line securitization. And I wrote a little bit about this on LinkedIn, and so did Ray, but AlphaFlow obviously is a FinTech, VC backed platform, doesn’t have a ton of equity on their balance sheet and the majority of Wall Street banks that are going to give aggregation lines to someone like AlphaFlow need to look through and see a certain amount of equity. AlphaFlow didn’t have that, we needed to find an off balance sheet solution for a warehouse line and we created that by the securitization market. So we did $100 million line that’s functioning today to allow AlphaFlow to go out and quickly close loans, be able to buy into that vehicle, aggregate to critical mass for certain institutional investors that they work on the backend and be able to pool up certain critical mass loan trades to be able to sell into their institutional investors.

Ryan Craft:
So that’s just a few type of examples of innovative and unique securitizations that we’ve designed to be able to solve problems that we identified inside of our portfolio companies in our advisory clients. And we’ve done a bunch of other things that are unique that would probably take up the whole show, but really the other thing that we do that I think is just valuable and it’s something that I try to talk about with our banks, our lawyers, our legal, et cetera, is that private lenders work fast. That’s the value add that they deliver to the ecosystem. Real estate investors are looking to get things done now, be in and out of a real estate market today, tomorrow, soon gone onto the next, right? And that’s the same way that we like to work.

Ryan Craft:
So we’ve closed a securitization in 23 days, soup to nuts, 23 days. And that was a $300 million+ securitization of a relatively first time asset class that we brought and really what it did to us was it pushed us to push our counterparties and push our teams to move faster, to be in and out of the market quicker, to be able to do more for our portfolio companies, our issuers, and our originators, et cetera. So, those are one of the things that I think that we will continue to try to do, so we’re trying to bring two to three deals a month, the pullback in rates, and we can talk about that, the pullback in rates starting in January and the Russian conflict has caused a huge amount of friction and slow down in the bond and issuance markets, which is widely covered and discussed.

Ryan Craft:
But that will continue to be our mantra is to help our portfolio companies to move fast and increase volume. And anytime that someone’s talking to Kurt, and you’ve seen the origination volume increase, and Kevin Warner over at Renovo and the increase in their origination volume, I think it’s much to, not only their ability as entrepreneurs, to build businesses that can scale at that rate, but it’s also their partners in the capital markets to be able to supply them with the gasoline to go faster.

Kevin Kim:
And that’s an interesting point you make, I mean you’re translating the values and trying to match those types of values, business values that you’re identifying in the private lending space and trying to make sure that you speak the same language if you will as it pertains to speed, but from my experience, when folks from the institutional world, from Wall Street come to our space, they tend to bring their mentality to the industry and force it to slow down a little bit. And that’s actually been real, we’ve seen your average closing time in our industry has gone from what used to be a couple days to about a week or so. And so, that is… And also different types of requirements.

Kevin Kim:
But what I’m hearing from you is that you’re trying to match culturally to them and provide that kind of parallel relationship so you’re speaking the same language, but when it comes to securitizations in general, I mean generally speaking, they’re not that quick, especially when you’ve got all these different counterparties, different agencies, different rating agencies, different leaving investors, bankers, all these different folks are involved. Have you guys approached it differently than your average institutional securitization? And has that allowed you guys to do it fast? Or is it the same product and you guys are just really, really fast and have it all locked in in advance?

Ryan Craft:
So now I know why you are the world’s only lawyer with his own logo. I don’t know if you can really see that. Kevin has produced swag with his own icon, and I think everyone that knows you is that you’re not just a lawyer, you’re a personality, but also extremely good at understanding and getting to interesting points.

Ryan Craft:
So, the answer is yes. First of all, all securitizations in the fix and flip, RTL, private lending world have been unrated, will probably continue to be unrated for a number of different reasons. So there isn’t that slowdown from the rating agencies, but anyone that I would say that listens to this show and is trying to understand if longer term their platform can be adapted to a securitization model, they should understand that aggregators are truly at the whim of their lending and financing counterparts. They buy, and then they finance those loans. They finance in an aggregation model to be able to deliver term financing, which really is, securitization’s a funny word and sometimes it’s spelled wrong with a Z, you can make an argument either way, in Britain it’s not with a Z, but the concept of the idea of securitization is simple. It’s just term financing, term final permanent financing for certain asset classes, I’m sorry, for the end bottom part of the capital stack to be essentially the levered investor on those assets.

Ryan Craft:
So, to get to that point from A to B to acquire loans over a certain period of time, that’s an aggregation and they work with usually Wall Street or commercial banks to be able to finance those loans to a term takeout. So, and that’s what we saw during COVID. There were a lot of financing counterparties that just shut down and stopped the aggregation, and that’s why a lot of the aggregators paused. And again, that’s nobody’s fault on the aggregation side, it’s just really the way that the system’s been built. So when you think about the slowdowns and the friction and all those different things that are inherent in the aggregate to securitize model, it is what it is, it’s just part of the ecosystem, it’s part of the model. There’s a couple of different ways that we’ve flipped that on its head. We usually deliver securitizations that are a little bit different and just different-

Kevin Kim:
Well, I mean if I put my lawyer hat on, a little bit different, very different, and a lot of people were talking about it, like, “Oh, that’s a different way to…” We had a lot of folks that have been through that before and they were talking about how interesting and how different it was. And when we were on a panel too, I think afterwards John had been asking you about your products and that kind of stuff. So I mean you’re being humble about it, but it’s very different than what I’m used to seeing, and it’s very streamlined in a lot of ways, because the documents to me, I read it, I’m like, you guys kind of removed a lot of the, I mean fluff’s the wrong word, the fat I guess you can call it. It was very, very interesting how you guys attacked it.

Kevin Kim:
For our audience who was not familiar, give them, I guess, the layman’s version of what that means. Because you’re being humble about it because I saw them and I was like, “This is so unique. This is so different than what I’m used to seeing when Toorak does it or whoever else out there is doing it.” So give us a little more color on that please.

Ryan Craft:
Yeah. I mean we don’t need to go into too many details and I’m not trying to be humble on-

Kevin Kim:
No, don’t give away the secret sauce for sure.

Ryan Craft:
Yeah. No, it’s not even that, we’re trying to deliver differentiated capital structures, differentiated financing tools to our portfolios and counterparties, right? So when we left the traditional banking world and we came back to it with the mindsets as entrepreneurs, building platforms, investing in those platforms, we have become partners to our originators. We have learned many things from them and one of the things that we’ve learned is, why not? Why can’t we? So when we’re asking these questions to lawyers and structures and bankers on when we’re issuing our securitizations, that’s the question is, why not? Why can’t we? We’re going to do it this way and we’re going to move forward because it just makes more sense.

Kevin Kim:
So you’re pushing the envelope on their expectations too. So I’m guessing you probably got some pushback from your bankers then, right?

Ryan Craft:
Well, bankers are-

Kevin Kim:
They only like what they’re used to, right? So that’s kind of-

Ryan Craft:
Oh, no, everyone would rather work on a legal document that they’ve worked on previously-

Kevin Kim:
Exactly.

Ryan Craft:
So we have a phenomenal team at Denton’s that’s been with us since the beginning and they’re just as creative as we are, maybe definitely more so. So we’ve pushed them as hard as, and they pushed us. So, we’ve just taken the entrepreneurial spirit that we’ve learned from our partners, like Mark Hanf, Kurt, Rob Trent over at Builders Capital’s become a big mentor of mine. Kevin Warner’s become a best friend. So we’ve learned from them to say, “Why can’t we? No, actually we’re going to do it this way and we’re going to move forward and we’re going to find a path and forge a way forward that’s just different.”

Kevin Kim:
Trying to find a way to say yes to people and make it happen for them, even though it’s not necessarily-

Ryan Craft:
And if you think about it, that’s what they did from 2010 to 2015-

Kevin Kim:
It is.

Ryan Craft:
… where there was literally no capital for their best borrowers that needed to do projects that they knew would have fat margins. They needed to find a way, right? So that’s what we’re doing for them and we’ve learned a ton from our partners and we’ve become, I think more, I would say creative because we have been forced to… And again, I’ve sat with Nomura, I’ve sat with CS, I’ve sat with every investment bank out there, and I say, “New construction or this heavier rehab,” in 2019, I was like, “This is where the market’s going. Are you going to get there?” And they make the joke, they go, “We’ll get there after you securitize it.”

Ryan Craft:
So slowly after we’re opening the channels of some of the things that we’ve securitized that have never been securitized. I think banks will catch up, will get more traditional aggregation lines in place with a more deeper, broader set of financing counterparties, and that will open up the market for everybody, which will just be the way it’ll work and I’m glad it’ll work that way. But at the end of the day, I think that we are forging a path forward the way that John Beecham forged a path back when he launched Toorak and the way that our portfolio companies have been forging a path in offering differentiated capital solutions for their partners for many years.

Kevin Kim:
I guess one of the… I want to segue into what you hinted at earlier as current, I guess, troubles or pains the market is facing and private lending. And you guys have a unique perspective on things with your background and your involvement on these different assets, but, well first of all I want to ask, are you guys doing the same thing with the DSCR product and actively involved there? Or is it kind of something you don’t really touch? Because that’s kind of a good segue to talk about market volatility right now. So before we get into that, I want to ask about that. Have you been doing that at all? I actually did not-

Ryan Craft:
Yeah. So we’re actively buying DSCR rental loans now. We were not as involved in it versus bridge, classic fix and flip in your construction previously. I think it’s a valuable differentiator for not only all the aggregators, but I think it’s an awesome product for all of our lending partners as well, because it’s also a hedge, right? If the owner occupied market, if you’re preparing all these homes for first time home buyers or owner occupied borrowers and mortgage rates go up and first time home buying slows down and they become renters, et cetera, then you have a takeout for that bridge loan inside of a termed out investor loan. So we love that concept and we’ve become more bullish on the bridge lending asset class because of the proliferation of that that term takeout.

Ryan Craft:
So, yeah, but everyone has seen that with a longer duration in a true fixed rate mortgage, versus a short duration bridge loan, there’s a huge amount of rate risk that I don’t think a lot of counterparties fully understood going into November and December. And frankly, it was one of the reasons why we hadn’t been that big in it. And so-

Kevin Kim:
So you were worried early? You were worried about rate volatility very early then?

Ryan Craft:
Well, I mean again, we come from longer duration owner occupied mortgage asset-

Kevin Kim:
Yeah, you’ve been doing it before. You saw-

Ryan Craft:
Right. So, Brian Brennan, who’s our whole loan trading senior portfolio manager, has been buying billions of long duration mortgage for a long time. So hedging mortgage conduit is very, very tricky and very hard, right? So it was easy and fun to just buy one duration year, I’m sorry, one year duration mortgages and be able to not really worry about rate risk, et cetera, but when you move into trading longer duration, and obviously the majority of the aggregators in the DSCR product are very sophisticated mortgage shops that understand rate risk. But I just think that it got so, like all things, when it gets so mundane and you’re buying, you lose concern and I think that we saw a huge fracture in that market between December and February.

Ryan Craft:
So it’s starting to kind of settle down. I know that there’s been some losses and people have taken some legs. We definitely didn’t have everything perfectly hedged and everybody’s been kind of caught off guard by a massive rate move that is unprecedented. But yeah, but I think that that product’s not going anywhere. The undersupply of housing’s so bullish for a lot of different things, but the millennial generation isn’t going to all become homeowners all at once-

Kevin Kim:
Not with prices they way they are right now.

Ryan Craft:
Yeah. So, and I think it’s great. It’s great because the end real estate developer investor that really is the lifeblood of the client that we’re trying to all service as capital markets participants, as lenders and originators, to see them be able to grow their business is really the end key. And that was one of the things Kevin Warner really harped on very early with me, teaching me about fix and flip in this asset class was if we do right by our clients and we grow their business, we will win.

Ryan Craft:
And that’s why you’ve seen Renovo win and that’s why you’ll see… So I’m excited about being able to offer them a product that in theory will allow them to be able to grow their company’s balance sheet and their personal wealth by becoming a landlord or essentially an owner of rental properties over time. It’ll differentiate and diversify their business. So it’s an exciting, but again, that connection from the end securitized product down to the end borrower is how we think that whole value chain. If you’re adding value all the way through, again you’ll build really significant businesses in the lending origination platforms, like Renovo, Builders, et cetera. So that’s why I’m so excited about the asset class as a whole and our ability to participate as a value difference-

Kevin Kim:
And that is an important thought process to think about with an audience who’s doing a lot of… A lot of our listeners have, they added the product a couple years ago and they started a massive volume in it and they started concentrating on it and now they’re kind of looking back and said, “Well, maybe now we should maybe do some more RTL, more flips and more construction loans or do commercial,” or whatever have you. And it’s been kind of a hot button topic, I guess you can say, is this whole rate issue and the volatility and concerns in the DSCR market.

Kevin Kim:
And we had a panel and it was kind of funny, at Innovate, and one of the things was it was kind of funny because from my perspective, and I kind of agree with the panelists in the sense that it didn’t feel like it was a doom and gloom panel, but then I talked to some clients and some attendees and the feeling about it was a lot of uncertainty. And as an originator, they’re not quite sure how to approach this anymore because their perspective is there’s not enough room for them anymore, there’s not enough margin for them anymore. And what’s fascinating about it is that no one really knows where we’re going to end up and everyone thinks and has their own perspectives on it.

Kevin Kim:
And I want to ask you about this because when you were on a panel with me a couple years ago at Innovate, you had some really interesting perspectives on the impact of the Feds and just the federal government’s assistance during COVID and how it helped us get out of it. I’d like to hear your thoughts on this now, where we’re headed when it comes to this rate environment, because some folks are in very, very well known and very big companies are predicting a pretty hefty rate situation by the end of the year and they’re nervous. And so, some are very concerned and others are saying, “You know what? We’re going to be okay. It’s not going to be that bad.” And so I just want to get your thoughts on that.

Ryan Craft:
That was a multilayered question. Jerry Rice said, “Do today what others won’t so tomorrow you can do what others can’t.”

Kevin Kim:
Right.

Ryan Craft:
And I think what you’re talking about is over the last six months, because of the rate of securitizations that we’re bringing, we’re allowing market end investors to pay such a high premium for DSCR loans, it was a phenomenal originate to sell, immediate gain on sale business that drove a huge amount of profits and revenue to your private lending constituents. So what’s happened now is that margin has collapsed and the market doesn’t have as deep of a bid and there’s just been a complete chaos in the capital markets as interest rates have moved 300 to 400 basis points, when you think about the addition of both the rate curve and credit spreads. So we’ve seen about 300 base points widening of rate and credit spreads.

Ryan Craft:
So when you think of how that, again it’s always a trickle down effect, and how end investors are able to finance and how they in relative value in the capital markets, how that trickle down effect impacts originators and then also end investors. So when I say do today what others won’t so tomorrow you can do what others can’t, what I think that you should be focusing on if you’re a private lender is building a very differentiated lending business and thinking and helping your end clients understand how they should be focusing on different parts of the food groups. You should be focusing on rehab. You should be focusing on customers that are now going more new construction and you should also keep your ability to deliver a term takeout for either yourself or for other people that want to have longer term ownership of rental properties-

Kevin Kim:
To serve the client, like Kevin was saying, to serve the client’s needs to help them grow, right?

Ryan Craft:
Because-

Kevin Kim:
And borrow.

Ryan Craft:
Right. And for the same reason, at Saluda Grade, why I tell all of our capital markets participants and our counterparties, don’t let us be your only buyer, don’t let us be your only capital market solution. We want you to have a diversified capital stack underneath you to prepare for some of the things that we can’t always prepare for. For the same reason we tell them that, they should be telling their clients and they should be looking at their business as not only a diversified outtake of capital markets, diversified capital stack and investors, a mix of balance sheet lending like you talked about, and also the ability to originate and sell. You want to have diversified outtake or capital markets. The same way you should be trying to advise their end borrower clients and their customers to really have a diversified takeout as well, I’m sorry, a diversified revenue base.

Kevin Kim:
Yeah. Irons in the fire, we’ve been talking about this for years, for a long time, but ever since COVID, I’ve been stressing the point. You need to have a diversified strategy. I mean I’ve been trusting it on the capital side, but I’ve been telling clients the same thing with the products. The nice part-

Ryan Craft:
But would you agree that you’ve seen a lot of people move to what’s hot, right? They move to-

Kevin Kim:
Yeah. And DSCR was the scary part.

Ryan Craft:
So-

Kevin Kim:
We had an interview with Sharon [inaudible 00:44:12], she was like, “We don’t touch that because it’s not conducive to our end investors’ demands,” but she was concerned about it and it was funny because that episode aired right at the tail end of season two, which was right when the rate hike started to happen. And it was funny because one of her sellers called me and was like, asking about when we filmed that. We filmed that in the summertime and it was like she had kind of called it and a lot of folks were deny, deny, deny, it’s going to be fine, it’s going to be fine. And I was like, logically speaking, this doesn’t make any… If the rates go up, this will go up too. Fix and flip, construction, it’s a different market, it’s a different world.

Ryan Craft:
Well, no, those rates are going up now and that’s-

Kevin Kim:
And I was going to ask you that, so with DSCR going up and rates climbing, what’s your thoughts on how it’s-

Ryan Craft:
It’s been amazing. It’s been amazing. I’ve had so many bridge lenders call me and they’re kind of shocked that fix and flip rates need to go higher. And I say, I go, “Well, your friend that’s buying a house down the street right now, they were getting you two and a half or two and three quarters and then it was three and a half mortgage prior to this rate move. Where’s their mortgage rate today?” “Well, that’s different.” “Well, okay. Well, why is that different?” Right. Okay. Well it’s longer duration, you can make that argument, yes. But then you need talk about the two year part of the curve, how much is the two year part of the curve up?

Ryan Craft:
And then when you talk about where the securitized bond market, we issued, I mean this is all public obviously, right? We issued senior bonds off of our RTL securitization, our first one in November. It was two and a quarter, our second one in January, it was three. And now we’re issuing stuff and MFA’s deal just got five and an eighth. And now NPLs, which are really kind of the unrated barometer, kind of the bellwether of unrated securitization senior bonds, NPLs are kind of in the market, [inaudible 00:46:09] in the market now with a five and a half to like 5.8, price talk, right?

Ryan Craft:
So what we’ve just seen is as senior bonds off of these securitizations, and again you can talk about weighted average capital stack, cost of capital, et cetera, but just look at the senior bonds, two and a quarter have gone to five and 5.8. And now fix and flip guys are saying that rates should be, they don’t believe that rates should be higher. So we’ve been working along all of that and really trying to send information out to our ecosystem to understand what’s happening daily as things have widened, and we’ve been pushing them to make sure to instruct your borrower. Nobody likes to call one of their best clients and say, “Hey, we got to charge you more.” But every single bank in the country is doing that now with the mortgage rates up, so it’s the-

Kevin Kim:
Costs have gone up. They’ve gone up.

Ryan Craft:
No, it has. No, I would say it has. So I think that guys are starting to fix and flip in new construction, are starting to move about 100, 150 basis points.

Kevin Kim:
And that was an interesting, I was talking to some folks recently at our last event and I was talking to them like, “Guys, we all remember when mortgage rates were at sevens and eights.” I remember when I got out of law school, my student loans were 8%. It wasn’t weird for us, at the same time fixed income was at 12 and two. That was the market at the time, and partially because there was no institutional access, but partially because mortgage rates were high. And so-

Ryan Craft:
Again, so it’s all about sources of capital, right?

Kevin Kim:
Agreed.

Ryan Craft:
So there are three different types of source of capital, right? There’s insurance, there’s money managers, mutual funds, asset managers that raise middle duration money that currently, I would say are in the mid to high singles. And then there’s mostly private equity and/or hedge fund money, right? So those three buckets have three different costs of capital. So when you think about where you can get the most amount of actual fire power, really it’s through securitization because you’re taking the hedge fund money and you’re multiplying it really by eight to 10 times. And that’s how levered the majority of the securitizations are.

Ryan Craft:
So when you think, if you think about those different food groups, again, of investor bases, the largest bit of fire power, until the insurance companies really, really lean into new construction and they haven’t yet, right? Until they really lean into new construction, you’re still going to see the majority of the fire power of capital that’s pointed to this asset class coming from those levered players. And it doesn’t matter what you think of where things should be, interest rates are where they are and they are driven off of what the Fed will do, and then all of those things stack up on a risk premium basis, and then it comes down to where people will finance loans.

Ryan Craft:
So if you don’t think it’s there, if it hasn’t happened in your lending business, it should have already happened, and if you had been paying attention, you’ve already been raising rates and you probably will be raising rates more. But yes, it goes back to when we got out of college, Kevin, [inaudible 00:49:16] was six and a quarter. And it was six and quarter for a long time. So, it’s hard to forget that, I mean it’s hard to remember those days, but if you think about historical interest rates, we are going higher and that’s what inflation will drive.

Kevin Kim:
Right. And we’re talking to folks, and I noticed the ones that were more stressed out than others were the ones that didn’t have… And same story from COVID I feel like, they didn’t have source of capital, [inaudible 00:49:44] reliable source of capital, however you want to put it, and they were concerned because it was so volatile because they may pull out at any given moment. From your perspective, are we facing another crisis like we did in 2020? Are we just going to have to adapt and just see a little bit of compression within the market when it comes to our client base? The industry as a whole, some saying, “We’ll lose a little bit of activity, but…” Or is it going to be another crisis on our hands like we had in 2020?

Ryan Craft:
No, it’s definitely not a crisis. We’re back into, for COVID there, there was a minute, there’s a saying in the bond market, there’s no bad bonds, just bad prices. And during COVID, there was, for many period, there was no price. Right? So what would-

Kevin Kim:
[inaudible 00:50:33] price should be, no one knows.

Ryan Craft:
Well, no, and that’s what’s caused a lot of the slowdown in new issuance. That’s what’s caused the slowdown of, I would say overall liquidity, but as things kind of settle in and people get some sort of visibility, there’s a massive amount of cash on the sidelines. For the same reasons that everybody who didn’t care about fix and flip in 2017, 2018 has now been studying up and trying to get into the market.

Kevin Kim:
That’s really strange to me. I’ve been living in this space for so long, the fact that there are still institutional players out there that are now learning about this-

Ryan Craft:
Just trying to now look at it. Yeah.

Kevin Kim:
Yeah. And it’s like, I’m just flabbergasted by it because, man, I mean late to the party much. It’s a bit of a late entry, but they’re making very interesting moves.

Ryan Craft:
I mean, people are still going to have the same… It’s still a yield problem, right? We’re still in a historically low yield curve, so for them to be able to go find yield and be able to go find assets, it’s still going to be a big problem. So everybody is focused on alternative assets and going to esoterics, going to what they call private credit. And this is very much private credit. You’re literally lending to a business to transition real estate and you’re backed by the real estate. That’s why we love it so much.

Ryan Craft:
But at the end of the day, this is the definition of private credit. And now that people have been smoked on growth equity and the equity markets have pulled back, we’re seeing a lot of allocators and a lot of LP and a lot of asset managers now trying to go find alpha in different sources, right? So they will be coming back to fixed income, and now that the nominal rate curve and the interest rate curve has come up, they will be moving back into fixed income. So this will be a place that there will be more and more interest.

Ryan Craft:
So there’s no crisis. There’s not a… It will be harder for a certain amount of time and it will cost more, but if lenders are smart and they can educate, because again at the end of the day, these are usually nine month loans and one or two points on overall cost of capital to an end borrower doesn’t massively change their margins. Nobody likes to pay more, but if you are educating them and continuing to differentiate on service, on how you provide helping their business grow, the same way Kevin was trying to always teach me that that’s how you build your lending business is you become so integrated in the developer investors business model that you don’t win on price, you win on service.

Ryan Craft:
So getting back to basics and competing on service and having them win, not focus on prices is really something that I think a lot of lenders will do. And then they’ll be ahead of the game, right? So if they’re really pushing interest rates higher, they’ll be prepared for the fact that we’re going higher.

Kevin Kim:
Right. Because they’re going to rely on that value add customer service mentality, as opposed to your conventional mortgage banking mentality, which I’m seeing, starting three years ago, we started to see whiffs of in our space and you see that, I guess, robo lender mentality and I-

Ryan Craft:
And by the way, that’s what scares me. Again, you can robo lend on owner occupied mortgages, right? You cannot robo lend on business purpose because of the massive amount, and I like to say this, the greatest risk in fix and flip lending is not the loan that you do, it’s the loan that you do not know about. It’s your end borrower is getting over levered because they’re getting financing from somewhere else, and they’re working on projects that someone else gave them financing that they shouldn’t have, and once they get over levered, then they will blow up and it doesn’t matter whose projects they’re working on, if they blow up, all of them are going to suffer.

Kevin Kim:
Yeah. The business is all connected under one umbrella if you’re doing multiple loans with them, but this one really risk alone with a third on it, you going to have some problems.

Ryan Craft:
And if you do robo lending and you do not fully encompass and fully understand the breadth of your client’s whole business, then you will run into trouble and then you’ll see cascading effects. So that’s-

Kevin Kim:
So that’s interesting, because I think that’s going to continue because we saw a lot of growth in companies that have that value that you’re talking about, that kind of customer service mentality, and they have a diversified balance sheet, difference of our capital structures, companies like, I mean Renovo’s grown immensely, our friend Noah in Arizona’s grown immensely, our friends over at Rick’s have grown immensely, they’ve hit the Bs now in origination volume. And I think that you’re right, this market will bear fruit for them specifically, because they’re able to say, “Hey borrower, things are mighty tight for everybody, we’re going to have to come up a little bit on this one and incrementally come up and increase the prices to match,” and making sure that they’re keeping up with the market. So…

Ryan Craft:
Speed and ease. If you know that you will win on speed, ease, and competency, not on rate, you will grow a great lending business in the private lending world.

Kevin Kim:
That makes sense.

Ryan Craft:
If you are focused on giving the best rate at all times and best price, you will eventually lose because your customer base will negatively select you, adversely select you. So you will end up with the guys that are thinking about things incorrectly, as opposed to people that are trying to build bigger, broader businesses for the long term.

Kevin Kim:
Right. And that’s so true. Every group that I’ve seen scaled this past few years is they’ve all taken that to heart. So…

Kevin Kim:
All right. Well we have to transition now because we talked a lot about business, talked a lot about the industry, we talk a lot about Saluda Grade, but I want to talk a little bit more about Ryan because you actually have a very interesting story, not everyone knows you were a college athlete, right?

Ryan Craft:
Yes. Well, I mean barely.

Kevin Kim:
I don’t know about barely, man. It’s a pretty impressive story. The things you told me when we were watching that ball game about a year ago. So what’d you play in college?

Ryan Craft:
I played baseball at Georgetown.

Kevin Kim:
Very nice. Very impressive. And I mean, was there a point in your life where you’re thinking pros or was it a college thing? What was that like?

Ryan Craft:
Like anyone that knows me, I am deeply passionate about the stuff that I’m focused on, and baseball was everything for a long time. And I had some great momentum and ended up not having the senior year that I wanted and ended up having a job opportunity at Merrill Lynch and decided to hang it up. I’d already, I’d gotten that minor league experience through the summers during Georgetown and I’m obsessed about what we do at Saluda Grade and I’m obsessed about some of this stuff with private lending and home equity and technology and FinTech. So I was easily able to replicate the passion and the obsession that I had with baseball previously.

Kevin Kim:
I like that. I like that.

Ryan Craft:
But I do miss the game, it’s a phenomenal game. I miss all sports. I played a ton of different sports, but I have replaced the competitiveness that I loved about that, about sports with business, which has been fun.

Kevin Kim:
And I wanted to ask about that, what values have you, I guess, taken from, I guess, athletics and competitive sports into business today? I mean the competitive nature is what’s quite attractive and keeping you motivated, but are there any other things that you’ve taken from your time as an athlete and have found to be incredibly valuable to business today in your current business?

Ryan Craft:
Yeah. We love recruiting athletes at Saluda Grade. I think it creates a time management skills. Any college athlete does the same amount of work that all the other college students do, but they also, by the way, have a full time job of literally 50+ hours a week and 50’s low. I mean there were times that baseball takes way too long at times. So, Friday, Saturday, and Sunday can be 30 hours easily, 25 to 30 hours when you talk about getting out to the field, batting practice, setting everything up. So we were putting in, at times, 40 to 60 hour work weeks alongside of being a college student.

Ryan Craft:
So I think there’s an inherent work ethic that’s embedded in college athletes. So we really love to recruit college athletes and we have a bunch of them at Saluda Grade. One of the things I found about Wall Street trading, Wall Street institutional finance is, especially in super efficient markets, it is hyper competitive. You end up making your profits on ticks, which are one 32nds of a percentage. If you’re literally fighting over ticks at different times, it ingrains a competitiveness into you that I think never leaves you. And that’s why we have a lot of former traders at Saluda Grade, which is definitely the DNA of the firm that we’re building.

Ryan Craft:
So, those two things really were, coming out of sports, work ethic, time management, passion, and competitiveness are the things I think that anyone learns in sports and something that I’m excited, I love competing, but at the same time, I love seeing other people compete. So my two brothers were Brent and Darren, younger brothers were college athletes at Georgetown as well, and I can tell you the most fun I’ve ever had, and my wife was as well, Kate was a volleyball player, full scholarship volleyball player at Georgetown. She had a way bigger scholarship than I did, but going to their games was as much fun as was ever playing in mine. So seeing my teammates, my friends, my peers and partners, seeing them compete inside of their arenas is, for me, just as much fun as competing in mine.

Kevin Kim:
Very cool. All right. So we have some rapid fire questions that I want to close out the interview with. This is a new segment for us, so bear with us. So these are going to be some quick questions and think of it as a speed round, right? The first question is, what was your first job?

Ryan Craft:
First job, well I was talking about this the other day, first company or first job?

Kevin Kim:
First job.

Ryan Craft:
First job, I ran baseball camps in high school. During the summer I was running baseball camps.

Kevin Kim:
Fantastic. All right. If you weren’t currently where you are career wise, what would you be doing instead?

Ryan Craft:
Good answer to that would be, in college I was the only campus rep. I was an on campus rep for Apple Computer. And the guy came to me after I’d worked there for a year and he said, “Hey, I can get you a job at headquarters, at Apple’s headquarters in California.” And I said I wanted to go to Wall Street, so if I were not doing any sort of fixed income or traditional institutional asset management or investing trading, I probably would want to be in technology.

Kevin Kim:
I mean Silicon Valley somewhere, right?

Ryan Craft:
Yeah.

Kevin Kim:
Yep. All right. Third question. When you’re not dominating the private lending world, what do you do for fun?

Ryan Craft:
I am not dominating the private lending world. I have a Churchill, Redwood, everyone, Toorak, I think there are some big giants out there that we are constantly-

Kevin Kim:
You guys are doing pretty well for yourself-

Ryan Craft:
… trying to keep up with, so we are definitely not dominating. Builders Capital’s dominating the lending world, and so is Renovo. What I do for fun, I have two young kids. I have a four year old and two year old and any parent that has those kids’ age know that there’s no other fun, it’s work, and then you’re hanging out with your wife and your kids.

Kevin Kim:
Yes, I am in the same exact boat, as you know.

Ryan Craft:
I know you are. I know you are.

Kevin Kim:
And we have fun by-

Ryan Craft:
We have fun by… So we’re in Colorado now, so we do a lot of skiing.

Kevin Kim:
Nice.

Ryan Craft:
And my four year old’s now skiing, so it’s been fun.

Kevin Kim:
Your four year old is skiing?

Ryan Craft:
Yeah. It’s fun.

Kevin Kim:
That’s awesome. That’s awesome to hear. All right. What’s the weirdest question an originator has ever asked you? You mentioned earlier, you talked to hundreds and hundreds of originators, you’ve worked with hundreds and hundreds of originators. What’s the weirdest one they’ve ever asked you?

Ryan Craft:
I saw that earlier on the list of rapid fire questions and I’ve been racking my brain since while you’ve been beating me up this whole interview. Can I come back to you on that?

Kevin Kim:
No. Yeah, it’s fine.

Ryan Craft:
Land banking, right? So we have gotten recently a ton of inquiry around land banking and frankly, we’ve had to go back to school on it to understand the economics and the mechanics of it.

Kevin Kim:
Totally different.

Ryan Craft:
So everyone is… And sometimes I don’t think that they understand it, so the lenders come to us and say, “Oh, well why can’t we do second [inaudible 01:04:00] versus equity on this?” So having to rethink through capital stacks, but looking at it through the lens of owning land, and then thinking about the ripple effects of how the markets can shift home builders’ demand, and then thinking through land banking has been, I wouldn’t say weird, but I’d say one of the most challenging questions we’ve got.

Kevin Kim:
Yeah. And that’s what I love about private lending is, especially before, I guess ’18, ’19, you saw all types of deals in this space and it was just fascinating. And even to this day, we see all types of random structures and deal types that come to the industry and come to us as a law firm for assistance. And it’s interesting to learn about new things, and I think that’s always been part of the exciting part about our industry. Our last-

Ryan Craft:
I’ve learned more in the last three years than in any-

Kevin Kim:
Right? Exactly.

Ryan Craft:
Well, that’s a combination of running a business, starting a new business, expanding into new sectors, growing as a leader and entrepreneur, all of those different things, but I’d say from the most amount of complexity, the private lending world has the most, because it’s the most bespoke. Right? And so what I think has been interesting about the institutionalization of the asset class is the homogeneity that we’re forcing lenders to try to create with their borrowers. And homogeneity creates liquidity. So when things can get pushed down and say, “Hey, this is how it will work and this is how it’ll work in the end bond markets,” it makes people more efficient. And because the end borrower knows what to request and how to request it, the end originator knows how to process it, and then the end investor knows how to buy it structure, et cetera.

Kevin Kim:
Okay. This is the last one, more of a business question, more like a, I guess, entrepreneurial question. What’s the one business tool that you cannot live without?

Ryan Craft:
His name’s Brad Hartung. Brad Hartung is one of the most hardworking, but also flexible, get it done, I mean the number of all nighters that guy’s pulled since he joined our firm, the number one business value tool that I have in my life and that Saluda Grade has is Brad Hartung.

Kevin Kim:
I wasn’t expecting a person. I was expecting a tablet or a cool notebook or something, but that’s cool. Shout out to Brad.

Ryan Craft:
Again, I think that anyone that’s building a business, and I ask this question a lot too, we it did at our conference, we had 75 people here in Aspen. I’m sorry you weren’t there by the way, Kevin, we got to blame Jay Ford about that, and we’ll do that after, but I was always asking everybody about productivity and I wanted to know some app, et cetera, et cetera. But I think that everybody knows that building a business is so reliant on the team that you hire and your crew behind you and the surprise that we’ve had in the complete, ultimate weapon that Brad Hartung has become, it’s by far and away the thing that I should talk about the most. So, Brad, thanks for being such a star.

Kevin Kim:
Fantastic. I’ll shout out to Brad. What a great way to close, I love it when we talk about people, people is what I’m passionate about. And the fact that we’re closing on that kind of note is awesome. Well, I mean, that’s all the time we have for this episode of Lender Lounge season three with our friend Ryan Craft, Saluda Grade. Thank you very much, Ryan.

Ryan Craft:
Thank you, Kevin. You guys, and again, to throw it back out, you do an incredible job at Geraci. I love that you have expanded on the idea of a law firm and you have made a complete media company. So from an entrepreneurial standpoint, I have a ton of respect for what you guys do and I’m constantly impressed with every new thing that you are bringing out to all of us as partners and teammates of yours. So thank you, and thank you for having me on the call today.

Kevin Kim:
Of course, of course. And thanks for the kind words and we wouldn’t be able to do this without the love and support of our, I guess, clients and friends in the space. So I love doing this kind of stuff and for our listeners out there, look out for more from Lender Lounge and from Geraci this coming 2022 and 2023. So we’ll close out with that. Thanks.

Ryan Craft:
Thank you, Kevin. Take care.

Kevin Kim:
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. If you’re 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 word, so please send this over to someone you think might enjoy. See you next time. This is Kevin Kim, signing off.