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Every Friday, join us as we dive into the latest in real estate multifamily with David Moghavem, Head of East Coast Acquisitions at Trion Properties. David invites top experts who know the ins, outs, and trends shaping the real estate multifamily market across the nation!
Whether you’re a seasoned investor or just curious about where the next big opportunity might be, Deal Flow Friday brings you the weekly inside scoop on what’s hot, what’s not, and what to watch for in today’s ever-evolving real estate scene.
David Moghavem (01:13)
All right. Welcome to another episode of Deal Flow Friday. I'm your host, David Mogavam. And today we got Zach Streit, founder and president of Priority Capital Advisory. Priority Capital Advisory, if you don't know, providing debt and equity capital solutions for middle market and institutional commercial real estate. Zach's been in CRE for 20 years, starting on the principal side, then on the lending side. And for the last decade in the capital advisory side,
prior to starting his own firm and his own capital advisory platform. So Zach, you're a big name in the industry. ⁓ Welcome to the pod. Great to have you and great to finally meet you in person ⁓ on a couple of days ago, so at Crefsey. So it's good to have you on.
Zack Streit (01:46)
Hmm.
Well, thanks David. It's great to be here. Big name in the industry, I don't know, but somebody with the hairline improved that I've been in at it for a long time for sure. And it was actually awesome to meet you at CREFC. And I'm actually sad I'm back in LA, which is generally a nice place to come back to and that we couldn't be recording this live, but next time, hopefully.
David Moghavem (02:05)
Exactly.
Exactly. Any excuse to kind of come back to Miami is a good excuse. Definitely bummed that we're not doing this live. It's always a little bit more fun to ⁓ banter around the the setup I have here in the office. But good to have you here. And it was fun at Crefsey, too. It was a it was a madhouse. mean, it was crazy being there. A lot of people, a lot of buzz, I think half half of it just because everyone wants an excuse to come to Miami. But
Zack Streit (02:21)
Done.
Yeah.
David Moghavem (02:46)
I feel like there's, yeah.
Zack Streit (02:46)
And in January, most of the country
is like craving Miami then. So it always gets a good crowd.
David Moghavem (02:50)
And I think some people,
and people were probably let down a little bit that it was a little bit gloomy and rainy that day, but ⁓ there was some energy there. I'm sure you felt it. And I'd love to get your take, first of all, like what was kind of the vibe that you got from it? What was the key takeaways from Crefsey after the back-to-back meetings that you had?
Zack Streit (03:02)
Yeah.
Sure, sure. So I probably had 20 or 25 meetings. We try and pack them in and make sure that we're talking to all manner of lenders there. I think the biggest takeaway is probably a continuation from a theme in the debt capital markets that really started last year. And that is not a little more capital than deals, but a lot more capital than there are deals. ⁓ I think this was underscored by when banks really came into the market, probably second or third quarter last year.
They really re-emerged and they re-emerged making cheap loans direct to borrowers and they re-emerged ⁓ back-levering debt funds more aggressively than they had previously. That's caused compression in the market. It's caused increased competition. ⁓ You are hearing just about further.
compression and spread, and you are hearing about more leverage, you're hearing about, you know, decreased debt yields, both in place and stabilized and like it's a little bit of a race to the bottom. It's still relatively new. So I don't think it's as frothy as it was in, you know, 19 or 21. And, you know, the macro picture probably isn't as frothy now as it was then. But from a debt capital market standpoint, there's a lot of money out there.
Part of this too, and I think this is interesting, is that there's I think been the rise of insurance companies backing transitional lenders, which is a newer trend in commercial real estate historically. You learn this in your finance classes. Insurance companies are generally, you know, 7, 10, 15 year fixed rate long-term lenders. All of a sudden you have insurance companies backing transitional lenders, both bridging construction.
David Moghavem (04:37)
Mm-hmm.
Zack Streit (04:54)
in a pretty significant way. And so that's just in addition to banks, another liquidity pool ⁓ entering, I guess, commercial real estate and backing debt funds and causing some of the problems in there.
David Moghavem (05:04)
And do you think that's, to cut you off, you think that's just
because they can find some extra yield there, an extra spread?
Zack Streit (05:12)
100%. I don't think it's because they can. I think they need to. think, you know, between keeping up with the annuity products they offer their clients and just their insurance liabilities, I think putting money out at five and six percent, while great, probably isn't enough to meet their needs. And so I think, you know, similar to commercial real estate investors and their search for yield, think insurance companies are on a search for yield also. And I think they found something that they like. Now,
David Moghavem (05:16)
Mm-hmm.
Zack Streit (05:38)
Unlucky for them, yield today on transitional products, and we can talk about this in more detail, are probably 200 to 300 basis points less than they were 18 months ago due to a mix of spread compression and also rate cuts. But look, we closed the construction loan year end that was through a debt fund that I know is backed by an insurance company, and it was an 8 % loan. And there's no way you're going to get 8 % on a long-term permanent loan. So you can see immediately the arbitrage and why they would be kind of in the space.
Last thought on CREFC, and I don't know if this was an aberration or if this is a trend. I spoke to three people yesterday, each at different debt fund platforms, and all of them had either folded,
or they'd consolidated. Now this is something that I'd wondered about for a long time because for probably two years plus or minus, we've been reading about the golden age of private credit. So said Steve Schwartzman and John Grey at Blackstone. We'd seen this just tremendous proliferation of debt funds. And I started to wonder like, is this sustainable? How many and for how long?
And it was interesting that not one, not two, but three different people from three different shops said, hey, our shop had either folded or consolidated and we're out looking for something. So look, that may be something to watch and maybe a gentle plug to the sponsors out there to use a broker or me, they just say like, you need to know who you're getting into bed with out there while capital is plentiful and while non-recourse debt fund capital is plentiful.
They are certainly not all made equal and the guy that's here today might be gone tomorrow. And should that happen during the course of a transaction that can be like potentially very damaging. So it's just something to watch out for generally in terms of an industry trend. But I think it's also something to just watch out for while you are in a transaction, make sure that you're with somebody who's here to stay.
playing a long-term game has discretionary capital, probably isn't a newer outfit and just has longevity, has staying power. I mean, that's the key to many things.
David Moghavem (07:45)
Yeah, there's a lot of parallels between the credit side and the equity side. As you're seeing debt funds fold and consolidate, you're seeing syndicators also kind of going under or out of business or trying to just put out fires and liquidate whatever they can and get rid of the dogs and save some assets that are still salvageable. ⁓ You're also seeing that
Zack Streit (07:57)
Hmm.
Yeah.
Right.
David Moghavem (08:14)
The credit side can be almost an indication of what the equity side can be. As you're seeing spreads compress and capital flows going into credit and yields getting tighter, what's next on the capital stack on the equity side or pref equity? And so it's a domino effect. The credit that they can't find their yields, they start coming into hybrid, Mez, pref equity products.
Zack Streit (08:32)
Yeah.
David Moghavem (08:41)
the prefect equity, Mezguise start getting into common equity and those capital flows result in compressed yields in the marketplace.
Zack Streit (08:50)
I think you're right. So, you know, to be clear, 90 % of what I do is as a debt broker, and I would include preferred equity in mezzanine financing in activity as a debt broker. But 10 % of the activity that I do or deals that I work on are deals where I'm helping sponsors place JV equity, not syndicating, but with
you know, call it single source equity capital providers that might write a check between, let's say, 7 million and 25 million. And there has been an uptick, at least in interest, I know about closed transactions, but from people in that space. ⁓ And I think it has a lot to do with what you just said. I think there was a tremendous amount of money raised for distress, rescue, mezz financing, preferred equity strategies over the last few years.
David Moghavem (09:24)
Right.
Zack Streit (09:41)
And I think some of it, a little bit of it deployed. And I would venture a guess that 75 to 80 % of it didn't, because I just don't think we saw distress on a grand scale during the correction of the last few years. And it's got two options. It either sits idle or it begins looking at JV equity opportunities. And I think, you
David Moghavem (10:03)
Right?
Zack Streit (10:05)
guess I'm a big fan of the Blackstone guys, but they said earlier that, we think the deal damn breaks in 26. And I think what they meant was, hey, you've got cheap debt available in the marketplace, primarily from banks, but also to some degree from debt funds. That was missing over the last few years. And rate cuts are a real thing. We've had about 200 basis points in Fed funds rate cuts.
And so now, as opposed to in 22 and 23, when you were sort of staring at the barrel of rate hikes, you're now staring at the barrel of rate cuts. So that and cheap debt are powerful. They don't solve all the world's problems. I don't think deal flow explodes overnight, but they are two pretty powerful instruments, powerful themes that just weren't present in the marketplace. Call it, know, 18, 24 months ago, and they are now. And I think that
combined with the lack of distressed opportunities is forcing more folks to turn and to look for common equity opportunities. Now, to be clear, I don't think the spigot for common equity and development opportunities is all of a sudden turned on. I think that continues to be a very challenged place. But the spigot for common equity into value-add opportunities, ⁓ multi-industrial to some degree retail, and maybe for game-year.
David Moghavem (11:17)
Right.
Zack Streit (11:30)
provider's office. I think that's interesting again and we're seeing it ⁓ in our flow. ⁓
And I think that, you know, we typically will close two to three equity deals, these types of placements every single year. I hope we at least do that this year. But I am getting hit up more than normal for people trying to find equity capital solutions. And on most of the deals we market, we are getting stronger responses than we did one or two years ago. So I think you're absolutely right. And I think the arc is generally positive.
David Moghavem (12:05)
One thing to add there, feel like a couple of years ago when we were all anticipating the wave of distress, these institutional partners that are now you're saying asking for common equity opportunities are interested. They had a whole plan of putting out pref equity out there with mid teens return. But there was a little bit of a pitfall in the strategy because most of these groups would try to pitch.
Zack Streit (12:24)
Yeah.
David Moghavem (12:33)
80 % of the stack or 85 % of the stack and have a sponsor come out with the rest of the 15 subordinate to that pref equity to rescue the deal. The problem is there's not a lot of operators out there, A, with the liquidity and B, with the conviction to be behind that when you're subordinate to a slug of capital that needs a mid-teens return. That's
Good. That could be good money after bad for a common equity provider, right? ⁓ still a good deal for the prep equity, but you're stuck. You're not solving the whole problem for that sponsor. So what happened? A lot of that equity didn't get put out. And as you said, Zach, they need to put this money out now. They need to put that money to work. They're seeing on the the credit side, the spread start to tighten. So for also coming down and it's a race to the bottom. As you said, once that hits bottom,
you're going to start to see that back into the common equity side. And so I do feel like this year, at least, you know, we have an image in a couple of weeks and two years ago, everyone was pitching their prep. Every equity provider was pitching their prep. I don't know if everyone's going to be pitching their prep this year. I think it's ⁓ a people are tired of pitching the same thing for the past three years, but B, I feel like the smart ones at least know what's next and that
Zack Streit (13:45)
Right.
Yeah.
David Moghavem (14:02)
you're not going to get your return ⁓ being 80 % ⁓ of the stack for preff. You got to take a little bit more risk if you want to hit that return. so that's where you're hearing that some of these groups are now interested. Are they in line with market yet? Not necessarily. I think there's still some time and I think these sellers still need to meet the market and
capitulate to kind of get to those returns that work for that cost of capital. But you're seeing that bid ask spread start to tighten a bit.
Zack Streit (14:37)
Yeah, I think everything you said is right. would add one thing. Another reason the pref that was expensive didn't deploy in 2022 through 25 was banks extended and pretended a lot of deals. And they did so either without a common equity injection or just with a small one.
And in many cases, not all, that common equity injection was made just by capital calling the existing equity. And in a lot of cases, those capital calls occurred. I worked on numerous deals that I thought would be right for third party preff because they met that distress profile, but somehow sponsor was able to blend and extend pretend and extend. ⁓ and if it had to make a small capital call and make a token pay down. then now in turn arrow where rates
are on transitional products, 200 to 300 basis points lower because of rate cuts and spread compression. And an arrow where you can talk about financing multifamily, which I guess is the benchmark.
at a sub 5 % rate with a buy down. And now there's a way out of a lot of those problems. So you're right. So where does the money go? It has to move back onto the equity side and we're seeing it. And for sure, there's still a bid ask. The untrended return on cost, the benchmark for multi typically being around seven is still very, very, very hard to manufacture. And I think most sellers have not capitulated to that point yet.
but there is a moderation that's happening. And I think both sides are gonna have to give a little bit in order to get deals done. But I think we're much closer to that now than we were. So it should be a fun year and an exciting year as I think we see equity creep back into the marketplace.
David Moghavem (16:29)
Yeah, I hope it's a fun year. ⁓ It's been it's been a lot of all starts the past couple of years. One more thing to touch on this. You know, we talked a little bit about ⁓ transitional borrowers and we've been focused a little bit more on re type of recapitalizations or rescue. But from what I see, there really hasn't been too many acquisitions that are being executed with Bridge. And I feel like part of that is because from the fundamentals.
Zack Streit (16:31)
You too.
Sure.
David Moghavem (16:57)
at least in multifamily, there isn't enough conviction in upside to justify buying with bridge and the risk, risk adjusted return on putting something like expensive bridge on a deal that operationally you don't have conviction is going to go up. doesn't really justify buying bridge and maybe a lot of capital's not as, as comfortable to taking bridge. Is that also kind of what you're seeing where
You know, maybe some of these spreads are tightening to do deals, but it might not be as much on the acquisition side. Or are you actually seeing these start to happen in acquisitions and borrowers might be going back to old habits?
Zack Streit (17:38)
Yeah, no, so I'll break questions. So a few points first.
Acquisition activity ⁓ is coming back, but it's muted relative to what it was. It still feels like it's way down. And I think it's way down because of the bid ask spread that we just kind of touched on. Second, with respect to bridge financing, I think you're right. You're not seeing bridge financing predominantly on acquisition deals. Where you're really seeing it is lease up deals, construction takeout deals, and then some bridge to bridge deals where, you
people just need additional runway. think third, the reason you are seeing more fixed rate agency and otherwise activity on acquisitions is I think two reasons. Number one, you can get a fixed rate below 5 % and I just think generally there's some sort of psychology out there.
where if you're at five or significantly, let's say above it, you might go bridge because you feel like on a long-term basis, hey, like north of five, I don't know, doesn't feel great. Just from a gut level, not even.
David Moghavem (18:49)
Just from a gut, from like a 10, you know, past
10 years in the industry, gut below five feels good above five feels expensive.
Zack Streit (18:57)
⁓
100%, just licking your finger, putting it in the wind. I think that's the psychology. And now that the dam broke and you can get to five or below, I think that's a lot more attractive. I think the second part of the thinking really has to do with...
how a lot of folks got burned with floating rate that was either not capped or limited cap exposure. So I think you could do a bridge deal if you had, you know, sort of a five year cap on it, which you could purchase or maybe a three year full term cap on the initial term. But I just think there is a lot of heartburn.
over that strategy because of what happened to folks when rates ran up. On all of the construction deals that I've been working on, some of the bridge guys are doing at least three year caps so that they're capped all the way through the initial term, thinking that would be sufficient and it probably is. But again, this is just psychology. This is just people reacting to what they've seen recently. And so I think those two forces of low fixed rate availability.
now that the 10 years moderated somewhat from its high in like the fives, to fear over what is unlikely to happen anytime soon, but what could happen if interest rate hikes were to start again. I think that's pushing people more in the fixed rate direction.
David Moghavem (20:26)
Yeah, and it'll be interesting to see how that might shift, right? There's talks of new Fed chair and they're gonna be a little more hawkish and do a few more rate cuts. Rate cuts really affect so far, but is it gonna cut treasuries too? We saw that a couple of years, like a year or so ago, where there was a 50-bip cut and everyone thought that bonds will rally and it did the opposite. And I think with treasuries,
The fear of deficit matters, the fear of inflation, runaway inflation still matters. And so that stayed kind of sticky. But it would be interesting if they do cut and treasuries do stay sticky and higher if people maybe just go back to bridge saying, hey, I can get the same exact rate for something transitional than something fixed rate.
Zack Streit (21:15)
Great, great point. So I think what you're saying big picture is that greed always settles in or the rational mathematical scientific mind settles in and you're absolutely right. Like you're dealing with sofa that's 350. What if sofa goes back to 200 and then you have a spread of 250, which is where a lot of multi deals are getting done on top of a sofa right? That's 200. Now you're talking about a floating rate. That's four and a half percent all in starting to feel like 21 again.
you cap that for three years and you have four and a half percent fixed rate for three years, that absolutely could.
move people back in the bridge financing direction, especially if you can only get fixed rate financing at say 5 % today, or maybe four and half or four and three quarters with a buy down. Like people may just not want to incur that and the yield maintenance that goes with that. They may want to preserve optionality because their view may be like, hey, fixed rates shouldn't be four and a half or 5 % if so far as you know, at 2%. Now,
There is a relationship between the short end and the long end of the curve, but as you alluded to, it's a complicated one and it doesn't always move in lockstep. just because the Fed lowers rates dramatically, even from where they are, doesn't necessarily mean the longer end of the curve moves. It's governed by a different set of rules applied to magnifying treasury, future potential for inflation, so on and so forth. And so yeah, if there's a big sort of Delta.
then arbitrageurs are going to jump in and they're going to take another side of the bet. I think that that's absolutely true. We've seen it before. There's no reason we shouldn't see it again.
David Moghavem (22:56)
Yep. And I could see how you get a bridge loan that's three plus one plus one or four plus one instead you want to be responsible. So instead of the three year cap, you go five years and say, okay, I learned from my mistake. I'm going to cap it longer. And that rate cap probably costs pretty similar to what a buy down would be to be sub five and justify to do it. And you get a little bit more leverage. And so I do feel like this is a year where
If the Fed does cut enough, but Treasury still stay a little sticky due to some of the systemic issues of the country, you could see that trend. You could see people actually ⁓ kind of going back to to bridge. So we'll be very, very interesting to see in that regard. Yeah. Yeah. So, Zach, I want to shift a little bit. You you've worked on. ⁓
Zack Streit (23:42)
You could be right. It'll be interesting to watch.
Thank
David Moghavem (23:51)
a lot of deals, a lot of complex deals. You actually just closed a hundred seventy five million dollar construction and land recapitalization loan in Santa Maria, which for California, that's, you know, that's that's massive. ⁓ So a couple of things. One, I would love to hear a little bit about the deal itself. ⁓ This is obviously a huge milestone for you for priority capital. So I would love to hear a little bit about the deal itself, about
Zack Streit (24:04)
Thank you.
Yeah.
David Moghavem (24:20)
how this kind of feels for your company as well ⁓ as this milestone and go into some of that.
Zack Streit (24:28)
Yeah, well, I very much appreciate the question. And I would start by saying that I feel just very, very grateful that I even got to work on a deal of this size, let alone close it. ⁓ It's the second largest in my career. So I've closed a $400 million loan prior to this. But it is the largest since I started Priority Capital about 20 months ago. ⁓ And no question, I hope that it sends a message to the marketplace that
I have a long history of closing large transactions. I just closed another one and hopefully sponsors that are working on larger scale deals, which I really consider call it 50 to 200 million. Well, think of me, particularly one that have some hair, need some storytelling and really needs somebody to lean in. So that's, that's, my little commercial in terms of the deal itself.
Yes, it was a $175 million loan that I closed. It was an interesting one. It was for the first phase ⁓ of a master plan development. So the loan facilitated the vertical development of 300 units of ground up multi, which let's say is a medium hard thing to do.
What was very difficult was there was an additional 85 acres of entitled but vacant land that was part of the collateral. ⁓ For structural reasons in terms of how the equity was deployed, it was impossible to separate the two. So anyone that was going to make this loan needed to not just make the loan for the vertical multifamily, but also needed to recap the land. ⁓ The land was bought
peak of the market, so that made it hard to offset some of the value degradation. The sponsor very shrewdly ⁓ densified the master plan.
⁓ added another 500 units, so it's total of 1500 units, ⁓ and added some optionality where some of the ⁓ parcels that would have been billed to rent or multifamily got re-entitled for for sale, which I is a very smart move. And you're seeing this strategy across the industry broadly because for sale housing is held up despite higher rates better than, call it, for rent development housing.
So, all that, the financing mandate was, you know, go out, do this, raise money so we can build the first 300 units, our thesis, and recap the land. It took me probably a year to get this done. I remember CREFCE a year ago, we brought the sponsors out.
And we had 25 meetings with them. ⁓ tried to get the same table again this year. They wouldn't give them to me. They're like, hey, that's good karma. And it just shows you the power of in-person meetings and the power of perseverance. ⁓ We actually had this deal apt and we were close to closing it five months ago. And we had a big lender retrade, which resulted in us having to go out and find ⁓ a new, I should say, mezzanine lender. So there were actually two lenders on this deal. There was a senior consultant.
construction lender and there was a subordinate debt lender or a mezzanine lender. The first mezz lender that unfortunately we had to deal with retraded us. It was a major institution and unfortunately they claimed they didn't have the capital for it, which was crazy. And frankly, that happens, it's a precarious place to sit as a broker in a transaction, but the client was very loyal and kind of very understanding. And so we went back out and not two weeks.
After that retrade, I'm proud that I was able to procure another ⁓ sub debt offer with a lender that ultimately closed the deal. And it was actually for more proceeds than we had initially. Part of that is my hustle. Part of that is it was a lender that we met with back in January a year ago. At the time, we just, I guess, ⁓ didn't see the value in the same way that he did later. The market kind of thought.
And part of it is just luck, and it's better to be lucky than good. But that lender ultimately closed on the transaction in a relatively seamless fashion. And I'm excited the sponsors are now going to be able to get the thing built, prove their thesis.
And Santa Maria is a great market. It's almost like the Texas of California. It's had a ton of growth, unlike many other markets in California, which have been under pressure. But there's a real story, know, Vandenberg, SpaceX, and, you know, also the land or that area being kind of a bedroom community to Santa Barbara in a sort of feeder into the Central Coast swine country, which is, you know, becoming a bigger and bigger industry. So there's a lot to like about the transaction. It certainly had its
David Moghavem (29:06)
Right?
Zack Streit (29:28)
challenges, but I think that's an example of where somebody like me can be, I think, really effective in terms of just not giving up, remaining optimistic, leaning in and telling a story that ultimately resonated and now lets the project move from dirt into something else.
David Moghavem (29:50)
First of all, credit to you. mean, to be at it for over a year to get this through the finish line is in this choppy environment is truly a testament to your hard work and credit to you on that and big milestone. And I'm sure there's way more to come. One of the things that I, that you mentioned was, you know, it was a little bit of meeting and luck. And I feel like part of that luck you've really created yourself by
Zack Streit (29:51)
Thank you.
Amen.
David Moghavem (30:20)
going back to Crefsey and the 25 back-to-back meetings you have. And you were even telling me, hey, ⁓ between NMHC in a couple of weeks and Crefsey, I have another conference that I'm going to. And hey, before Crefsey, I was at another conference. you know, talk to the audience a little bit about why you hit every single conference there is to hit and why you do the 25 meetings a day. And what's the benefit of that? Because I really do feel like
end of the day, the luck is something that you've created for yourself. So talk a little bit about the audience on that power.
Zack Streit (30:56)
Thank you, no, I appreciate it and I agree with you. I'm a big believer that one creates his own luck. I think for me, ⁓ even though we're doing this digitally, I'm a big believer of the in-person, especially when you're a broker and you're doing, if I didn't have two young kids at home.
David Moghavem (31:15)
If you just stayed another day, we could have done this in person, but.
Zack Streit (31:21)
You know, there are seven in five and go to miss their dad and I wasn't already gone for like, you know, three days and two nights, but I will make it up to you. We will do it. Part two of this will be in person. You have my word. I'll figure out a way to do it. Maybe I'll take the whole family to Miami for a little vacation. As a broker, especially as a debt broker in a crowded market, you're selling trust.
David Moghavem (31:30)
Perfect.
Amen.
Sounds good to me.
Zack Streit (31:43)
you're selling trust that you're going to hustle more than the next guy, that you have a strong understanding of the capital markets, which is the debt capital markets, which is an ever changing landscape. And I think it's pretty hard to do that if the sponsors don't see you in person. ⁓ And so that's a real reason I try and remain as visible as I can. ⁓
and I go to all the conferences I can. ⁓ I'm not JLL, I'm not Newmark, I have no aspirations to be. I love the white glove boutique, intimate service that we provide our clients. I'm also aware that I don't have a many tens of millions of dollars marketing budget behind me. And so, you know, how do you offset that?
You sell yourself, get in front of people, you let them know that like you're meeting, you know, with the sponsors, with their competition, you're meeting with all the debt capital providers, you're meeting with all the equity capital providers.
because a big part of my business is making intros to sponsors, to equity providers to help them grow their business. ⁓ You know, and I won't lie and also say that the equity capital sees you hustling. Two things come from it. Number one, equity capital will make intros for you to sponsors. And some of my best clients have come through that because my gosh, if your money partner is telling you to use this debt broker, you're probably going to listen. ⁓
And number two, sponsors feel more comfortable coming to me where they have an equity capital provider pre-identified in their deal who knows me. And the only way of staying in front of those guys and meeting them is making sure that you're going to all the conferences. ⁓ can't, ⁓ I also work across geographies and across ⁓ product sectors. So I pretty much cover nationwide geographies except the Northeast, which I think is too over brokered.
Certainly very dangerous Colorado, Texas and West, but I'm refining an office bridge deal in Indianapolis We just launched a spec industrial deal and in all places Charlottesville kind of outside Richmond in Virginia and You can only get that business and that reached you know if you're kind of constantly out there and and constantly in front of people so
It's kind of where we began. It's a big part of creating your own luck, but it's also about visibility and selling trust and giving people an example of your hustle, the white glove service and the intimacy of it that you really care. There's, you know, part of being a boutique and you guys are pretty big, but you know this to some degree is there's nowhere to hide.
I had some name on the door to nobody else's name. ⁓ We don't have investment sales. So we aren't kind of handed deals. And you know, my name is on the packages, consult the deck guy. It's it's kind of very naked brokerage, priority capital is. But I like that. And that that motivation, that type of relationship that it conjures has really served to be well over the course of my career. It's a very entrepreneurial thing. And I'd say a lot of my sponsors, not all of them, a lot of them are either
entrepreneurs themselves or have a very strong entrepreneurial streak. It's generally those types of guys that want to work with me and vice versa. ⁓ I find them inspirational. Maybe they do me too now that I really have my own shop with my name on the door and nobody else. I have no outside debt, no outside investors. And so yeah, this is all part of creating your own luck, creating a structure that sort of aligns with entrepreneurial shops where they'll want to use you, where they know that I'm a killer for my clients.
that there is nowhere to hide, that there is no safety net, that I'm out here pushing the envelope as hard as I can ⁓ every single day.
David Moghavem (35:25)
Yeah, and you know, actually the first time I've heard that term naked brokerage and you said it when we met a few days ago and saying it now, I guess to wrap What does that term really mean to you? And in that context, what is some advice for people in your shoes looking to get into the brokerage and capital advisory side and call it, you know, naked brokerage?
Zack Streit (35:31)
Yeah
Sure, we may coin a term here. When I say naked brokerage, mean brokerage that ⁓ kind of doesn't have investment sales, isn't attached to a larger company, ⁓ and really sort of lives by the sword and dies by the sword. Now, don't get me wrong, if you're a broker at a bigger shop, there's a lot of pressure on you too. You only eat what you kill. I think for me also adding to it that I have my own platform. So, unlike most brokers, they cannot make money.
but I can lose money. I've got a team of five people and they ⁓ are compensated base and bonus, not commission based, they're execution only. They help me get big and hard deals done, small ones too. And I've got a monthly obligation and monthly liability every single month. So if I'm not closing, not only do I not make money, I lose money. So I think, you know, that's part of what I mean by that in terms of being naked and being aligned. You know, with that said, I've got some partnerships too.
⁓
I do a lot of agency work through Walker & Dunlop. I do some insurance company correspondent work through a company called Slatt. These are relationships born over years, ⁓ tend to work very, well. And so, ⁓ you know, I don't like have no mousetraps in the arsenal, but it's less than you would ⁓ at a larger shop. My advice to young people who are starting, ⁓ I think Broker generally is a wonderful place to start. You see...
the landscape of who's out there and what's out there. You see how deals are made, kind of, you know, how the sausage is made, ⁓ so to speak. And then you kind of have a unique purview where, you know, if you work as a debt broker,
You're primarily focused on debt, but you see how some equity deals get done. You see what the sponsors have to go through to raise that equity. You see how the sponsors are compensated. You see how the sponsors maybe entitle a project, execute a business plan. So gives you an amazing purview. You see almost all sides of the business here. So I encourage people to start. I wish I started here. I went to B-school and brokerage was a bit frowned on, and I bought into that for a while. And I often wonder if I didn't buy into that. And I had started here like,
where would things be? Not saying I'm unhappy.
Thankful for my background, I absolutely encourage people to start. Now, whether you want to start at a big shop or a small shop, really depends who you are and where you want to go. ⁓ I did five years at two large shops and I am forever thankful for that time. I learned from some very smart, very polished people. ⁓ And part of me misses that, but it isn't who I am. It's just not in my DNA to be in a big corporate environment. And I think this one suits me. And so a lot of it is about, you know, do you know yourself? And if you don't,
try a small shop, try a large shop. You have the advantage of trying things when you're young to figure out who you are and where you're going to fit in. So I absolutely endorse brokerage, I endorse big shops and small shops depending on who you are and what you want. Bigger shop you probably see larger deals out of the gate and you know, I don't know, maybe cleaner stuff. Smaller shop, you work on a lot of middle market and maybe smaller deals, they'll be less clean, they'll be more entrepreneurial. So it just depends, you know, what exposure you want.
There's no right or wrong way to do it. It really just depends what appeals to you. And remember, where you start is not necessarily where you finish. My first job was for a Fortune 100 insurance company. That's about as big as it gets. And here I am, a smaller six-person shop, but hey, we pumped out $600 million last year and $800 million in 20 months since inception. I'm really proud of that. So also trust your gut a little bit. It's OK to try.
David Moghavem (39:14)
Right.
Yeah, I actually to to carry out what you were saying, I actually started in capital advisory as an intern at George Smith Partners, probably while you were there, you know. So, yeah. So as you said, ⁓ it's it is a nice place to start. Get learn the lingo, so you will. ⁓ And and getting a good mentor. Shout out to Steve Stein, by the way. And. ⁓
Zack Streit (39:43)
Yeah, my own matter. Good stuff. Love it.
Yeah.
You okay? Yeah. Small world.
David Moghavem (40:02)
⁓ but you're right. It's a, it's a good way to get your feet wet. And I think end of the day, just keep on working hard and having the work ethic. You'll, you'll end up in a right place, big or small shop. So, and that's. Yeah.
Zack Streit (40:14)
That's all you can do. You
can't control the macro. You cannot control what deals close and what deals don't close. All you can control is how hard you're working, who you're reaching out to, ⁓ and if you're giving it your all. That's it.
David Moghavem (40:28)
Amen. Amen. Well, Zach, great having you on the pod again. Looking forward to linking up at one of these thousands of conferences. And ⁓ thanks again for hopping on.
Zack Streit (40:32)
Thanks, David.
Thank
Yeah, my pleasure. Thanks for having me.