Michael Hoffenberg, Founder & Managing Principal, Trevian Capital

0:00 Speaker 1 Good morning. This is Mike Stolen for the Stolar Real Estate Report on the Cat’s Roundtable. What’s an alternative lender? What’s a bridge lender? I’m not certain every people in my audience knows what that is. So I’ve broked to today an individual who I respect, I’ve known for probably the past twenty years, Mike Hoffenberg, who is the founder

0:18 and CEO of Trevion Capital. Thanks for being.

0:21 Speaker 2 Here, Michael, thank you for having me, and it’s great to see you as always.

0:24 Speaker 1 Thank you to be here. So tell me a little bit about what Travion Capital is and what an alternative lender is.

0:30 Speaker 2 Sure, so we really do two things. First, to our borrowers, we provide a certainty of execution, a transparent communication, and a flexible loan solution for them and a shorter duration loan, typically two to three years. And to our investors, we provide principal protection, a low volatile investment, and a current income solution by distributing on a monthly basis. And alternative lenders. Look,

0:51 we’re not a normal bank, We’re not regulated by the FDI. See we provide shorter term solutions to borrowers in need of capital. Predominantly in the middle market throughout the country.

1:01 Speaker 1 So who are your clients.

1:03 Speaker 2 We’ve lent to everyone from publicly traded routs, private equity funds, all the way down through local owners and operators, but typically it’s a local or regional owner and operator of predominantly multi family real estate throughout the country.

1:15 Speaker 1 Why did they come to you?

1:16 Speaker 2 Barers typically come to us for what I like to say are six reasons. The first being time sensitivity. We can close alone in thirty days or less, where conventional banks, especially today, are typically taken anywhere from sixty ninety to one hundred and twenty days. The second, is there some sort of transitional nature of the real estate? Your typical

1:34 buy it, fix it up, reposition it, cure deferred maintenance ad amenities, and then refinancers sell, so a transitional real estate. Third, is there some sort of transitional nature of the borrowing group or sponsorship. Maybe it’s a sponsorship buy out, there’s some sort of first time borring group. A guy wants to self manager, doesn’t have a track record, so sponsorship driven.

1:53 The fourth being some sort of a special situation.

1:56 Speaker 1 What is it a special situation?

1:58 Speaker 2 We get what I like to call nuanced deals every single day. I like to the li liken it too, the farmers commercial right. When you think about the farmer’s commercial, we are farmers right. All the weird scenarios that fall onto our desk, that fall outside of the conventional lending realm, they fall into our lap, and we’re able to really

2:13 lend against the value of the real estate first in the situation, second underwriting to a conventional likes of strategy. The fifth is construction completion. That’s an area of the market that’s really underserved from a capital perspective. Not many guys like to step into a project midstream fifty to ninety percent complete.

2:29 Speaker 1 Well, will you go into a project that has not started construction yet.

2:34 Speaker 2 We will do ground up construction as well, but the majority of what we do is construction completion. We help our borrowers get to a certificate of occupancy. Maybe they have a mature and construction loan, need to replenish reserves, and then we’ll allow them to stabilize the deal as well during the duration of our loan, which our loans

2:50 are typically anywhere from two to three years with options to extend. And then the sixth scenario as to why borrowers come to us, which is definitely prevalent in today’s financing markets, or senior stretch loans.

3:01 Speaker 1 So explain to me and my audience what a senior spreash loan is.

3:05 Speaker 2 Sure, a conventional bank is going to underwrite to in place cash flow today, right, and most banks maybe the properties in transition in the cash flow or the business plan hasn’t fully been executed. So we’ll lend off a future cash flow and the successful execution of that business plan.

3:20 And so we’re able to lend more dollars than a conventional bank will, and we’ll go a little bit higher or materially higher than a bank will go, and provide a one stop shop and a seamless execution versus getting say a senior loan and MES or senior plus pref We’ll stretch do the whole capital stack and provide a

3:35 seamless execution for a bar.

3:37 Speaker 1 So why don’t you tell me the structure of financial structure, of the rates and everything of doing a loan? Now? Okay, sure, I’m an owner. I own a property in New York City, perhaps not too much of your proper businesses over here, and I own a residential property. I need the value my building has gone down, my insurance premium has gone up,

3:58 my expenses have gone up. What can you do for me? My bank says, I need somebody else to be there.

4:03 Speaker 2 Sure, So one, we’re going to spend a ton of time up front underwriting your deal to make sure that we can execute once we sign up a term sheet. Right, We’re very transparent, very communicative on the way in, so that by the time we sign up a term sheet, due diligence should be a breeze and we can execute

4:18 and get to a closing table without any issues, typically within three to four weeks. So you’re coming to us for a certainty of execution balance sheet execution. So, if you own a residential building in Manhattan and you’re looking for a non conventional loan or a non bank lender to step in and provide you a capital solution and

4:34 a flexible solution, you can come to a lender like us. We’re a non bank lender that will provide you certainty of execution. We’re going to spend a ton of time up front underwriting the deal, being transparent, communicating with you so that by the time we sign up a term sheet and we go through due diligence. It should be

4:50 a breeze to close. We specifically have two products. One is a floating rate deal, which is anywhere from call it three hundred to six hundred over one point in either half a point two point over one month term sofur and we offer. We also offer a fixed rate product as well, which is called it two seventy five

5:06 to four and a half over. We have both a discretionary fund and a separate account with an insurance company. What you’re going to get from us is structure light, very communicative, ease of use, certainty of execution, non bank type of process.

5:23 Speaker 1 Now, who’s in the discretionary fund? Who are the investors? You? And who else?

5:28 Speaker 2 Yes, so we have some institutional investors, We have insurance companies, We have foundations. We have a number of multi family offices rias wealth managers, high net worth individuals, some and some friends and family you know obviously, yes, as general partners.

5:41 Speaker 1 So I read a press release with this Happiness. Who are they and what do they do with you? They funded nineteen loans, I think it’s said in.

5:50 Speaker 2 Yeah, so Happiness is just an LP in our fund, you know, came in through one of the principles in the firm. Charlie’s Abrisky close friend to Charlie’s and you know supported us in the fund and you know, gave us discretion over their capital and we continue to perform for them. You know, we’re delivering eleven to thirteen percent

6:09 net returns on an annualized basis with an average loan to value across our discretionary fund of fifty five percent, with ninety percent secured by multifamily. So today Trevin as a platform, we’re currently in eighteen states, really focused in the middle market sub thirty million dollars with an average loan size of fifteen million dollars across the platform. Of

6:27 course we can go larger one hundred million plus, but borrows really come to us in that middle market, which is very underservable from a capital perspective as well as geographically.

6:35 Speaker 1 So what loans, typical loans that are you doing today?

6:38 Speaker 2 Yeah, So we just closed the deal on five forty gram in Brooklyn. It was a senior stretch scenario. It was an existing brand new Class A construction twenty five units in the Williamsburg neighborhood of Brooklyn. They had a mature and construction loan, the conventional bank couldn’t get their own proceeds. There was also some nuance surrounding some subcontractor

6:57 leans and some disputes with the general contractor. So we provided them a little bit higher proceeds today based on the future cash flow going forward. They’re currently in leased up. They were offering concessions. We’re allowing them to burn those off razornts to market and we’re seasoning the property from anywhere from twelve to twenty four months, and they’re going

7:15 to look to either sell or refinance us out with a long term solution there.

7:19 Speaker 1 What about a land loan? Will you do a landland?

7:21 Speaker 2 You know? I found that land’s the most volatile asset class when it comes to commercial real estate. So the majority what we lend on is multifamily class A down through workforce housing. We also like industrial student housing, some medical office, self storage, and some strategic retail. I like to say, grab a beer, get your nails done, go

7:36 drop off your dry cleaning. What about hospitality, It’s an not bringing business house in real estate, so that’s not really for us. Again, ninety percent of what we lend on is in the multi family space.

7:46 Speaker 1 So how do people find an alternative lending like you?

7:48 Speaker 2 You know what’s interesting. I think our value differentiator right now is our access to deal flow. We’re seeing one hundred and fifty inbound deals that we see on every single week, so it’s a lot of frogs that we got a kiss to get to our princess. But look, being in the business for over twenty years, we’ve built

8:02 up a database and relationships of about thirty five thousand real estate professionals across the country. We come to Stoller talk shows and TV shows from time to time to get our name out there and make sure everyone knows what the brand recognition is. And we also speak on panels.

8:16 We’re doing LinkedIn social media. We’re constantly talking to folks, but you cannot replace in person relationships, which were a big believer of.

8:23 Speaker 1 So knowing you over the close twenty years, I’m very happy that you’re doing well. I’d like to thank Mike Hofmand for being here today. See you next week, Michael, always a pleasure. Thank you,