Embarking on a career in private lending is no easy feat. Cultivating an innovative industry leading business is a different story all together. No one knows this better than Donald Pelgrim, an owner, a director, and the CEO of Wilshire Finance Partners. Between a banking job during the day, law school at night, and starting a family, Pelgrim’s perseverance and all-around can-do attitude was a present from early on in his career.

In his current position as the head of Wilshire, Pelgrim oversees the WFP Income Fund, WFP Income Fund REIT, and WFP Opportunity Fund – which are internal funding platform used to deliver fast, efficient small-balance bridge loans from $1,000,000 to $7,000,000 secured by multifamily and commercial real estate.  As an attorney, Pelgrim practiced corporate, real estate, and real estate finance law at Brobeck, Phleger, and Harrison, LLP and Rutan & Tucker, LLP.  He received his Juris Doctorate from Loyola Law School of Los Angeles and his Bachelor of Business Administration from Hofstra University.

When Pelgrim sat down with Originate Report to discuss the company’s origins, as well as the triumphs and obstacles of his career, he outlined some of the important factors that allowed the private money space to prosper – and what sets Wilshire apart from the rest of the pack.

Originate Report (OR): Can you describe the company’s background, and how you reached your current position of CEO?

Donald Pelgrim (DP): Wilshire Finance Pastners was founded in 2008 and I am the second CEO of the company.  If you recall that timeframe, the financial crisis was in full swing and banks, federal regulators and servicers were dealing with problem assets, eroding capital, reduced liquidity, bank failures and foreclosed properties.  At the same time, there were opportunities for buyers to acquire distressed properties (or REOs) held on the balance sheets of banks and the FDIC.  There were also opportunities to purchase distressed properties through the foreclosure process, short sales and other means. The problem was that banks were not making loans and the capital markets were seized up.  The original founders of  Wilshire recognized that financing gap and the significant need in the market for fast and efficient debt capital to capitalize on the opportunity to purchase those distressed properties – so, Wilshire Finance Partners was formed. 

OR: How did your background, and the circumstances of the company’s founding prepare you for your current position?

DP: My background is banking, law and finance.  Right out of college, I worked with the President of a bank owned by the Dreyfus Corporation in New York to create mortgage programs marketed in eight states along the eastern seaboard.  When I moved to California in the mid-1980’s I worked and became friends with Kevin DeMeritt, an individual who eventually became one of the original founders of Wilshire.  While working as a Vice President for a bank during the day, I went to law school in the evenings, passed the bar and went into private practice with a large law firm.  At that time, my practice focused on corporate and real estate law, with an emphasis in real estate finance.  I was enticed back into banking and became the Chief Administrative Officer for a couple of multi-billion-dollar community banks. In those roles, I managed and was involved in a number of functions; including, mergers and acquisitions, secondary marketing, strategic alliances, and special assets.  During all that, Kevin asked for my legal assistance in the formation of Wilshire and the creation various legal documents that Wilshire initially used in their lending business.  The original founders of Wilshire were Kevin DeMeritt and Thom O’Bryon.  A couple of years after its formation, Kevin contacted me to let me know Thom was very ill and to ask for my assistance – he wanted me to run Wilshire as a partner.  After looking at the market and the possibilities, I acquired Thom’s ownership interest in the company and became the CEO and a director of Wilshire.  Unfortunately, Thom passed away a few years later. Out of that tragedy an opportunity was created. and that’s how I became involved with Wilshire.  It gave me the opportunity to be involved with a growing business in an emerging market.

OR: Can you describe the onset of that market? What do you think caused borrowers and lenders to seek capital outside the traditional realm of banking?

DP: Private lending has been around for millennia. Before there were banks, people bartered for goods and services and bought items with cash.  Lending occurred between people who knew each other. Although private lending is nothing new, the creation of banking systems and the capital markets in many ways eclipsed private lending, but never fully replaced it.  But as I mentioned earlier, what really triggered the resurgence of private lending on the scale we see today was the financial crisis – traditional lending sources dried up, so real estate professionals needed to reach outside the “traditional” realm to secure capital.  That dynamic brought private lending to the forefront. It was one of the most consistent forms of capital during that time, and some would argue that it helped the recovery in certain sectors of the market.  Persistently low interest rates over the last decade on fixed income instruments caused private lending to catch the attention of investors. Additional capital looking for yield has helped to fuel the growth and assist in maturing the industry. 

OR: Can you talk more about Wilshire’s platform for funding multifamily and commercial real estate bridge loans? 

DP: Wilshire started to focus on multifamily and commercial real estate loans soon after I joined the company and the formation of our funds in 2013 solidified the funding platform we needed to engage in that business.  Today, our primary focus is on multifamily (5+ units) and commercial real estate bridge loans nationwide.  With respect to the commercial real estate collateral we consider, we lend on office, retail strip centers, warehouse, industrial, senior assisted living, student housing and self-storage.  We do not lend against land, development, major rehabs or ground up construction.  However, we will consider value-add, stabilization and repositioning loans.  We lend in primary and secondary markets and will consider tertiary markets if the market and the transaction make sense.  We fund loans from $1,000,000 to $7,000,000, but many of our loans are below $3,000,000.  The vast majority of the loans we make are first liens that are placed in our WFP Income Fund.  Through our WFP Opportunity Fund we are able to provide higher leverage and deliver more creative structures using lending tools like second liens, split notes, participating loans and joint ventures.  Generally, our loans are just outside the banker’s “credit box” and the typical repayment strategy is the sale or refinance of the property once its stabilized or the issues requiring a bridge loan are seasoned. 

OR: With that said, why are some of the reasons brokers and borrowers use Wilshire?

DP: As a balance sheet lender we have discretionary capital to lend and hold the loans on our balance sheet from the time they are originated until the time they are paid off.  They are not sold or securitized.  Because of that platform, we can provide greater speed, efficiency, flexibility and service – which leads to certainty of execution.  Because we are the capital source, communication is more robust, and brokers and their clients are dealing directly with the decision-makers.  All of that helps with the ease of the transaction – it makes the experience more crisp and easier to get to a final decision.

OR: What would you say is a primary differentiator for Wilshire in the market?

DP:  Ease.  We have a talented group of folks at Wilshire representing different disciplines; including, banking, finance, law, accounting, portfolio management, and the acquisition and disposition of real estate. Our people are seasoned professionals with decades of experience in multifamily and commercial real estate lending. Combined with our capital platform, our team has the ability to scope, structure and close multifamily and commercial real estate loans quickly and efficiently. Even challenging transactions become easier because of the knowledge, experience and service levels of our team. With the broker’s access to deals and our funding platform we can get a lot accomplished. 

OR: Getting back to your career, how has your background helped in your current position? With experience in both lending and the law, does that breadth of expertise translate into running Wilshire with more efficiency?

DP: I would like to think that all of the different experiences I’ve had contribute to the position I’m in now.  The collective experience of being a banker at a Wall Street firm out of college, working on large, nationally syndicated credits as a lawyer, and bidding on failed banks through the FDIC receivership process in the financial crisis gives you a tremendous amount of experience and prospective.  I believe that helps Wilshire in a number of ways.  That includes assisting on one-off transactions that may be more complicated to the creation of strategic relationships with brokers and other partners.  I get a kick out of creating strategic relationships with brokers and other parties where we can leverage our collective strengths.

OR: I can imagine the difficulty of going to law school at night while also trying to jump-start your career. Can you speak about the challenges associated with doing this?

DP: It was pretty interesting – I attended law school at night, worked at a bank during the day, had a young son, and a daughter along the way. It’s one of those things where it takes a lot of mental fortitude and determination as well as the support from the people around you. My family and friends were very supportive of what I did, and that gave me a lot of latitude because there were missed holidays and missed vacations due to the tremendous time commitment.  However, no matter how challenging it was for me, didn’t have to look very far to see a single mother or someone else in my class with greater challenges buckling down and getting it done.  That’s a pretty good motivator. 

For people who are starting out in the real estate business, I would offer up that the people who are successful in this space are the ones who treat it as a profession. What I mean is that real estate is not always a “9 to 5” job, and you need to put the time in. I have some pretty good experience and that experience helped get me to where I am today, but I am also learning something new every day. One of the first things to do when thinking about a career in real estate is picking out a path – and, there are a number of paths you can take.  I believe it’s also crucial to find a mentor or someone who can take you under their wing. There are formal and informal mentorships, and I think it is important to take advantage of both.  At Wilshire, in addition to our training programs, we have mentor-mentee relationships. 

OR: As the marketplace changes and the role of technology expands exponentially, what is Wilshire doing to “stay on its toes” not only in terms of changing technology, but the services offered by the competition as well?

DP:  We are investing in technology and we are building out some platforms to benefit our strategic partners. Some of the things we’ve been working on include a technology-based backbone that provides real time to our brokers as well as information to help facilitate transactions. We are also looking to expand our reach through increased strategic partnerships with other companies. Some of those partnerships include companies who are private lenders. We don’t view those companies as “the competition,” rather we view them as potential allies. In fact, I did presentation for the American Association of Private Lenders (AAPL) in August of this year on this exact point – the market share once dominated by banks has been partially eroded by different technology platforms and other parties; including, credit card companies, Wal-Mart offering deposit products to their customers, and alternative lenders. What banks have been doing for years is partnering with each other. For example, while the banks are highly competitive when originating loans in the street, once the loan is on their balance sheet, they have collegial, strategic partnerships with other banks for trading, selling, participating and servicing loans.  Some of that is by necessity to meet capital, liquidity or concentration requirements, and some of that is part of an overall strategy.  By looking at our business the same way, we can view other lenders, brokers, and bankers in the marketplace as potential allies and create relationships with them leverage our collective strengths.  For example, leveraging our capital, marketing and technology with their distribution channels may make sense to facilitate the growth of each of the respective businesses.

OR: Are there any growing pains associated with the ever-changing nature of technology?

DP: Every day! As an entrepreneurial company, growing pains come with the territory. It’s not just technology; it’s everything associated with being a business owner and manager. The “game” if you will is facing those challenges head-on and adapting to them – as opposed to being reactionary, being proactive.

OR: It seems as though many c-class executives are apprehensive about mentioning strategic partnerships with other companies, so I was surprised to hear you so open when discussing the partnerships that you have made at Wilshire, and the partnerships that you plan on in the future. Do you think that mindset is an important differentiator?

DP: I think so. Sharing a page from the banker’s playbook, it is great to have healthy competition in the marketplace and that is never going to go away. When you get into the c-suite, however, and you are also looking other avenues and approaches to grow and manage the business, if you shut down potential partnerships as an option you are also shutting down that opportunity to grow. When I started in this sector of the lending business 2011, it was non-existent or done in discrete transactions on a small scale. While there are a few platforms that have tried to take a run at it, I still believe that type of approach hasn’t fully evolved in our business.  As this industry has continued to mature the timing is now better and if Wilshire can be one of the catalysts to help that occur, it would be fantastic.

OR: Continuing that thought, where do you see Wilshire moving in the future? Is it more-so focusing on emerging technology or facilitating growth in other ways?

DP: I see us growing in many different ways – both vertically and horizontally – assets under management and additional products and services.  The key driver remains the relationships we will develop. We are actively seeking new strategic relationships with Brokers and other Lenders, developing new products and technology.  Combining those opportunities with our capital is exciting.