Getting funding for your deals is challenging, especially when you’re dealing in smaller transactions or a small household name. Trying to grow your portfolio is going to be tough when you can’t find a lender to fund your projects! That’s why joining us in this episode is Vernon Beckford, a graduate from Harvard Business School with a Master of Business Administration and currently the CEO of Diversified Lending Solutions, a company focused on helping small to mid-sized real estate operators with their transactions and financing. Vernon has fifteen years of expertise in investment management, debt, and equity joint ventures, commercial mortgage origination, and distressed loan workouts, as well as in leadership.
Vernon will be taking us on a ride on what they do and how they help out their clients along with tips and tricks when it comes to deals.
What You’ll Learn From This Episode:
- Vernon Beckford’s background
- What is Diversified Lending Solutions?
- How they structure transactions with limited capital
- Stability in real estate
- Tips and tricks: deals
Why don’t you try and learn more about learning how to grow your portfolio and understand more about how you can deal by
Connecting with VERNON@:
- Phone: (844) 487-8648
- Website: https://www.dlsloans.com/
Connect with Corwyn @:
- Contact Number: 843-619-3005
- Instagram: https://www.instagram.com/exitstrategiesradioshow/
- FB Page: https://www.facebook.com/exitstrategiessc/
- Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
- Website: https://www.exitstrategiesradioshow.com
- Linkedin: https://www.linkedin.com/in/cmelette/
- Email @: email@example.com
Lending and Dealing with Vernon
CORWYN: Good morning, good morning, and good morning guys! Welcome to another fabulous episode of Exit Strategies Radio Show. Hey, I am your host… your host Corwyn J. Melette in beautiful North Charleston, South Carolina guys. Hey, If this is your first time listening to this show, you Sir or Ma’am are in for a treat. Because our mission, here at Exit Strategy Radio Show, is very simple. That is to empower our community, to financial literacy and real estate education guys, we are legacy building that is what we do. And so guys look, to- no look, we will not disappoint you today with this show. Okay. I told you guys in previous shows to go get your tablet, and a pen or pencil, guys, I need for you to put everything look, I need you to turn off everything on the stove, you cooking breakfast this morning because you want to make sure you pay attention and get some notes from this one, today. So, guys, I’m extremely humbled and honored to have, as a guest here on this show, none other than Vernon Beckford, who is the CEO! That’s the Chief Executive Officer! The chief guys with Diversified Lending Solutions. Vernon, how’re you doing today?
VERNON: Corwyn, great to be here. I’m excited. Legacy building is our goal as well. So can’t wait to speak to you and speak to your viewers.
CORWYN: Awesome, awesome. So thank you so much for that. Look, just so you know, I hire out my introductions. I’m, you know, you know, that’s what we do. So, look so, Vernon, if you don’t mind, tell our listeners a little bit about Diversified Lending Solutions. You know, what’s your role there? Because I’m sure they’re gonna want to– they’re gonna want to buckle their seat belt up and take this ride with us today.
VERNON: Sure, happy to do it. So, as you mentioned, Vernon Beckford, the CEO of Diversified Lending Solutions. Diversified Lending Solutions help small to midsize real estate operators arrange to finance their projects. And as your listeners are already well attuned with the process of getting funding for your deal, whether that be debt or equity, or everything in between, can be very challenging, especially when you’re dealing with smaller deals. And if you’re an operator, that is not a big household name. So our goal is to take folks who are in the position of having: good backgrounds, hard work ethic, they’re in their local communities, they have visibility to deals, how do they get to a position where they’re doing deals three times as big as they were doing a year ago? What resources do they need on the financing side to get that funded, that’s what we’re here to provide them.
CORWYN: That is awesome. So Vernon, if you don’t mind, give our listeners a snippet of, if you will, your background, you know, we’re you know, Fortune 500 companies. You have an impressive resume and I just want to give us– make sure our listeners get a sampling of that. So if you don’t mind, tell us a little bit further about your background.
VERNON: Sure, happy to do it. Born and raised in New York, attended Columbia University, and then jumped into the wheeling and dealing world of Wall Street, which was for me a really good opportunity to understand the nuts and bolts behind how businesses got bought and sold out. You know, you always saw articles at the beginning of the Wall Street Journal about mergers and acquisitions. Well, I told myself, how does that work in real estate? You see folks that own shopping centers and you see these multi-high-rise buildings? Who’s behind all of that and how are they getting it done? So I spent my years cutting, cutting, cutting my teeth on Wall Street and learning how these deals were structured, and ultimately ended up as many did in the height of the last great recession, finding that the world had changed dramatically. And so, went from being in a position to actually structuring deals to a position of working out distressed deals. And ultimately, ultimately, I went back to business school, attended Harvard Business School, and then joined a firm called Global Atlantic. which was a spinoff of Goldman Sachs and is now owned by KKR. And we built a large real estate investment business where we were investing in everything from ground-up multifamily to writing loans to joint ventures to buying bonds. So, have been through multiple cycles, multiple iterations, and multiple types of real estate, and decided, frankly, at some point, we’d spent so much time working on these big transactions. And I know that you can appreciate this, would do smaller deals with my friends and colleagues. And it would feel like you were pulling teeth or moving mountains, just to get the deal funded. When here, on this other side, you’re working for massive institutions, billions of dollars sloshing around, and those deals are moving by fairly smoothly. So it always irked me, especially in our community, it felt like what do we got to do to make baby steps to pull your horses and, take the knowledge that I know was there. [inaudible] their capital. And so eventually, my partner and I, my partner, Eric Andrew decided we need to start something to actually bridge that gap, take the institutional knowledge that we’ve accumulated all these years, and don’t just store it and keep perpetuating the same deals, bring it to Main Street, where folks have the potential to use that information to take the next big leap. So they’re not investing in a one-off project, and maybe they have one rental property, which is great. Why can’t they be the owner of a 200-unit multifamily complex? Why aren’t more of our folks getting there? So that’s really, what brought us to this point.
CORWYN: Wow. So that is impressive. And it’s interesting to us for you to say that, so maybe, it might have been yesterday, you know, is that I use this often in educating, you know my agents, you know, I’m a broker, you know, we have a group here of about 17-18 agents. And as you know, in educating them, you know, I’m reminded I had a client one time that managed, he was a regional for RV company for when the large retailers or whatever, of RVs. And he said to me when the purchase of a property he was purchasing, I think maybe around 300,000 at the time, that was a number of years ago, the same house now is 500,000- 600,000. And he said to me, said, quote, he’s all understand this, he said, he said, “I can get motorcoach finance at a half million dollars, million dollar motorcoach finance and out the door. And I can get it underwritten, the financing in 96 hours, I can get the whole deal done in 96 hours. Why does it take y’all 30 days? Or why does it take you this long”. I think at a time we will probably run around 40-45 days. He couldn’t understand it. And so what you just said was the same thing. You watched the big conglomerates, if you will, make money move just like this. But yet and still, here we are in our community, trying to figure out how we are going to get these deals done. And it’s taken us months to do what you guys have done in days.
VERNON: Exactly and I would say it’s even worse than that, right? Because if the residential world is 45 days, in the commercials anywhere from, call it 40 – 90, depending on how quickly a bank moves, that assumes all the ducks are already in a row, right? That’s the smoothest timeline. So do you know how many times I get clients to come and say: “Hey, this deal has been in limbo for three months, six months.” And people hear that and automatically assume well, that must be because you did something wrong or because there’s something wrong with the deal that you haven’t been able to pull the piece together. And that’s frankly, just not true. And in a lot of cases, the money that’s available for these deals is just either so expensive, the terms are so punitive, or however, that operator framed the deal to who they went out to wasn’t framed the right way. So now that person is looking at the deal the wrong way, and the deal doesn’t get funded. And it just happens over and over again.
CORWYN: You know, so the framing. So you know, financing, you know is art. So your position is hard, you got to take– you got a canvas, which is the loan, if you will, and this is the analogy I came up with a number of years ago and you got to take the pieces of people’s lives, businesses or whatever, business and life and all that stuff and kind of use the collars if you will, to paint a picture that you can get a lender to approve and give and take and buy that loan. That’s what you’re doing, you’re trying to put a deal together so you know when you start looking at all of that, you know Vernon. It is impressive what you do. So let me ask this question. Where do you guys– your company, are you guys nationwide? Are you guys helping fund deals across the country?
VERNON: So we are nationwide, I would say the overwhelming majority of our focus is the Northeast, the Mid-Atlantic, and the South. We actually have a project in Charleston right now. So, as a beautiful market, but our goal is really to be as expansive as possible, we tend to find that those are really specifically the Mid Atlantic and I would say really, especially the South, where a lot of the economic growth has been for the last, you know, for the last several years. So it’s no surprise that you know, whether the Carolinas or Atlanta or, you know, Florida or the Charlestons, the Nashville, there’s just a lot of inbound activity in those markets.
CORWYN: So, you know, let’s…you structure deals in a number of different ways. I would assume, so you know, you know, a lot of, you know, some of our listeners are, you know, very seasoned investors, and, you know, they know what they’re doing, they’ve been doing it for a while. And I will say that they don’t know what you know, so they still need to talk to you because you probably can take them a– scale them up. So you know, the beginning investor who’s looking at trying to fund a deal, you know, how. What are some creative ways, you know, someone with limited capital, can figure out how to structure– or you can help structure a transaction?
VERNON: Sure, that’s a great question that could be an hour or a couple of hours in of itself. So, I’ll try to cut to the Reader’s Digest version. And let’s start from the beginning kind of to the closing of a transaction, very beginning of the transaction, often folks are gonna have to put up an earnest money deposit. One of the biggest impediments to them doing much bigger deals is well, I don’t have enough liquidity for the earnest money deposit. Or if I do, I’m going to exhaust all of my liquidity and have to backfill it with the investors I bring to the deal. One of the things I started doing at DLS started a fund, earnest money deposit loans, so that you had the ability to go out and make offers comfortably without fear, “Will I actually have to exhaust my whole bank account just to put it as a deposit”. We found that for folks in our communities, doing little things like that can be very impactful. Next piece of the puzzle, I would say, what are the other reasons that prevent folks from doing bigger deals one, in many of the loans, when you do a bigger deal, the bank’s gonna say, even if it’s a nonrecourse loan, meaning that if everything goes bad, we’re not going to come out of your come after your personal assets, if certain bad acts are committed, whether you commit fraud, or you commit malfeasance, or you took dark toxic waste and threw it on the property that does trigger recourse, and we’re going to need to see that there’s sufficient net worth and liquidity there to collect, well, doing a 10-20 $50 million loan and you just show 100-20 $50 million in net worth, that automatically is going to take a lot of folks out of the running too. So what we start doing: Bringing “key principles”. That’s what we call, “key principles”, to the transactions, to partner with these operators so that they can leverage the fact that they have an iron net worth. And that gives them the ability to participate in larger deals as well. One of the other things, so let’s start there, then let’s say okay, well, now I need to secure debt for my property. That’s going to be the overwhelming majority of the capitalization of my project. So I need to know, am I going to get 55% of the costs? 65-75? Because that’s going to dictate how much equity I need to bring or raise to the table. And what I’d say is that there’s an entire process that we participate in, and we lead. And that’s an entire interview in of itself, of how you convince the lender to give you the most accurate, how you convince them if you want 70%, that that’s a reasonable ask. And there’s a whole process to doing that, that involves speaking their language, and being able to frame the deal from the perspective of a lender, who at the end of the day doesn’t make extra money if you do well on the deal. They just lose money if you screw the deal up. And so you need to convince them not why this is such a home run, but why from a risk management perspective, they’re not going to lose their shirt or lose money on it. And that’s a very different way to present it versus going out to your cousin or your uncle as to why this is such an exciting project. Right?
CORWYN: Look, we can’t take this to and look at Vernon. Y’all listeners, please excuse me, but we can’t take this out to the homeboy network. Do you know what I’m saying? We can’t do that, look at this is we got to bring this to and I love how you say “key principles”. You know, essentially what we’re talking about as JV and it becomes a joint venture, you bring up– you collaborate, you bring people together in order to get a deal funded, closed, and get it successfully transitioned and everybody wins in that situation. Everybody wins! I mean, that’s what it’s about, right?
VERNON: And there’s plenty to go around, especially the bigger the deal you do. So what I found is that in our community, there’s a lot of lone soldiers out there, you know, and, you know, that are going out, they’re hustling, they’re putting their back in every property and they’re growing one property at a time. And there’s an alternative, where if you’re doing big enough deals, right, there’s plenty of more to go around, such that you can draft on other people’s experience, their expertise, their financial strength, and then you can come together, now you have a pathway to doing that much larger transaction.
CORWYN: Because eventually with the experience, then you become someone that can be a “key principle”
CORWYN: Everybody is relevant in that situation. So what, you know, one of the things that, you know, you know, people always trying to figure out: life hacks, how to, you know, how to, you know, get in how to make something work. And it’s what I just heard there, man is, this is how you hack into a higher level of real estate investing?
VERNON: Absolutely, no question about it. I’ll give you a story. So one of our favorite stories that I like to tell is that we have a client, African American sister based in Houston, really, really great. Heard about her, she talks about her deals, she left corporate, and in very quick order managed to get about 500 units under the management of multifamily housing, which in of itself was tremendous. She found a large project, many of our larger competitors, she’d spoken to beforehand. And they said, Oh, no, we’re not going to be able to fund you whether it was because they didn’t love the market. Maybe they didn’t love the… the deal was large relative to her prior experience. There was an assortment of reasons why they said, “We’re not going to get it done.” We looked at her background, we looked at the project, we looked at the market, and we said we understand these things, and we’re going to actually be able to translate to a lender to get it done. Forward, we got her a $40 million loan on a 500-unit multifamily portfolio, four years or three years ago, she wasn’t in the business. So, for us being able to be a part of that with, by the way, an African American attorney and an African American sponsor were absolutely liberating from our own point of view, the evidence that this can be done, and you don’t have to be starting from some crazy level to level up to get there. So to your point, she was very good at acknowledging what she was good at, where she could pull other people into the puzzle to add value, and then draft on them so that she could accelerate her own growth.
CORWYN: And that’s, that’s impressive, you know, in, you know, the opportunities are endless. I’m assuming you guys are able you guys able to help with, you know, all types of transaction, whether it’s just, you know, buying an existing asset that’s already cash flow and an asset or whether it’s purchasing, renovating, you know, improving and then stabilizing the property, and then selling off or something in the future, which is all great models, according to what your appetite is and what you’re looking for in the long term. Is that correct?
VERNON: Absolutely, that’s absolutely correct. And what we find is typically, what requires the most creativity are the deals where you are either building ground up, or you’re doing maybe a fix and flip, where you’re doing a renovate and stabilize business plan, because there are so many variables there, what’s the in-place value? What’s the “as renovated” value? How are you going to get there? Which contract are you going to use? What are rents going to be when you stabilize? All those variables, you know, come together to determine whether the deal’s attractive or not. That’s it, that’s where we can really add the greatest value because there are so many opportunities to get derailed and sidetrack when you’re trying to pull that together. And I will say one thing, just to add to your earlier question, in terms of creativity, there are so many programs and so many structures out there that folks aren’t aware of whether it be, for instance, many of your listeners probably aren’t aware of CPACE, which is a great program that can be used if you’re completing renovations on your project that are tied to energy efficiency. Those funds can be a great supplement to a senior loan that gets you more leverage and allow you to raise less equity under very attractive terms. And so there’s a game here that we’re just getting to we’re probably just in this third or fourth inning of understanding products like that, that we use to our advantage that, frankly, can make or break a deal and whether it’s financial.
CORWYN: That’s awesome. So a lot of stuff that you know, projects and stuff that, you know, work on and work with, you know, energy efficiency, you know, becomes one of the conversations, you know, you know, will improvements be made, you know, energy efficient windows, you know, are you, you know, what kind of system or systems mechanicals are you putting in? Is there any efficiency ratings or anything there that you can capitalize on? I don’t think I knew it per se as quote unquote, CPACE. But I know that because if you make certain improvements, then you can, you know, that gives you a little bit, I give you some credit, if you will, on the backhand. So it’s– that’s quite impressive. So, you know, Vernon, you know, what, what are some tips, tricks, or anything else that you’d like to share with our listeners to kind of get them to see the bigger picture? That you would like to share?
VERNON: Sure. So when I think about what is the key to success in almost every deal, it really comes down to four things, right? These are four simple things. The first is litmus testing. What I mean by litmus testing is, Everyone falls in love with one deal, I get it, I’ve done the same thing. But you can’t fall in love with your deal so much that you’ve completely lost all objectivity and how someone else will look at it. So the first thing to do is really be robust in analyzing why you think the deal you’re pursuing is as attractive as it is based on actual defensible numbers, whether it be the demographic data, the recent sales, or why is it attractive. and that’s a big part of what we do, helping bring people back to reality as to is your deal as good as you think it is. Two is what I like to call “objection smoothing”. Right? You have to look at every deal from the vantage point of the person that is most conservative, think of your conservative grandmother who’s going to say no to everything, and look through a lens as to what questions would she ask, what things would make her feel nervous, right? If she wasn’t in your shoes and knew everything about the deal you knew what would scare her away and give her a quick out as to say “No, no, I shouldn’t be doing that.” And leave with that and be able to position around that. So that you’re not giving people an easy out, especially if they’re not familiar with markets that are historically underserved, or markets that we may have a really good touch with, that they don’t, don’t take it for granted that they should just know, approach the conversation from the vantage point of I’m going to assume you don’t like it and convince you why you should. Point three, would be what I would call “de-risking”, you know how many folks I see that get so excited that they get a term sheet from a lender that they’re ready to go off to the races because they just want to close? And then if you read in the fine print, there are all those little things that they’re gonna give them heartburn once they close, that they didn’t pay enough attention to. So take a step back, look at the language that you’re agreeing to, and be able to either really dig in or use people outside your network, whether it be your advisor, your lawyer, or whomever, to watch for the “gotchas!” because inevitably, there’s going to be something that is better serving your lender than it is to you. And then the fourth piece, and this is such an important piece is what I call “fact filtering”. You don’t know how many people I’ve encountered, it’s almost like the person that just overshares with you when you’re talking, you say
“I didn’t ask you that” And they just said something to put themselves in a less favorable light than they needed to. Operator sometimes in a rush to get their deal funded share information that either confuses the business plan, raises skepticism around certain aspects of the business plan just, you know, leaves a lender befuddled as to “Is this really the person that I want to lend money to?” Don’t put yourself in a position of the five-yard line where now a lender just wants to walk the deal back because you’ve given information that gave them a reason to doubt you. So one of the things that we’ve been very good at is being the wall of defense for our borrowers so that they don’t put themselves in a mess by oversharing or sharing the wrong things. So I would say it’s really those four things. And it doesn’t just have to be, you know, real estate, I’d say if you’re an investor, if you’re an entrepreneur, view your activities through those four lenses and make sure you’re approaching those thoughtfully.
CORWYN: I like all of that, man, that is awesome. Because, as you were talking, I’m just kind of you know, over here, sometimes, you know, people just you just see, I mean not saying that you should not see the silver lining, but you shouldn’t miss the cloud because of it. You should have enough of a view, a rounded view, if you will, that really just kind of embraces everything. So you can see the entire thing.
CORWYN: You know, it’s extremely important not to miss that. So you know Vernon, look man, this has been an awesome conversation. You and I have to connect, otherwise, so you know, I’ll definitely be in touch. But if you don’t mind, our listeners, how can they reach you?
VERNON: Absolutely. And thank you for asking, you can reach us at dlsloans.com, where you get more information about what we provide. We also have a newsletter, a free newsletter that covers a whole host of real estate-related news. It’s called the DLS newsflash. dlsnewsflash.com. And then if you want to reach out to me about a project, I live on LinkedIn, you can always freely reach out to me on LinkedIn, I’m a deal junkie, and we’ll be able to sit down and talk about your project.
CORWYN: Good deal. Awesome, awesome. So for our listeners, guys, this is this, this right here is why I do what we do right here. You know, to have people to come to pour into us, to explain to us, the opportunities that are beyond what you see, to see oftentimes, we are so focused on just the picture in front of us, we miss the background, which encompasses it all. So Vernon, thank you so much for being with us today. Thank you, man, for being a part of the Exit Strategies Radio Show family, for dropping them jewels and those nuggets on our listeners, for our listeners, guys, please go to our website, exitstrategiesradioshow.com, please make sure you subscribe, you can get this episode, all other episodes, guys that we have, have put up and you can start to put these pieces together. We’ve had people that have given you the hack on how to, you know, how to leverage yourself into multifamily deals. But now you got the financing piece of it. So now you got Vernon here who can help you fund that deal. You know, you already know what you can do with it once you got it. But now we got the guy that can help you get it. So that’s what this thing is about. We’re linking all of it together guys. We’re putting all of it together, all of it on the table. All of it is on a plate for you. Because you are our listeners. You are our family and we love you. So Vernon again, one more time, man, I really appreciate you being on with us today. Thank you so much from the bottom of my heart.
VERNON: Thank you so much for having me.
CORWYN: You’re welcome. For our listeners, guys. Y’all know how I feel. Y’all know what I say, I’m gonna put all of it together, and I’m gonna do it this way. I love you. I love you. I love you. And I’m gonna see you guys out there in those streets.