JF1519: How To Find Equity & Debt For Your Syndication Deals with Marc Belsky
Mark has over $3.5 Billion in transactions under his belt. He specializes in helping investors find equity and/or debt for their deals. He can help you with most aspects of putting together a syndication deal and today he’s giving us free tips to help us with our deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
Marc Belsky Real Estate Background:
- Managing Director of Eastern Union Funding and lead affiliate of Eastern Equity Advisors
- They have a proven track record of introductions that have resulted in investments from $500,000 to over $50,000,000
- Done about $3.5B in transactions
- Works with his team to raise institutional equity for acquisitions and recapitalizations on behalf of multifamily and commercial real estate owners
- Last year his team successfully raised over $100 million
- Based in Valley Stream, NY
- Say hi to him at https://www.easterneq.com/ or firstname.lastname@example.org
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Best Ever Listeners:
Do you need debt, equity, or a loan guarantor for your deals?
Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.
I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him email@example.com
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Marc Belsky. How are you doing, Marc?
Marc Belsky: I’m great, how are you?
Joe Fairless: I am doing great, and welcome to the show. Best Ever listeners, you probably recognize Marc’s name, because he and his team are sponsors of this podcast, but more relevant than that – he’s done approximately 3,5 billion dollars in transactions. He’s the managing director of Eastern Union Funding, and the lead affiliate of Eastern Equity Advisors. He brings debt to deals, he helps bring equity to deals, and you can learn more at his company’s website, which is in the show notes page.
With that being said, Marc, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Marc Belsky: Sure. I’ve been in the business about 20 years, I started off on the principal side. I’ve spent about 15-16 years on the principal side, which as I’ve heard from many clients, gives me a unique perspective of really understanding how to finance deals, both on the debt and equity side. I focus primarily on middle market deals. We’re focused on loan sizes of one million up to 100 million dollars, and then on equity of about five million to 40-50 million dollars.
We’ve recently completed about 250 million dollars of equity raised, representing over a billion dollars of real estate deals, and I probably did about another 150 million dollars worth of debt in the last ten months… So we’re having a great year, and we really are focused. We do a lot of multifamily deals, we [unintelligible [00:04:25].21] but most of what we do is in multifamily, I would say.
Joe Fairless: Why did you switch from the principal side to the lending side?
Marc Belsky: Sure. Again, more brokering than lending, but the secret is I also am still on the principal side. I saw an opportunity, basically… The way it started was I saw an opportunity in the capital raising for the middle market. There’s a lot of big shops that are out there that raise for these big, massive institutional deals, and when people are doing the smaller deals or syndicating deals, they go to their friends and families etc. and I saw a niche that just wasn’t being covered by anybody, which was, again, middle market equity.
So while I was still buying my properties [unintelligible [00:04:57].10] about doing equity, and we ended up getting into it. Then over time, as the business just became larger and busier for me than my investment business, [unintelligible [00:05:10].08] for my own account, but as a business, [unintelligible [00:05:15].05] business than just investing.
At this point, it’s become my primary focus. I’m dedicated to it 18-20 hours a day almost some days, and I work full-time… Again, giving the fact that I am a principal, and I come from the principal side, it really gives me a unique perspective when I get involved in deals and I have clients, and even with banks and lenders. One of the stories I tell all the time is when you have a real estate deal that you’re buying and you need a mortgage – suppose you’re buying a property for 10 million dollars and you get a 7 million dollar mortgage… You can go to any mortgage broker in the country and they’ll help you get that 7 million dollar mortgage based on whatever your NOI is. What most brokers don’t know is really what happens between that 7 and the 10 million dollars. That’s where I add the most amount of value, because I’ve done so many deals on the principal side, and I own real estate myself, and I’ve been buying real estate for close to 20 years, that I understand really how to do the deal on the equity, but more importantly as it relates to debt as well. I’m not just pitching the bank on the NOI; I really understand the real estate transaction, how it works, what the value is, why the bank should be lending, and there are multiple stories I can share – I’m sure we don’t have time for today – where banks said no at first, and then after I was done with my pitch, I convinced them to say yes, because I really happened to understand the real estate and the transaction. It wasn’t just looking at a piece of paper and taking the NOI and dividing it by what the property can carry as far as the debt is concerned.
Joe Fairless: Can you tell us one of those stories?
Marc Belsky: Sure. A good example was that there’s a shopping center that we did about six months ago. It went to committee, and about two weeks before closing, the bank calls us up and they say they have a problem; they wanna cut the loan proceeds because they thought that the center maybe couldn’t perform the way they originally underwrote. So we said “What are you talking about? What changed?” Long story short was that it was a grocery shopping center, and the grocer was doing something like $400/square foot over a 50,000 square feet space, and the lease was coming up in about four years. They felt it was a good store, because they were doing about 25 million dollars, so that makes sense – 25 million divided by 50,000 is about $500/foot.
What happened was the bank suddenly started panicking whether or not they were gonna renew. We spoke to the tenant, and the tenant said they’re doing very well. The problem was that they were just in too much space. So because I have an owner’s perspective, not just a broker looking at numbers, I was able to convince the bank that the issue is not that they’re doing $500; if they would just give back 15,000 square feet and they would do that 25 million dollars over 35,000 square feet, they would do over $700/foot, which is very healthy for a grocer. Not only that, but they were paying below market… So then a) they would renew their lease, because they’re below market; b) they would take a smaller space and they’d have a high-performing price per square foot, and c) the owner would be able to take advantage of leasing that 15,000 square feet to another tenant at a higher market rate.
So we got on the phone with [unintelligible [00:07:46].24] officer and had to walk him through this process and explain to him how and why [unintelligible [00:07:52].13] not just “Hey, there’s a grocer that’s not doing so well with a short-term lease.” The grocer actually was doing really well, they just had too much space for that location… And we ended up closing the loan a couple weeks later.
Joe Fairless: When you have that conversation, how much convincing is needed? Because I imagine the actual lender – I know you’re the broker – tends to be fairly rigid, at least from experience, in their underwriting and how they look at things.
Marc Belsky: To say the least, they’re definitely rigid. Look, every bank’s got that box, but at the end of the day, that’s the value in having a broker. We meet plenty of people along the way; some people have brokers, some people don’t, and I can tell you, sometimes I look at clients who say “Oh, we’ve got that right”, and I see the mistakes they make.
My job as a broker is to know the market and understand what happens. For example, if I’m a principal and I’m buying a single building and I’m going directly to a bank and something comes up, I don’t really have market data to provide to the lender to say “Well, you did this elsewhere” or “Another lender did this elsewhere”, but as a broker, if things come up throughout the process, I can say a) “Hold on a second, lender… You know that your competitor did this. You don’t wanna lose a business. Why don’t you match it?” or b) Well, we did this on the last loan” etc, because we do such volume.
As a company, we’re gonna do about five billion dollars this year in debt placement, and close to 1,000 deals. As I said earlier, we do middle market deals, we focus on 1 to 100 million dollars, but our average loan size is only about five million dollars. So we do a tremendous amount of volume here. We have a lot of data to share, so when we get on the phone with a lender, we really know how to push all the points and the hot buttons of what we think they’re interested in, because we know what the market is doing.
A good example of that – I’m doing a deal right now in New Jersey, a construction loan. We went to a lot of lenders, and we actually brought the equity to the deal as well, and the equity wanted to use some lender from another state… And at the end of the day, the lender from the other state wasn’t able to understand the market as well as our lender, and the reason why we [unintelligible [00:09:31].22] is because we knew that lender did all the deals specifically already in this market… So it wasn’t just throwing a dart against the wall; we knew based on the knowledge that we had on another deal in this market that this lender was the one that did construction on the other deal, and we were able to successfully bring that lender.
It was two partners. One partner wanted us to bring this lender, and the other partner was like “Oh, I have my own relationship with this [unintelligible [00:09:48].18]” and he really pushed against it. Ultimately, he came around, recognizing the value that we were able to bring, and we ended up getting a better deal, with a better spread, and just a better overall loan for the real estate deal.
Again, it’s a lot of market knowledge and data that we bring to the table when we speak to a banker, and many times they appreciate it. They’re in the business to make loans, right? We sometimes forget, because they’re so rigid, that they’re there to put out money. We assume that “Hey, they’re a bank, they’re tough, we’ve gotta put on a suit when we go to the bank.” The reality is that they have to put their money out in order for them to make money. So when we were able to show them a clear path for them to do that in a conservative way, that they can put out the money and not lose it, they’re very appreciative for us.
Joe Fairless: Not needing to name names, but just an example of where you said “You know, your competitor did this”, and then the first group ended up doing it, because their competitor did it… What would be an example of that?
Marc Belsky: An example of that… Look, we have that literally on a daily basis when we’re competing on loans… Bridge loans are a good example of what happens, because this is balance sheet lending, and people have control of their own balance sheet. So if somebody is charging a point on a deal, and the other lender is charging half a point, then the first lender says [unintelligible [00:10:53].22] “Well, your competitor is charging half a point. Why don’t you match it?” That happened.
It happens on equity. I’m working on a deal right now where the client [unintelligible [00:11:00].06] couple of shops, and one of the shops wanted to do the deal, and a second shop wanted to do the deal. The first shop was a little tough about it, and he’s like “Well, I need this, I need that.” Then as soon as he found out there was some competition on the deal, he started softening up, and he’s like “Well, I maybe could do this, I maybe could do that.”
So again, it happens so often that it’s even hard to say. Forget about even giving an example, it literally happens [unintelligible [00:11:17].02]
Joe Fairless: What are some questions that beginning investors ask you that if you answer it now, if they’re listening, then they’ll have the answers? Because I know as a sponsor of this podcast you get a lot of inquiries, and some are from investors who are kind of just starting out, so what are some common questions that they ask and what are your responses?
Marc Belsky: Good question. I just have to think what the most common ones are… Look, they say that the bank never wants to lend you money when you need it. A lot of people are starting out and they need the money, and the banks don’t wanna lend you money. Banks wanna lend money to people who don’t really need it. This is a big problem in how the banking business works… But I think it comes as a big shock to some people that banks won’t lend the money. “I have a property I wanna buy.” “Well, what’s your credit score? How much liquidity do you have? What’s your net worth? What’s your experience?” I think there’s this misconception that just because I’m buying real estate, I’m gonna get a loan. When a bank lends, they look just as much at the borrower as they do at the property… More so at the property, because obviously they have some collateral to take back… But ultimately, if there’s a guy that never bought anything in his life, or has no net worth or liquidity or doesn’t have good credit history, it’s probably hard to get a loan… So I think that’s probably a big misconception that people have, that “Hey, I’m buying a property… Let me just go ahead and get a loan.” I would say that’s probably the most common misconception that people starting out have.
Of course, you’re gonna ask “How do I do that?” The answer is you buy small, you invest together with other people, you partner up with other people… You know, what we’ve done in the past is we’ve introduced some of our larger clients to some of our smaller clients, to help our smaller clients grow… And the main thing I can tell is “Look, be prepared to give up–” There’s many people that started out and became big, and didn’t own everything. Sometimes it’s better to be a small fish in a big pond when you’re starting out, instead of owning 100% of the pie. Just be prepared to give out pieces to people that are getting in the way, and that’s how you grow.
Joe Fairless: When you work with a client, what’s your typical project, your sweet spot?
Marc Belsky: Partially by design, partially by default, I would say it’s a 10-15 million dollar check for a multifamily deal. For example, we just closed a deal last week of 10,1 million dollars equity check in Tampa, Florida. It was a 39 million dollar acquisition, so there was a 28 million dollar loan connected to that. Something like that is probably right [unintelligible [00:13:25].14] We do a lot of those.
I was running my numbers yesterday [unintelligible [00:13:30].06] I think I’ve financed, between debt and equity this year, over 6,500 units already. Again, we just hung up a call for an office building in Texas, and as I said earlier, we did a shopping center. I’ve done industrial deals. I’m closing at the end of the month a ground-up self-storage deal in Arizona. But at the end of the day, most of what we do is multifamily, again, middle market, between 5 and 40 million dollars. Most of the check sizes we’re doing are between 8 and 20 million dollars.
When I say “partially by design, partially by default”, it’s because like anything else in life, the more multifamily deals I do, the more assignments I get from them, the more my name gets out there, and the more assignments I do, the more I close; the more I close, the more my name gets out there and then the more requests I get. And at the end of the day, multifamily is probably the easiest asset class to understand, likely the easiest asset class to finance, and surely the easiest asset class to raise capital for.
Joe Fairless: When you are looking at self-storage, multifamily, ground-up development for something else, how much of a challenge is that to your brain, to switch gears from one to the other?
Marc Belsky: Again, the easiest thing down the fairway, as I said earlier, is just the typical, traditional multifamily type deal… But the good news is I’ve been doing this for a long time, and I have a lot of knowledge and a lot of different type of deals. I’ve closed office, retail, hospitality, multifamily, industrial, healthcare… I’ve done a lot of it over the years, and time buys experience for you. So for me it’s not such a big challenge, but it’s definitely the more challenging of deals. When you’re buying a [unintelligible [00:14:52].10] multifamily, you’ve gotta find out what the market occupancy is, what the commission structure is, what the demand is for vacant space, it matters on obviously what the credit history of the tenants are, you’re gonna have to understand how much traffic goes in front of the building every day, the [unintelligible [00:15:04].11] There’s just a lot more brain-damage to understand commercial deals versus multifamilies, which is why I said what I said earlier, [unintelligible [00:15:12].13] probably easier Thank god I have the experience to do that, and I’ve done quite a lot of deals over the years, as I said earlier… But ultimately, multifamily is still easier, but thank god I understand all of it.
Joe Fairless: With the commercial deals where you used retail as an example, would that be the most — I don’t wanna use the word “headache”, but the most in-depth research and time, compared to the other types of asset classes, like industrial or storage?
Marc Belsky: No, I think8 it’s really bifurcated between commercial and multifamily, because again, even in an office building, what’s the [unintelligible [00:15:45].28] but they wanna buy a building at X% occupied, and they wanna take it up to Y. The question is what’s the market occupancy? If the market occupancy doesn’t equal Y, why is it that they think they can bring it to that occupancy? And the answer is because understanding the submarket is another level of what you need to do. You need to go down and understand what the demand is, how many square feet in this submarket are the building’s comparables really? If there’s two million square feet in this submarket, how many square feet of this submarket is really competitive to the building they’re buying? Meaning, I [unintelligible [00:16:20].06] older buildings that have no recent cap-ex upgrades in them etc. What’s the real occupancy in that?
So there’s a lot of layers that go into even office, and industrial is the same thing. So one is not more difficult than the next. They’re both pretty different than multifamily collectively. Obviously, with regards to retail, you have the added target on your back with the whole retail [unintelligible [00:16:40].14] that people think is common with Amazon, and even Walmart going online now, all that kind of stuff. That’s just an added target. But other than that, I wouldn’t say one asset class, once you get into commercial, is more difficult than the next.
Joe Fairless: Based on your experience, what’s your best advice ever for real estate investors?
Marc Belsky: The number one advice I can give you as an investor – are you saying someone that’s investing as an LP or someone that’s syndicating deals?
Joe Fairless: Whichever direction you wanna go.
Marc Belsky: Someone that’s investing as an LP, find people you trust, because all the deals in the world, if you’re in bed with the bad person, it’s completely worthless. If they take advantage of you when things are down, the greatest returns in the world are completely worthless. And life’s too short.
Number two is somebody who’s on the syndication side, what I’ll say is it’s more important to make money in life than it is to be right. You don’t always have to be right, you don’t always have to get your way, you don’t always have to get everything you need to get. If you want to grow, just sometimes swallow hard and do what needs to get done to get a deal done.
Joe Fairless: When you were on the principal side, is there an example of that where you had to swallow hard just to get the deal done, and then it ended up making sense?
Marc Belsky: There is. I had a partner actually, who I decided wronged me, and I had to be right… And this was my biggest lesson – if you’re gonna ask what my biggest lesson in real estate was, it was exactly this, which is why I’m sharing it. We got into a disagreement and I decided I need to be right, and I just walked away. And it was more important for me to be right, and we just separated.
Over the next three years, he went on to buy a huge portfolio in the right timing, and I started again, and I didn’t get that big, and I ended up selling this business, which I’m very thankful for… But thank god, three years later he showed up at my house one day, and made up with me, and we’re actually buying real estate again, because I learned over that period of time that it was less important to be right than it was to make money. So I learned how to make up with people, and sometimes just swallow hard, and then get a clear pathway to make money.
Joe Fairless: Powerful. Yeah, I appreciate you sharing that. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Marc Belsky: Go for it!
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partner.
Joe Fairless: Alright, best ever book you’ve recently read?
Marc Belsky: Other People’s Money. I’m an obsessive reader of real estate biographies. I don’t believe in reading real estate how-to books and learning on the job, but I’m an obsessed reader of stories about real estate. If you’re familiar with New York, there’s a building in Peter Cooper Village-Stuyvesant Town, that was bought for 5,4 billion dollars back in ’07-’08, and then they lost the building a couple years later, and there was a book written about that story. I think that’s the last major real estate book I’ve read. But I’ve read a ton of autobiographies. The last one I read I think is called Other People’s Money, and basically it highlighted what happened in 2008 and how people were playing with other people’s money, and they were buying this real estate at crazy valuations. It was a fascinating book, a tremendous history of the real estate, understanding how [unintelligible [00:19:55].11] works, and how foreclosures work, and [unintelligible [00:18:57].11] Again, a lot of this stuff being in the market then and now you know, but it’s just fascinating to read. It’s called Other People’s Money.
Another fascinating book I actually read as a kid – it was a book about Ian Bruce Eichner, who built 1540 Broadway, in New York. It was called “How 1,000 men and women spent 10 years building a tower and lost a billion dollars”, something to that effect. Just look for Ian Bruce Eichner. That was a powerful story. It really got into the detail of New York.
I’ll admit it, I read books from President Trump as a kid, I read books on Trammel Crow, I’ve read books [unintelligible [00:20:25].00] I am an obsessive reader of biographical real estate books.
Joe Fairless: I like that approach. I think I’m gonna read more biographies. What’s the best ever deal you’ve done that we haven’t talked about already?
Marc Belsky: The best ever deal I did was probably a deal I bought with this partner that I was saying earlier. We bought it in a matter of four days, and it was the riskiest deal. It was actually on Memorial Day; I was at a barbecue and he called me saying “Listen, we have an opportunity. You’ve gotta come tomorrow morning to see this. You’ve gotta wire me money, you’ve gotta do this, you’ve gotta do that.” And we went in there and we just bought a small building in Brooklyn. It was a 7-unit building, and we underwrote it at a certain exit, and we did significantly better. We sold it pretty quickly. It was a building that just had some legal red tape that needed to be cleared out, it was a vacant building, and it was problems — like everything else, nothing works out the way it is. We went into the building, a tenant moved in illegally, we had to get the tenant out, we called the cops… All the [unintelligible [00:21:14].00] but ultimately we planned to clean the red tape and sell it six months later. It took us a little more time, we sold it about nine months later, but we actually sold it for a lot more than we thought we would, and I think we made a 3X in a matter of nine months.
Joe Fairless: What’s a mistake you’ve made on a transaction we haven’t talked about?
Marc Belsky: On the principal side, I can tell you (thank God) nothing yet; knock on wood, as they say. But on the debt and equity side, I had a recent mistake… I had a large deal I was working on, and I was sitting with a client and he gave me his word that he wasn’t working with anybody else, (I was working on the deal really hard) and there was a lender that we were talking to, but he just wasn’t being as responsive as we would have liked.
I get a call one day from the client, and he says, “Oh, by the way, I signed the deal with that lender through another broker.” The mistake was I should have been more aggressive with that lender. I tell my guys all the time, “You get paid to push and to follow-up. That’s the key to this business.” The key to the business and the seat that I sit in is just push and follow-up.
Joe Fairless: Best ever way you like to give back?
Marc Belsky: Charity is actually very important to me, so I give what I like to think is a fair amount to charity, but I can tell you that I give it very quietly. My most favorite type of charities to do is people that really cannot help themselves. I give to charity for people who just can’t put food on the table. I pay people’s groceries bills, I pay people’s private tuition, because their kids were getting thrown out of school… Just things where you’re really at the bottom of the bucket and you’re at the end of the rope and there’s nobody else there. That’s really where I most enjoy giving… But I’ve given to so many things over the years… I really believe in that.
I’ll tell you something else, my personal opinion – giving is not just charity; giving is also time. I always try to see with any of the charities I’m involved with if I can volunteer my time, as well.
Joe Fairless: How can the Best Ever listeners get in touch with you and learn more about what you’re doing?
Marc Belsky: Sure. The best way probably is by e-mail, which is firstname.lastname@example.org. My office number is 212-897-98-75.
Joe Fairless: Marc, thanks for being on the show, talking about the different types of ways that investors can benefit by working with a broker, and how you gave some specific examples of how you’ve helped get transactions to the finish line when initially perhaps the finish line was not visible at the time.
Also, talking about the different types of asset classes and what you look for, as well as the type of sweet spot that you have with your clients. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Marc Belsky: My pleasure. Thanks for having me.