Kirkland Capital Group and Concreit Fireside Chat

Navigating today’s market can seem daunting to many investors. The rising interest rates, inflation, and general uncertainty of what will happen in the coming months or years have created doubt and fear among investors.

Chris Carsley, our Chief Investment Officer, and I joined Concreit for a fireside chat to discuss what’s happening in today’s market and, among other things, what can investors do to safeguard their portfolios.

Video Highlights

• Challenges investing in the public market.

• Big winners and losers in today's market.

• What can investors do to safeguard their portfolios?

• Non-negotiables when investing in a fund.

• History of Concreit and their experience building the company during the pandemic.

• Benefits of being in Real Estate Debt and Equity.

• What are the real estate deals that are worth looking at?

• Why investors are looking for capital preservation in today's market.

“REITs are technically alternative investments but you’re really taking a market-level risk with it. If you went out and bought a REIT that’s publicly traded in the last year, you’ve probably had a pretty bad year because you became an ATM where people were just pulling money out.”

— Chris Carsley

“I think about the early days before I was involved in Alternative investments and I just simply threw my money in the stock market because I thought things were sort of just going up, up, up. I never really thought about even doing due diligence on whether an ETF really works. Or is the stock that I’m buying something that I really want to buy? It’s because it has become so easy. I just need to click twice to buy a hundred shares of X, Y, Z that I thought I don’t need to do my due diligence.”

— Brock Freeman

Watch the full video below.

Transcript

Gretchen Lirio: Welcome to our round table where we'll be discussing Alternative Investments. I'm Gretchen Lirio, and joining me today is Chris Carsley from Kirkland Capital, Brock Freeman from Kirkland Capital, and Sean Hsieh from Concreit for starters. Chris, could you start off by telling us a little bit about yourself?

Chris Carsley: Sure. Uh, worked most of my career in, uh, investment management covering traditional investments and probably for the last 20 or so years in the Alternative space, covering hedge funds, venture, and obviously most recently real estate.

Gretchen Lirio: Sean.

Sean Hsieh: Cool. I'll go next. I'm Sean Shay, CEO and founder of Concreit. Um, we are a fractional real estate investment platform.

We're also registered as an investment advisor with the SEC. Uh, we're one of the first robo-advisors focused on private equity, real estate investing. Uh, I'd call myself, uh, serial entrepreneur. I think a lot of people use that term, but I think, uh, more specifically, I'm a technologist, so I love diving into different industries.

Uh, my prior company was called Flow Route, we were in telecommunications, uh, hyper-regulated space. Um, and I, uh, after exiting I wanted to be able to offer, uh, new ways to build wealth, um, to my friends and family. And so that got me really interested in real estate investing. And, uh, now we're here.

Brock Freeman: My name is Brock and my background is in real estate finance, although I've done a few things outside of that, but mostly it's between the intersection of real estate, finance or finance and technology.

So I think similar to you, I have this love of technology, not really for technology's sake, but how can we use it to make markets or things more, uh, efficient? So that's really what we've done at Kirkland Capital, is go into a niche where previously it wasn't really profitable to be in, but because of technology, some other things that Chris and I have done, it's been fun to see that become very profitable, both for ourselves and for our investors for sure.

Gretchen Lirio: Awesome, and I'd love to dig into that a little bit more later. Um, so for starters, um, we're gonna be talking about some of the challenges investing in the public markets. Um, I wanna talk about some of the benefits of Alternative investments, um, and some of the options available to investors who are looking to diversify today.

So my first question to you, Sean, the real estate market is always changing and it can be difficult to keep up with the latest trends and developments. So what's happening in real estate today and can you give us a snapshot on the current state of the real estate markets?

Sean Hsieh: Yeah, so, uh, for those of you that are watching, uh, this video, we are now in the beginning of 2023.

Uh, I think we just came off a period of, uh, rapid inflation. Um, our interest rates are at the highest point it's been in decades. Um, and that's really kind of frozen up a lot of transactions that we're seeing in the real estate space. So you can think about that in terms of single family homes all the way to affecting multi-family transactions.

Uh, office has its own dynamics, and we might touch on that a little bit later too, but there's always like different sub-asset classes. But at the end of the day, if you think about it from a macro standpoint, if your cost of capital is high, your buying power is low. So it makes it really tough for new buyers to come in and effectively pencil out deals.

Um, and so we're just seeing that impact on a lot of different segments of the market. It hits it very differently on, on, on a lot of different aspects in terms of how deals are constructed. Um, but at the end of the day, it's like if your money's expensive, then it's gonna make it tough.

Chris Carsley: Yeah, I mean that's, that's the real key to almost any, um, investments, whether you're talking about real estate or private equity or, you know, in venture space, it comes down to the dynamics of funding cost.

You know, where are you getting your money from? I mean, I think a lot of people, especially in real estate, a lot of people I know are very focused on the equity side of it, and they forget that anywhere from 60 to some people as high as 80% it, it, it's, it's debt. They forget about that aspect of how important that is to, what is the cost of that debt and how it affects the broad swath of, uh, available investments.

Right now,

Brock Freeman: I've been involved with quite a few transactions in the last two to three months, particularly where we've had to either deny or severely dial back the loan to value that somebody wanted simply because, well, maybe we were a little bit more flexible on what that DSCR, the debt, you know, to, to income rate is.

However, when we look at, well, how, how are you gonna get out of our loan because we just do a short-term loan? Well, they couldn't, they couldn't meet those DSCR requirements that a long-term lender's gonna have. Well, that means they gotta cut. Come in with a lot more equity money. So that does make a difference.

That may kill the deal for somebody. Um, on the other hand, you know, if they want it and there's enough meat on the bone, we are seeing people pony up that extra money to put down because they know they got a good deal in hand, even if they can't get that leverage that they thought they were gonna be able to get.

Chris Carsley: Some of the, uh, larger platforms that are out there, you know, working with syndicators, it was really funny. I was reading through what they are looking for in the market now, and one of the items was they're looking for deals that have, you know, leverage under control, whatever that means, which basically means that phrase now, yeah, it's under control, which is super undefined.

But what they're really saying is, we're gonna be a much larger percentage of equity and we're looking for the deals that can facilitate and raise that equity for that deal, knowing that that deal's not gonna work at a higher cost of capital on a larger leverage ratio.

Gretchen Lirio: So who were the big winners and losers in today's market?

Chris Carsley: Well, I'll be biased and tell you the debt guys. Um, I was on a panel unfortunately with a bunch of equity guys once and, and they were very solemn. But the bank idea is winning the people who have the money and are lending it out there. As interest rates have risen, you've been able to capture and pass those increases and rates onto investors, uh, on the debt side, it's been incredibly dynamic, um, to see how quickly you've been able to adjust. Um, yeah, there's maybe less players. Uh, we're not really seeing that in, you know, our particular in lending space, but debt has definitely been a winner. It has been where you can capture a greater return and you're not necessarily taking any more risk in the effort that you're doing.

Um, if you structure it correctly.

Sean Hsieh: Yeah. I was just gonna add to like, um, just to kind of break this part a little bit more, like in private credit in particular, I think that's where you're seeing a lot of, uh, additional yield being generated just cuz it rides with the interest rates. Um, We are seeing these larger banks, though struggling with mortgage origination.

Mm-hmm. So if you're looking at sort of the macro, what's happening in the US you're just seeing originations drop, I mean, it makes sense, right? Transaction volumes drop, originations drop. So I would say the stress is being felt by lenders that need to do volume at more qualifying type mortgages, where they're more for what you, we'd consider to be the residential space.

But then you have these companies like what Kirkland Capital is doing, what we do at Concrete, and you're just, you're getting the alpha, you're gaining the edge on the market right now. So I think it really depends on where you look. It's not like there's a clear winner or loser. At the end of the day, we all play in the same real estate market.

Are we generating a little bit more yield right now? Yeah, we are. But is that gonna continue? It's like, well it really depends on, on how the market, you know, moves into the next phase of its cycle.

Brock Freeman: I don't think if you actually look at what the cost of capital is versus what inflation is right now, actually putting debt, even if you're paying a much higher rate, On a well, well thought out, well underwritten equity play, your cost of the debt sometimes can be actually less expensive right now compared to inflation at differential.

And so I think that's why we're continuing to see at least at Kirkland Capital, a plethora of deals coming our way on, especially secondary and tertiary markets where you didn't see those wild swings. And there's still a lot of meat on the bone on a lot of these deals to be had. They're not scared of paying the higher rates because at the end of the day they're penciling out that I'm still gonna make so much money by turning this asset around that I'm willing to pay these higher rates.

Particularly when you calculate the inflationary pressures on the, on the value of some other things that are happening there.

Sean Hsieh: I agree with you. I think it's just forcing people to get really creative today. Yep. If you can get creative and you have an edge and you have something in your back pocket that maybe you just do exceptionally well at maybe a lower cost of capital than everyone else, like you can still probably figure out the margin of the spread for your investment.

Um, it's, it's just tough. It's just forcing, I would say, you know, you can't just go, okay, lemme just go buy something today. Yeah. Generally in a market, Take advantage of what feels like free debt, um, or free, free money and then, and then just make money on that like that. I think that has completely changed today.

I don't know if we're gonna see that come back in 2023, but I do think everyone that's still around, that's still hanging out, that's still doing deals, they've figured out something very creative where, where they can actually still make money. Um, I also think, you know, to, to what you were saying earlier, Brock, you were talking about like, okay, the spread against inflation and the interest rate like that is, uh, I think in certain markets still very applicable.

And I so like what, what, um, Chris was saying was like, you still have to really look and figure out if, if the economic data can support that. Yeah. Um, because you could also make a bad bet if you're just kind of assuming like, hey, the, you know, the inflation rate, let's just say it was like tracking at seven, my, my, my mortgages or my debt set like a six something.

Like maybe I got a decent deal. It's like that. You know, there's still some risk there Yeah. In terms of whether or not you can actually hit those numbers. So I think that's where, uh, it is super important that we're, we're constantly looking at like how the deal is being put together, whether or not the execution actually hit, does the market actually support the thesis?

Um, and it's a tough, tough time right now to even go, like, does it all make sense? Right. Like, I think we're, we're just seeing those dynamics.

Brock Freeman: If I can equate it to something that perhaps more people might be familiar with. If I go to like the public stock markets that look in the last 10, 12 years, you could pretty much just buy the market.

I mean, you just buy the S&P or whatever and you would win. Right. And I think to some degree real estate has been that as well. It really didn't matter what you bought. I can just throw money at something and I'm gonna win. Those days are over. That doesn't mean though, that there's not a lot of profit to be made in the niches. Yeah.

Gretchen Lirio: So what do you mean by that?

Brock Freeman: I'm sorry.

Gretchen Lirio: What do you mean by that?

Brock Freeman: Well, I was gonna say previously you saw all these raw, raw headlines about real estate investment or stock market. Nowadays, you know, one day you're gonna see two separate headlines in the same hour that the sky is falling on commercial real estate or the housing market.

And then another saying, no, no, no, things are great. Things are okay here or there, or whatever. So what do you believe? I mean, it's so easy, I think particularly as someone who's not really deeply involved in the market, or as a passive investor, what do I believe? Is the sky really falling or are we gonna be okay?

Gretchen Lirio: Mm-hmm.

Brock Freeman: And I think that really depends on geography, which is always important, right, for real estate. Real estate, yep. And asset class. So we could dive into those and talk about those. Cuz I think they really do matter a lot here when we're talking about you as a passive investor, thinking about, well, where do I put my, where do I put my place, my next bet on the market.

Gretchen Lirio: Mm-hmm.

Okay. So I kind of wanna dig into that and you know, many investors have experienced unpredictable returns these days and it's just extremely volatile for those who want to get into alternatives. Um, what can we do to kind of safeguard our portfolios?

Chris Carsley: Question is, what can you do?

Sort of got a three part that I've sort of believed in is one, anything new you should educate. Approach it very slowly, learn and then try to, you know, accelerate your entry once you feel a level of comfort. The next one, after you feel like you've educated or found enough resources and network to be comfortable with whatever

alternative investment. And let's back up a little bit. Alternative investments is a super complex term cuz you're dealing with a plethora of potential investments. It's, I mean, we're talking about real estate here, but alternatives cover, you know, 30, 40 other different types in hedge funds.

Brock Freeman: Maybe it's easier, Chris, sometimes do you define what alternatives are not?

Chris Carsley: Yeah, it's not, yeah. Basically. Yeah. That's the, what I use in a lot of my sayings is where, let me tell you what it's not. It's not traditional, you know, long positions in your stocks and your bonds, I mean, and everything else falls into an Alternative. And there's some, there's some middle grounds where people have created, uh, some people are like, oh, you can access alts through ETFs.

Um, and I'll just make a small comment on that. Uh, Technically, yes, but you're really taking a market level risk also. So if you went out and bought a REIT that's a publicly traded stock, you'd probably had a pretty bad year last year because you were just another source of an ATM where people were just pulling money out.

Yeah. Um, and so, you know, you're gonna suffer what they call beta, that market volatility of when the whims and the emotional decisions of the broad market are moving, you'll move in that direction regardless of some of the underlying assets that you might have in that public instrument. So be careful when someone says you can access alts through public instruments.

You will have a very different investment profile. Yeah. That's not gonna look the same, um, and so, you know, as an investor. But back to the point of where, how do we access this after we've educated ourselves? Now you need to understand how am I gonna do due diligence? This, these, these are complicated. You've got two components where it's like you can't just understand what the investment is.

You gotta understand the management team. And who's running this shop that you're about to deploy money to? So that's actually one of the key aspects, and it's part of due diligence that most people overlook. They really focus on the investment side and then that's the end of their due diligence.

Mm-hmm. They stop and they forget. And I, I, I guarantee you a lot of people out there right now are really wishing they spend a little bit more time on the manager, uh, especially in real estate cuz it has been super easy. You could buy anything as you guys were saying and you didn't have the right operator.

Um, you know, a lot of people are kind of concerned nowadays, like, someone comes into the floor and says, I've been doing this for 10 years. Well, you need to realize as an investor you're probably talking to someone who hasn't ever seen a down market. Um, so yeah, you got a decade of experience of doing whatever it is you're doing, but you've actually, as I always say, you haven't been hit in the face yet.

So you're actually not really sure how that's gonna play out. And so now you have a lot of operators that are on their heels trying to figure out. Wow, how am I gonna fix this problem? And they may have more than one problem. So that's actually going live right now. And I'm sure a lot of people listening to this may be experiencing some of that.

Um, but once you, that's part of your new due diligence. And then lastly for these investors, and Alts is great. Now, I'm educated, I understand what I'm looking at. Where do I find them? Cause I'm not gonna lie to you. There are thousands of opportunities for you to get into Alts. And that is where there's a lot of people working to solve this problem.

It's obviously something that I know Concreit is trying to aggregate and be a platform that's building trust and supplying that education and information. And, you know, that's one of the reasons why, you know, KCG is, you know, working with Concreit. But there are many people trying to do that. Build that network, find those people doing that, engage with them and see if they've got an investment platform that fits what you need.

I mean, and that's, I mean, that's really how people need to start thinking about going into Alts cuz it's pretty new to a large number of people. I mean, um, the institutions have been doing it for a while, you know, the big institutional investors, pensions, endowments. But for some of your small family offices and especially your individual investors, this is new territory.

So be careful.

Brock Freeman: Let me touch on that because I think it sounds scary when Chris says, oh, you better go do your due diligence. But I, I think, I think about early days before I was involved in Alternative investments and I just simply threw my money in the stock market as I thought about, well, because things were sort of just going up, up, up.

I never really thought about even doing due diligence on, well, does this ETF really work? Or is this stock that I'm buying, is that really what I want? It's because it's become so easy, so transactionally, easy to go, boom, boom. I just clicked twice and I bought, you know, a hundred shares of X, Y, Z that I don't need to do my due diligence.

But now everybody's suffering because of that and seeing huge losses on the stock market.

Chris Carsley: Super easy is the crypto, crypto was so easy.

Brock Freeman: Yes, yes.

Chris Carsley: And well, a lot of people figured out, oops, I didn't think, I don't think I knew what I was actually buying. Or did I understand the operational structure underneath it?

And that's caught a lot of people off guard, so. Yeah.

Brock Freeman: That's right. That's right.

Sean Hsieh: Yeah. I just want to add to the whole accessing Alts thing. Like, I think for, so at Concreit we, we support not just accredited investors, we support non-accredited investors as well. And uh, you know, this wasn't until the Jobs Act, um, you know, was, was introduced where non-accredited investors could actually participate in, in more like pre IPO companies, which then we sort of extended into Alternative investments.

Um, but I think there's a whole new generation of fractional alts that are, um, starting to come out in the market today. Platforms that are, uh, bringing it so that it's accessible through a web app or through a mobile application. And trying to bring it to that same level of transaction, uh, like transaction efficiency or, you know, speed to get into the investment.

Um, I think there's a lot of work still to do in this, this whole market. Um, you know, it's, it's treated as if it's, uh, still coming from a very traditional private placement market as it's making a transition, leveraging technology to become more efficient. Um, but you know, at the end of the day they're still alts at the end of the day.

So you, you do need to think about this, not in, in, in terms of it being the same as a publicly traded stock because you have liquidity, publicly traded stocks, the markets are generally open, now there's volatility, but on the alt side, look at the investment you're getting into, understand the dynamics you're getting into, right?

Yeah. Because now you're looking at potential illiquidity, um, risk, or maybe you're taking a look at, like, you're talking about management risk. That's a super important one too. Um, I think a lot of, uh, retail investors, when I, you know, we, we have the conversation with customers all the time and the amount of due diligence is, is insane.

And you take a look at the range of, of, of how much someone might put in versus how little someone might put in Yep. Uh, before making, but they, at the end of the day, they make the same decision. Right. So, um, I, I do think it's important that if you are gonna dive into Alts transparency, being able to access data, being able to like, understand what the heck is happening inside of that investment is really important.

Like the, the, the engagement with the manager really requires repetition, trust, building and everything. Otherwise, like you, you are flying blind in.

Chris Carsley: Yeah. If you can't get your, uh, information and there's no transparency and whatever you need transparency in as an investor. Because it may be different, but if you can't get that, there's a lot of investment opportunities out there. And when I, when I walk through people and say to people about due diligence, really all you're trying to do is get to your "No", as fast as possible. Mm-hmm. And you gotta identify what's your non-negotiables. Mm-hmm. Um, and I've got a webinar coming up for a series of family offices and they asked specifically, can you bring a whole list of like non-negotiables across a lot of different, you know, Alternative investments.

And so I pulled a bunch of people who do it professionally and plus my own non-negotiables. But that's really what you're trying to do as an investor in your due diligence process is like, Hey, if I can't, if transparency's my thing and I ask for something, um, you know, and they don't give it to me, walk.

Gretchen Lirio: What are your non-negotiables?

Chris Carsley: Uh, one of 'em is transparency. Two, um, I think a big one that I mentioned earlier is experience. Um, even if a manager hasn't seen like this particular fund, because a lot of people have started funds, including us, have started funds, you know, and we didn't go through, uh, you know, an '08.

But that manager has been through those cycles before. If they haven't seen a real battlefield of where things were going really bad, really fast, and they were outta your control, um, it doesn't mean they're not a good fund. It's just something I, I think you should be, you know, cautious about as you, as you're approaching is like those people, you know, they're gonna be looking at, as we've stated here, a different dynamic, um, that it, it's gonna move quickly and you might have what they call gap events where things move within like a day.

And it's, and you know, usually those gap events are in public markets, but there is always some level of impact or broad economic impacts on a global macro basis that will hurt some alts. And you know, it gets fairly complicated, but you need to, you know, have that transparency. Have a manager or someone at the helm that has been through tougher times and one of the biggest ones is they just don't freeze up.

Mm-hmm. They're like, okay, we can, we can live through this. Mm-hmm. I mean, for Brock and I, I'll never forget, I mean our, our opening, we launched our fund in January of 2020 and we had investors left and right coming to us going, well I'm not gonna write you a check. This was in March. Well, we all know what happened.

It was, you know, COVID came out and people were not sure, you know, or we're all gonna be wiped off the face of the planet, what's gonna happen? Cuz no one really knew, um, especially here in this state. It was all of a sudden it hit Kirkland and people were like literally leaving the city cuz they're like, I'm not really sure what's happening in Kirkland.

Um, but Brock, you know, Brock gave me a call and he was like, what do we do? And I'm like, we have what people want. We're doing a decent product. We're just gonna have to, you know, kind of do startup mode. We're gonna write our own checks and just start. You know, bootstrap it and go, yeah. And it turned out to be the right decision, um, because it's gone very well.

But you just, you have to have that mentality of realizing I can get knocked to one knee and get back up. We're gonna survive and we gotta find a way to survive this.

Gretchen Lirio: So at what point did um, people feel comfortable enough to say, all right, fund manager, here's my money, invest it for me.

Chris Carsley: You, you'd be surprised today's world, it's a little unnerving,

Gretchen Lirio: in 2020.

Chris Carsley: Well, no, I'm just saying it's a little unnerving. Like if you go back in time, you had these big events and it took a while to get out of it. Um, to give an idea of most people, it took almost an entire year for people to just get even from '08. And that's if you were running a good portfolio, uh, in the alt space.

Um, and it's happening faster and faster. There's so many people that have so much money and they want to get in, and it's just crazy how fast it turns. So the answer to your question is, Yeah, we ran it in March. We ran it in April by May we had outside investors coming in. I mean, it was really quick. I was like, wow.

I mean mm-hmm. And these are people I'd never met, like, you know, of course you're not meeting them physically. It was covid. So I'm having, you know, this is before the boom of like Teams and Zoom. I'm having phone calls with these people and it was, I was very, very shocked how fast people were ready once they realized we're not all gonna be wiped off the face of the planet to become zombies or whatever people were talking about. It was like, okay, I'm ready to invest now. Yeah. And it's months now instead of years.

Sean Hsieh: We all became Zoomies though.

Chris Carsley: Yeah. We all became Zoomies. Yeah.

Gretchen Lirio: So Sean, you started and built Concreit in the middle of the pandemic as well.

Yeah. So what was,

Sean Hsieh: It's so crazy and we just love doing things that are crazy.

Gretchen Lirio: Why not make things harder? Okay. So what was that experience like for you? Uh, building a platform, um, and growing a fund at the same time?

Sean Hsieh: I'll just start off by fully admitting. I think it was an insanely scary time for us because one, you're a super early startup.

You have not just, uh, everything you need to figure out in terms of constructing a fund. You also have the tech you need to build, you have all the things you need to figure out. And we also were qualified by the SEC. So there's a whole dynamic of actually talking and working through the stuff with the SEC.

So, um, the team was really small. Uh, we had, uh, pretty much only four people. So if you think about it, it was just like a really good time for us where, um, I, I still remember the summer in which we launched was roughly the same time. Yeah. Um, I, I, I just didn't know if we were actually gonna convert any of the members that were on the waitlist.

Um, but sure enough, surely, but slowly, like, like you people started adding on, um, we made a decision early on too, like, we need to do something to actually make the feeling of an Alternative Investment feel. Um, maybe like it's, it's working a little bit faster than traditional investment. So yeah, our, our whole thing at that time, like we were God, summer of Covid, we're like, what do we do to actually win, to differentiate this market, to actually make it feel like people can access an Alternative and they're getting different experience.

And so we actually introduce weekly dividends. At that point we had a pretty generous liquidity program already. Um, learning to sort of work and manage that and operate a fund while you have, uh, what was really weekly liquidity is also very challenging. It kind of threw like a huge operational, um, burden on us.

But luckily, you know, me and Jordan, we've, uh, We like tech, we code. So we, we, you know, we, we were able to automate a good chunk of it. Is it perfect? No, there's still a lot of like, growing pains with, with building company, but I would say that it was one of those experiences where if we didn't have covid too, I don't think we would've really put that sort of fire underneath our butts to really figure out all this stuff.

I think in a lot of ways, um, building a company during that period of time, if you made it out of that, it really felt like you were sort of building what you like to call a tank. Yep. You know, sort of like, you gotta build your war tank, you're going out to war. Um, so really interesting experience. Uh, I, I would say the markets being frothy, uh, in 2020.

I think we all remember what that felt like. Where it was just like, okay, PPP, and you know, everyone's just like, oh, shoot, like run the printers on, on, on like overdrive. Um, that was a really interesting experience for us. Cause at first I remember going, I don't think we're gonna get investors on our platform.

Then a few months later I was just like, Whoa. Everyone's just throwing in whatever they have. And I'm like, I did not anticipate, you know, people throwing in this type of money into our platform this early on. So, um, it was a very interesting dynamic. I think one that I will never forget. I think all of us will probably never forget the pandemic, what happened with our monetary policy, how it impacted investments and you know, here we are now in 2023, like recipients of that whole experience.

Brock Freeman: Actually, Sean, I've got a question for you because I know we talked and I remember around that time I met you because you came as a serial entrepreneur, you came from tech. A little bit different than Chris and I, but you know, usually people in tech don't pick real estate to go invest in, so mm-hmm.

What was it about real estate? Why would you wanna build tech on top of real estate? I mean real estate tends to be this old, stodgy industry that things move so slow and it's such a laggard now be careful.

Chris Carsley: You talk to a guy who's tech.

Uh, God.

Brock Freeman: So it's, it's not a gotcha question. I think that the story here about you could have picked a lot of different alternatives to build this platform on, yet you picked real estate.

Gretchen Lirio: Yeah, great question.

Sean Hsieh: Yeah, so I would say it, it really touches back to my childhood a little bit.

Um, I grew up in an immigrant family that really didn't understand a lot of other things like capital markets or anything like that when they came to America. And I think for them, uh, they understood real estate. And so there was always the dream, the American dream, which is to have some level of financial freedom.

And, and, and for them, that conversation was pretty consistent in my home around let's get a, you know, let's actually build rentals and let's generate income. And like they understood, my parents really understood that. Um, you know, fast forward I went to college, didn't really follow a lot of stuff that they asked me to do.

I didn't really care about it. But, you know, you get older and then you actually. You know, get to a point where you have money, you need to care about it, and you're like, oh, crap, what do I do? So I personally started getting excited about real estate investing as a portion of my portfolio. I didn't go, lemme just put it all into the public markets.

You know, I was thinking about how do I generate enough cash flow for myself to be able to go out and still do what I want to do and be an entrepreneur. Um, and so real estate was really kinda the answer for me. Uh, and it was actually through that journey that I realized, um, that there were a lot of things holding back, even the 20 year old version of myself from being able to invest in real estate.

There's a reason why I never heard of these opportunities. And when I say these opportunities, I'm not talking about buying a home. I'm not talking about buying another home to then rent it out to people. I'm talking about being able to access private equity strategies that are being managed by a group that's gone through a number of different downturns where it's, you know, it's generating enough income for you.

Uh, you know, there's an accredited investor definition that the SEC holds tight and near and dear to the hearts right now. And they say that it's, it's a, it's a way to protect, but at the same time, protecting also means you're holding people back from being able to access it. So, um, we got excited about exploring the idea.

Uh, we dug in deep and, you know, we, we started kind of chipping away the problem to, to land on where we're currently at today.

Brock Freeman: Yeah, I love that about one of the earlier conversations we had about really, we used the word democratizing. I don't know if that's really applicable here, but, you know, one of the challenges when Chris and I started this fund was, well, in order to make it so that we don't need accredited investors, that puts so many limitations around what we do.

And that just didn't work for us. So that is one thing that makes me happy when I do talk to, sometimes when we get an investor who's not accredited, say, Hey, look, there are alternatives out there. Go check out Concreit that you don't have to be accredited. You can start out low, uh, in fact, going back to the due diligence that, you know when you're starting out, it is a little bit scary when you're outside of what you're normally used to, what you see in the media all the time about stock markets. It's like this whole almost secret thing around alternatives out there. Yet it's the thing that makes a lot of rich people really rich or at least preserves their wealth.

And now you can start out, I think, a lot easier with something that, like you've built where you're doing the due diligence behind the scenes on things as well. So I love that about what you guys have built.

Sean Hsieh: Yeah. Thanks. And it's, it's, it's actually been pretty awesome working with you guys too. Um, for, for those of, uh, listeners that don't really know, uhm, Chris Carsley, you know, he helped us out in the early days and so did Brock, in terms of coming up with a lot of these ideas. I think a lot of us have just been really fascinated with the concept of being able to bring this out and, and get people, like a broader group of people mm-hmm. To be able to invest. Um, I think we all feel like there's a lot of innovation that needs to still occur inside of this market.

I think there's just still a lot of people that don't have the ability to tap into alternatives that may not even know what they are, um, where it might actually be beneficial to actually just add some allocation into their portfolios. I mean, I, I think I'll speak personally, I think for me, I'm probably like a third in, in Alts at this point in terms of, you know, my, my money.

Um, at least, I mean, I'm just thinking about my private assets.

Brock Freeman: Only a third?

Sean Hsieh: Yeah, I think real estate people are really like 110%, right? Like, uh,

Gretchen Lirio: We're a little biased.

Sean Hsieh: Uh, or I should say, you know, probably what, a hundred?

Brock Freeman: Oh, I'll just, I'm, I'm a lot biased.

Sean Hsieh: It's like fully leveraged up.

Chris Carsley: I probably need some more public exposure.

Sean Hsieh: But, you know, it's, it's, it's like one of those things where once you start investing into it, you start going, there are actual merits. There's a different way to look at this. It actually does help. This is how I think about it now. And I go, this makes a lot of sense. I mean, I recently got my mom to invest.

Obviously she's investing because it's her son's company. But, um, still, I think for her it was like, she was like, wait, I'm doing what I'm getting what, you know, a lot of it was like new to her and I was just thinking, wow, this is really interesting too. Like, you know, it's like, People just have generally not been exposed to this.

Mm-hmm.

Chris Carsley: Selling to strangers is actually easier than selling your family a lot of times. Yeah.

Brock Freeman: Yeah. I mean, that was an early joke that Chris and I made. Well, not really a joke, but something we actually put on the website is like, look, we, we, we sleep at night well, with our family's money in there. Uh, you know, I mean, the funny thing is, people who never run a fund have this idea like, well, you got all the other people's money.

This should be easy. Like, no. I mean, it's something I think about every single day, every decision we make around a loan, I think about my own money, my family's money, and all of our investor money that I have, uh, you know, I have a responsibility there. And it actually grows as, as our AUM grows that responsibility and that feeling grows.

Chris Carsley: Yeah, it is a weight. Um, you know, sometimes, you know, being a professional money manager, a joke amongst money managers is you always take care of other people's money better than your own usually. Um, and the old adage is, um, if you're investing your own money, just do what you did for your clients, you'll be better off. Don't think you're smarter than what you did for them. Um, cuz you're probably gonna lose money. Um, which I have done that a few times. You're like, man, I, why don't I just do this guy beat my own, my own client, beat my, my returns. So, um, yeah, I mean it's true. It's, it's, it is a weight, but it's something that once you build that process and procedure and that mindset and you, you know, as investors, you find those people that are really putting you first.

It's, it's, you know, even if you don't get that, you know, hockey stick, giant return, you know that you've got somebody who's, you know, up thinking about you.

Gretchen Lirio: So you guys are all in the business of lending. So talk to me about debt. Talk to me about equity, um, and what are the benefits of that?

Brock Freeman: I think there's benefits on both sides for sure. I'm in both. Yeah. We love both. I love both. I just happened to come from a debt background, so that's why I started Kirkland Capital. Although we've had, uh, offerings on the equity side, a lot of that though is going to be dependent on both the timing of the market. Uh, equity's a little bit more difficult now, uh, but again, I mean, nobody would be coming to me for debt or come to Kirkland Capital or come to us for debt if there weren't equity stuff.

Cuz obviously they're on the equity side asking for debt. Uh, on the other hand, I think part of it too is your risk profile. What are you hoping to do when you're younger? When you're in your twenties, thirties, you're looking for a little bit more risk on, you're looking for those little higher returns.

And so those equity things where you're looking at those numbers are like, wow, that looks really good. I want that return. As you start to build wealth in your family and you start thinking about, well, I can't afford to lose this money. I've got maybe a section of my portfolio that I'm willing to sort of be a little bit more risky on, but I've got this other section that, Hey, I got kids now I've gotta think about providing for them, providing for my family next generation, whatever it is.

And, and classically, real estate's always been famous around building wealth that's solid. And, and even in times of down markets like we have now, that's why we talk about debt is because you have that cushion of equity on top that someone else is really taking the risk on when you're investing on the debt side. We've got 20, 30, 40% of that cushion that someone else takes and your investment on the credit side or you know, the debt side is still protected.

But again, I think then it goes back to the equity side, talking about which asset class, where are we talking about? And I think there's still some great deals that could be had out there.

Chris Carsley: I, I mean, in the debt and equity world, they're extremely complimentary from an investment standpoint and putting them together in a portfolio.

Um, investors, even if you have a very complex structure of what you're looking to create through using real estate equity and debt, there's, you know, you maybe venture debt or maybe you're dealing in corporate private equity. Putting these pieces together, uh, you can create some very complex outcomes that can meet some very complex goals as an investor.

So, hey, in this age, maybe I'm finding an opportunity in equity where I've got into a distressed play, but there's not a big income component. So I allocate a certain amount of money into that trade, but I need that income. I can go find a private debt play that's gonna pay out a lot more, and packs offsets.

There's all kinds of, like I said earlier, complementary aspects to playing on both sides. I mean, that's, that's why we obviously run a debt fund. But Brock and I are also directly involved in a lot of equity plays as well, cuz they do have value.

Brock Freeman: I'd be curious, Sean, on your side, cuz you're, what are you, what are you seeing from more of the, the younger investor side?

Because I know you tend to target that more, that's more of uh, what your Yeah. Customer set is what, what, what is their kind of feeling around debt versus equity? I'm, I'm always curious about that cuz even though if I try to put myself back into my, I don't know, 30 something, I'm not sure that I'm able to really fully engage with that.

Particularly with how things are so different in the economy now than when I was at that age..

Sean Hsieh: Yeah, I think to be perfectly transparent, I think in 2020, 2021, uh, it's, it was a little bit of a challenge when you had crypto markets. The stock stocks I'd call, I'd call it. Um, and then you had people getting into all kinds of weird things that when you had free money, they were just going up, things were inflating.

Um, people were like, I need to go buy real estate at, you know, peak of 2021. They're like, I still need to go do this, sight unseen, whatever. Just get, give it to me. Um, so I think when people think about debt, it was actually pretty unattractive to them. So for us, it was interesting as we had a sort of talk about the merits of debt, why it's actually complimentary.

So I like to think of this in terms of the old adage of the 60-40 portfolio, like you probably want to have a little bit of bond exposure. Now, of course, public traded bonds, back then, 60-40 probably didn't make sense, but at least in real estate, Like you're still able to make a level of income on the debt side and then on the equity side, I mean, that's where you do take risk.

I think we're seeing that now. We're seeing a lot of people that maybe entered the market that took equity positions and maybe took down properties in 2021 that might actually be struggling today because you're buying at maybe like a historical high valuation, uh, for whatever asset class you're buying.

The cap rates were super compressed. It's like, where do you go from here? And then now you have inflation. You know, the inflation was kind of running high and now mortgage rates are high too. So it's just like a deal zone pencil. Um, are you able to sell that if you need to? Probably not. Um, unless you wanna take a loss.

I mean, you could, right? But then you have people like us that are looking at the markets that are like, we're trying to be opportunistic. There's gonna be distress. We, we see it, we know that there's gonna be more. You know, so, um, that's where I think it's important. If you are a real estate investor, I do think it's, it's important to consider both.

Um, and, and to me, I feel like they're, if, if you utilize both positions correctly in different portions of the cycle, you know, you could probably maximize your total like return in your lifetime. Um, but I like 'em both. You know, I, I think they, they, they serve two different purposes. One for me when I think about debt is largely income.

Uh, and then the other one is, you know, largely, uh, potential appreciation with some cash flow to kind of just pay me to kinda hold onto an asset. Mm-hmm.

Brock Freeman: I think in the equity space, this is where unlike '08 and post, because that's what people are always comparing it to. Well, is it gonna be like the last time?

And no, I mean by almost every measure we're so different from last time. There is now so much money out there waiting to pounce on potential deals. Will do. I think that there's some potential deals out there. You know, you mentioned like people got in at the height of the market. You know, one of the things that we've seen over the past 10 years or so is the rise of all of these syndications.

And certainly there's some really good operators out there with syndications. You know, Chris and I are involved in several, but there's also ones many that we looked at that we looked at their model, and we said, wow, not only is this model like kind of high in the sky, you're going to have to hit every single one of these things perfectly and nothing can go wrong on any of the gearing here, otherwise this thing's gonna crash and burn. So I really think that you're going to see, we're going to see a number of these multi-family syndications unfortunately, uh, get decimated and they're gonna get picked up by a lot of this other Wall Street money or money waiting on the sidelines.

And there's a lot there that that's gonna be pouncing. To your point, unfortunately, that's gonna meet some investor losses there. Uh, on the other hand, and I think the other place you're gonna see a lot of decimation, not so much for, uh, individual investors. Most people don't syndicate a part, uh, office buildings.

But I think office is one of those places where when you read some of the sky is falling articles, inevitably you read down and they're talking about, oh, office. And I think there's some big problems in office, particularly where that used to be thought of from an institutional investor standpoint, like that was gold. That was golden. A class, A1 type of stuff in a gateway city like New York, San Francisco, even Seattle, invest in an office, you can never lose. Well that whole thing's been turned upside down with hybrid work and a whole bunch of other things there. So that's what's kind of interesting in this whole real estate alt space too, is seeing that turnaround.

So what does the future look like if we go back to multifamily? I think as long as you've got an operator that's figured out how to make it through, what's going to be, uh, another more difficult 12, 18, maybe 24 months, if you can make it through that, I think things are gonna go pretty well again in the multi-family space, particularly just because of some of the other core things that we look at around what drives multi-family value.

Gretchen Lirio: So for Kirkland Capital, what are some of the offerings that you're seeing, um, have the most meat on the bones in terms of deals? Uh, you've mentioned office is not gold right now, so, um.

Chris Carsley: A lot of it with office is just, why take the risk when you don't need to? Mm-hmm. It's, it's uncertainty. Um, I live in a world of gray. I'm not a very black and white person. Um, I generally believe that there are opportunities in office, there are things that will work out. Um, but if you have 50 investments to look at, And you're uncertain about one of them. Well, why bother? You have a whole bunch of other things to choose from. So I just wanna be clear on that.

It's like we still see people doing office and it's not that we don't go through the process of looking at it and saying, okay, would we do this? But when we come back with our measures and say, Hey, this is the LTV, this is what we gotta charge. I mean, generally the borrower's like, well, that's not gonna work.

Which implies to me there's not enough spread in it for them, for us to charge. Um, but when we have those, uh, you know, stipulations for other properties like mixed use or some of the multi-family, even light industrial type properties, you know, we throw out these stipulations, they're like, that's fine. It works.

And when we run our model, we understand that these guys are operating in a secondary or a tertiary market and there's an equity spread. They could drive a truck through. And so we can come in and charge a decent rate for our bridge loan, and it just doesn't faze the project for them. So, I mean, that's one thing I wanted to clear up.

Uh, you know, what we look at, we still look at everything. Um, but why take uncertainty when you don't need to. Mm-hmm.

Brock Freeman: You mentioned secondary, tertiary. Maybe I should define that because we throw these terms around sometimes and they're not so familiar with, uh, for you, not involved in real estate.

But you see what we mean by secondary, tertiary is not gateway cities like Seattle. So a secondary market might be Spokane, Washington or, uh, Eugene, Oregon. Yeah. These are decent sized towns that are usually driven by multiple different economic bases. Tertiary tends to be something a little smaller.

Might be Pullman, Washington, that's still driven by a college. Okay. Uh, and then of course you have rural areas. What we find many times is in secondary and tertiary markets. Where we tend to do most of our lending is that over time they do exhibit more steady economics. They're both slower growing, but at the same time, they didn't have those large variances when you look over the past. Like you look '08, did their housing go in pre '08 did they go way up like Las Vegas or Miami? No, they didn't go way up. They just kind of ticked up a little slowly, but then post '08, oh wow, they didn't really go down that much and neither did the commercial assets around there because people who like to live in those towns, they stay there, they stick around.

Things kind of work day in and day out. We like that as far as, particularly from a loan standpoint. Mm-hmm. But it also means that you don't have money pouring in there like you do the gateway cities, which is why we still see a lot of investors coming to us with real estate investors, active ones coming in and asking us for loans associated with those secondary and tertiary of those smaller towns because they're finding that I'm not competing with Wall Street money here.

I'm not competing with a syndicate who just got together a bunch of people and raised 50 million dollars. They might be the only player for a light industrial or one of two, they're not having to bid stuff up. So there's a lot of meat on the bone. Their cap rates never did sink to single digits, but, so maybe their cap rates went up a little bit, but not that much.

Mm-hmm.

Sean Hsieh: Yeah. I'm, I'm just gonna add too, I think if you're, if you're looking at opportunities today, if you have a deal where you think you can fundamentally change your proforma, you're, you're probably gonna be able to make money. So what I mean is, if you just take a look at Seattle, right?

We have this whole movement around densification. Like, if you can go in, you can buy, let's just say a home and go, okay, not only do I wanna rehab, I wanna throw an ADU. Um, you can fundamentally make a lot of spread there. Now is there gonna be more work? Yeah, there's gonna be more work for sure. But I think today, when you're talking about where do you make money, it's like, sorry, you're probably gonna have to put in some work to make money today.

Uh, I just don't think, you know, you're gonna be able to just throw money at something or, or generally into a market and like just buy it and sell, hold onto it for a little bit and sell it. I just don't think it works like that anymore. Um, if you're going to multifamily too, it's like, look, go. If you think you can take the market rents or bring something that's maybe, um, like there's, it's lower than market.

You wanna bring it up to market. Like, just make sure there's enough meat and the bones there for you to do that. Mm-hmm. Or see if you can actually like, add more rooms or, or new, new creative ways to generate more revenue. Um, I, I do think generally that's, that's the only way, you know, you'd be able to really make money right now unless you, you know, some stuff around like Up zoning or something like that.

You have some inside information. Um, but those are, I think, a lot more opportunistic, uh, rather than, you know, doing the tried and true, which is like, just get in there, find something where you can work with and build, build value. Mm-hmm. That's kinda what real estate is all about, is about building more value.

Gretchen Lirio: Yeah. So bringing it back to investors, um, I feel like people I talk to these days are all about capital preservation, and I know that is huge for Kirk Kirkland Capital and for Concreit as well. Um, why are investors seeking capital preservation and can you define it?

Brock Freeman: Nobody wants to lose money.

Gretchen Lirio: Well, perfect.

Sean Hsieh: Yeah. When things go, nobody likes to lose money. A lot of people have been losing money.

Chris Carsley: Well, as soon as they lose a lot of money, they're like, oh, I wanna hold onto the last little bit I have. I mean, capital preservation, I mean, is a term where some people call it principal preservation, um, think of it as the base amount. If I'm gonna invest, you know, a hundred thousand dollars into something, that's my base principle. That's the capital I'm putting in. That's what I don't wanna lose. Um, it's, uh, I always tell people, it's like if you're gonna go play at the casino, they're in business to take your money and they're really good at it.

So if you walk in there with a thousand dollars and you find yourself up a thousand, take your thousand off the table, put it in your pocket, you know, now you can't lose and you're just playing with the house's money. So what it's getting at is don't lose that original capital. How do you get into an investment and have it structured to where the probability of loss, and I want to be very clear, um, '08, showed me one thing, uh, that even the absurd can happen.

And when you don't think a trade is possible to break, you can still have a very, very, what we call sort of deep left tail, low probability event that can occur that busts your trade, everything breaks, it just may not break easily. Um, so you're looking for those trades that even in tough times it's very hard to dive in and lose a great deal or of any of the principal amount.

So what we focus on, I know across all three of us, is to look at investments to where we can structure, say our loan, to where we have a very big equity cushion. So we're looking at, hey, I want to deploy a certain amount of money, but I want to make sure if something goes wrong. And one of the things that always occurs in lending is, you know, you get into a default situation that leads to a foreclosure, that that entire process, the cost of that process and the time can be recouped, you know, in a worst case scenario through that equity cushion.

So that my investors’ money has a very low probability of actually diving into that original principal amount. And I tell investors all the time, I said, it doesn't mean I'm gonna be able to continue to pay interest. Something stops paying. Well I can't pay you cause I'm not being paid anymore. Um, but it doesn't mean I've lost the principal value.

And then that changes the nature of that part of an entire portfolio. So we have 42 43 loans in our portfolio and we do have one that is in a foreclosure process that actually has very little impact. Cuz when you want to find that operator, it has a portfolio that's diversified enough. So when something does go wrong, we always joke, it's not a, you know, "if" it's a "when" mm-hmm You know, when is this gonna happen?

It happens. Um, and so how are they dealing with that? What's the impact on the portfolio? And there again, comes back to that transparency. Stay on that manager and say, okay, how is that going? What are we looking at? And they should be able to supply and hopefully give you the confidence that yeah, we have a very good chance of getting back that principal value.

You know, are we paying interest on that piece of the portfolio anymore? No. Well, the borrower's not paying us. So now we're into this accrued balance and trying to, you know, ensure we get the principal and get that back working.

Brock Freeman: One of the interesting things, I want to kind of broaden this in a way that I think that most people don't think about.

We're in Seattle, this is TechTown. I mean, you are gonna run into almost like every other person on the street is gonna work for some sort of tech company. Amazes me how many tech people, uh, also think, well, I know tech, therefore I'm gonna invest all my money in tech. Well, uh, it kind of makes sense.

Here's the challenge with that and, and again, this, I'm gonna tie this back to principal preservation. You think of your job as a bond. And I'd love Chris to dive into this a little more. But bottom line, I mean you basically have your day-to-day wage cuz you're working for a tech company now in this industry and you've got all your investments in tech.

Well, what happens when tech doesn't do so well? But nobody thought that could happen, uh, until now. So sometimes principal preservation is thinking holistically around where is the money in my family coming from? Where have I made bets about my survivability, my ability to pay my mortgage, my debt, send my kids to school?

Where are those coming from? And it's not just those investments, it's also your job. It's also those types of things as well that really are part of principal preservation or wealth preservation maybe is a better word to think about.

Chris Carsley: Yeah, it's your entire picture. And yeah, I actually came up with that idea.

Unfortunately, living through a bunch of people I knew personally at Lehman, um, a lot of people I knew had their job at Lehman and they had a lot of their savings in.

Gretchen Lirio: You worked at Lehman?

Chris Carsley: No. Oh, these are people I know. Um, and they woke up, um, in an event they just didn't think was possible. Um, but it happened and they woke up with all of a sudden nothing.

They had no, your job is a bond. It's paying you monthly. Well, that's gone. That defaulted, that's over. And your equity portion of what you owned was in the exact same place. And people didn't think about it. They viewed it as, no, no, I'm diversified. And they weren't. Their entire wealth picture was all in the same place.

And there's a lot of people, and I especially think in this town where, you know, you get these tech driven people, they're like, I tech is what I understand. That's why I'm putting everything in there. I always tell people, I said, listen, I, I've been in venture. I've worked with a lot of different startups.

I think it's great. You should have exposure to that, but you should look at the other side of the coin too, of, well, that's pretty high risk. There's a high probability to go into zero on some of those. Hey, I'm part of a startup. What do you have that can't easily go to zero? That's how you need to think about that whole picture of your life for that preservation.

Sean Hsieh: Yeah. I, I think, and, and just to tack on a few more, uh, layers is I think capital preservation is, is really a mentality that lands in so many different aspects of how you're looking at money. But I think, uh, when, when we're thinking about capital preservation, particularly when it comes to investor dollars, it's like, Hey, we, we prioritize capital preservation and, uh, if we do that, that typically means that we need to understand, uh, that our investments are not gonna be taking an undue burden of risk, uh, that we need to make sure that, you know, in order to generate any sort of return, you can take on some form of risk. But, uh, the focus and the priority really is capital preservation.

So when you're doing it, the underwriting is to try to identify all the risks. You clearly understand the mitigants. Whether or not you can actually execute and actually take care of those is a different thing. But that's where knowing your manager, knowing their execution capability becomes really critical to even capital preservation.

Um, but just the underwriting general, like the loan to value, like that, having some form of a cushion, um, understanding the markets in terms of like the, like you said, the takeout lending. This all comes into how you underwrite. And so it's really a philosophy, a mentality, something that should be practiced as well if you're investing into a particular investment that prioritizes capital preservation. If you start doing stuff like equity, that might actually not be the case, and at that point, you should probably think about your money that's going into that vehicle differently. Like, you know, if you're looking at something that's a little more speculative, let's just say you want to go and do maybe like an apartment building, and it's a ground up development. Look, I'm sorry, like as much as you know, you, you want to think that it's real estate, it might be safe. It's like you're, you're throwing your money. There's a lot of risk in front of you depending on where you are at and stage of the process or the project you're taking on those layers of risk.

And the more risk, which is really just the unknowns, um, like you are putting your capital at risk. So it's about taking a, a, a stance in terms of like the mentality of your money. And we talk a lot about that at Concreit. It's like, in order to build a wealth mentality, you need to be thinking about your money in different ways.

Not saying that all, you know, you shouldn't get into different types of investments, but depending on who you are, what you want outta life, you're probably gonna frame it a little bit differently. Uh, like on every investment that you make.

Brock Freeman: Let me tie this back to the due diligence aspect that we talked about earlier, because I realize that when you're talking with people who've never really done alts before, it's, it's so huge.

It's easy to kind of get, uh, almost overwhelmed. Like, what do I start on? I mean, there's just, you name it, there's an alt for it. So maybe I can help you, uh, because I didn't come from the alts industry to start with. I came from real estate. Uh, let me maybe help, help you narrow it down as a, as a passive investor looking at alts for the first time and thinking, wow, you know, you're right, I work in tech, or I work in this industry and also have a lot of my, my investment in that. My recommendation, and yes, I'm a little biased here, pick real estate for one as an alt, but I also say that because most of you are going to, if you don't already, you're gonna own a home. And, and, and sort of understanding what's happening in the wider real estate industry and knowing that real estate is a traditionally great place to build wealth and preserve wealth, I would make that one of your areas. And then the other area that you invest in Alts, pick something that you are either already familiar with, you know, on the tech side. Sure. That could be tech. Okay? And, and pick something in the alts, it's VC or something. There's a lot of stuff you can do or pick something that you're passionate about, because I can tell you that when you're reading an 80 to a hundred page PPM, that's a private placement memorandum that you're gonna see for every private thing and your eyes start to glaze over.

If you're not passionate about that area, you're not gonna do the proper due diligence. So pick something you're passionate about, maybe you're passionate about healthcare. So you pick, Hey, I'm gonna, I, I know something about healthcare. I have an uncle who's a doctor. I know a bunch about tech, about this. Maybe yeah, I love this.

So you go and you start investigating into alts that invest into healthcare startups or whatever. All I'm saying is there's something out there in the Alts land, which you can get excited about. Real estate, some other area you're passionate about or know about, and, and be between those two. You probably will have an ability to give you a fairly balanced portfolio.

Gretchen Lirio: Thank you guys, for sharing your insights. Um, I hope the listeners can, uh, walk away with, uh, thinking about alternatives a little bit differently. Thank you so much for your time today. Um, until next time.

Brock Freeman: Thanks. Thanks guys.