Are Real Estate Debt Funds a Replacement for Bonds?

In this live online interview Chris Carsley and Brock Freeman talk with Brandon Walsh at Rocket Dollar about alternative investments, the death of the sixty forty or at least the lower interest rate bond market's impact on the low-risk part of your investment portfolio, what to look for risk-wise when exploring private investment funds, what we have done to lower operational risk and be transparent with our Kirkland Income Fund, and much more. We also take questions from the live audience.

“When I talk to people at Rocket Dollar when they call me on the phone, this is usually the three things they’re looking for. They’re looking for yields or income, something to replace their bonds in their portfolio. What we just talked about today, some type of stable producing asset, something where they know what the expected return is right when they enter that. Real estate is often giving you that angle.”

— Brandon Walsh at Rocket Dollar

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Transcript

Brandon Walsh: All right, everyone. We are live, really like to welcome Brock and Chris of Kirkland Capital Group here today, experts in real estate debt and also really combining real estate debt into a fund. We've talked a lot about a lot of real estate here at Rocket Dollar, but there's so many different types. We have had a few webinars recently about debt on an individual level targeting individual property. Today will be from the fund perspective. We're going to have some very interesting stuff on how that matches up against stocks and bonds. So, first I'm going to let Brock and Chris go kind of through Kirkland Capital Group, how they that can serve as a replacement for bonds here.

And then I'll just have a little bit at the end about general retirement education. Going over some modern portfolio theory stuff about how much Alts should be in your portfolio. Stuff that you hear about constantly from different advisors, but just kind of making that a little bit less no-nonsense and easier to understand.

So, Brock and Chris feel free to introduce yourselves and take it away here. 

Brock Freeman: Great! Thanks a lot. Appreciate this time to address everybody. Let me start off with a quick intro for myself, and then a really quick intro about KCG. I don't want to get into too much of that, I want to get into the meat of what we want to deliver today and educate about. And then I'll let Chris intro before we kick it off with diving into some things that Chris and I have been talking about a lot with portfolio theory, etc. as it's a great subject. First, just about Kirkland Capital Group. We specialize in micro balance commercial and multifamily real estate bridge lending, that is loan amounts under $1 million.

This is usually going to be anywhere from a 5-unit to sometimes up to 25 units, depending on the location, apartment complex. There's a lot of these around the nation. It is a very key multifamily apartment type of housing that's available usually in Class B or Class C. There are millions of families that rely on good quality housing in these, and so we're really happy to be able to be providing the funds to see many times what has become a Class C, be upgraded to a Class B, and provide really nice quality housing for people. 

Along with that, our commercial real estate debt fund, the Kirkland Income Fund, provides investors with lower risk and targeted 8.5% to 9.5% annual net fixed income returns, which we pay out monthly or can compound. So, what we've endeavored to do is create a lower risk type of investment possibility, really to sit in that fixed income area; we'll talk about that more in a minute.

My background is finance and technology, but more on the real estate side. I spent quite a few years underwriting loans and auditing loans. I also spent some time in corporate finance, and then a lot of it was also bouncing between automating much of a corporate finance as well as underwriting and mortgages, etc., in the real estate space.

Chris! 

Chris Carsley: Yeah! Thanks, Brock. My background is a little over 25 years across a variety of different investment management platforms. Started my career in traditional assets mainly just long stocks and bonds, and then quickly found myself into the alternative space dealing with Hedge Funds and Venture, building companies from ground up, a lot of different private real estate plays, as I was managing a number of different portfolios, and also dealing with individual clients that held a lot of complex real estate. And then led me to here where Brock brought this idea where we have a unique opportunity to build a fund and bring a product and a platform at a very interesting time when interest rates, thanks to COVID, are now at 150-year loans. 

Brock Freeman: Great! Thanks, Chris. Chris and I have been talking a lot about the changes recently, and as he mentioned there are these super-low-interest rates. 

There has been a long tradition of balancing a portfolio between the 60-40, let's just call it the traditional 60-40 Equity / Bond portfolio where you'd put 60% of your investment portfolio in stocks, that could be ETFs or anything around more high growth stuff, and then 40% and more of a lower risk fixed income, a lot of times those are bonds or bond funds, that sort of thing.

That has served most investors very well. The challenge now though is with these low-interest rates. Is that traditional 60-40 portfolio dead? That's really the question Chris and I have been tossing around, and Chris has come up with some interesting ideas about maybe on one side it is but maybe on the other we just need to do some replacements. 

Chris!

Chris Carsley: Yeah! We can talk. I always think dead is a harsh word, but it has been thrown around a lot by a lot of Wall Street on how to think about the 60-40, that Markowitz portfolio that was invented eons ago that has worked well for many people.

One of the things that you're looking at in this particular timeframe is a situation where equities, I think a lot of Wall Street is generally seeing headwinds in the face of equities. They're pretty much all expecting a positive return on the equity side, but they're talking broad index-based. They're not picking names per se, but they're not looking at the double-digit returns we certainly saw in the last two years. We'll see if they get it right, but there's a lot more pessimism on the equity side. 

There are two components to what we're talking about in 60-40, and if you're going to think about the equity side, some people have gone out and said you should think about private equity as you're still able to obtain some value in the general estimates. I think people are saying private equity should slightly outperform your public or more traditional investments in the equity side. 

Shifting to what we primarily focus on is that 40%, or in some cases as the population is getting older may have more than 40% in fixed income.

Historically the 40% was there for two reasons. One, it was a source of income generation for people who might need that income rolling out of their portfolio for utilization and supplement of not having a job, as they were retired. The other aspect is diversification, nullifying some of the volatility that might occur in your portfolio because the last thing you want to do is be in a very volatile portfolio where you need to be able to pull out money just in the time the market crashes.

That was that portion where a lot of people would be harvesting less volatile capital as they needed it over time, and then hopefully making readjustments and rebalancing their equity portion. 

Fixed income is a wide swath all the way from 91 Day T Bills to high yield corporate debt. There's a lot of variances that I don't think we have time to dive into on just on the traditional side, but the general premise is that if you're going to try and capture yield, you're going to have to go more towards that end of the curve that's on the high yield, which historically had the volatility similar to your equity markets.

To meet your required returns that you might need in a portfolio, you're going to have to take on more risk and stay in the liquid markets to capture that or look towards the alternative investment field which is where we're positioned. We're just one alternative of many. There are many different ways to generate income, but the one that we have chosen because we liked the risk profile, is commercial real estate debt.

That's one of those things where you should see a negative correlation, which is the basis of diversification. I always have a lot of investors that I talk to, everyone's telling them to diversify, but they don't understand what that really means and the basis of that correlation. I spend a great deal of time educating people about cross-asset correlation. You want that instrument that you're going to add to your portfolio that's going to be a replacement to some of that fixed income to really still be that risk mitigator, that's an important aspect.

And then, with interest rates at all-time lows, you need to find that source to where you can capture enhanced returns, a spread above the traditional instrument. That's usually going to require some extra due diligence. I think one of the major drivers that people see in the alternative space is it usually comes with the cost of a little bit of Illiquidity.

You might not have a market instrument. You might have to have a longer hold period, sometimes a year, sometimes a quarter, but that's something that is going to be important that people need to consider going forward in their portfolio and that's what we have strived to build with the Kirkland Income Fund.

Brock Freeman: I think that's what is so interesting about this partnership we have with Rocket Dollar. Obviously the money that's coming into Rocket Dollar is retirement funds so that's really aligned very well with these longer-term holds. Particularly on the fixed income side whether it's our own real estate debt fund or other real estate debt funds, or even on the equity side where you might want to hold real estate.

Chris Carsley: Yeah, exactly. Also, for a lot of clients scheduling that and understanding what you have in retirement funds to make sure you're meeting your required minimum distributions if that's what the stage you're at in your investment life cycle. Then that's another factor that you can easily sort of balance out and as you go into alternatives understanding that liquidity is important so that you can effectively manage that with your timelines of when you'll need to take distributions from qualified funds. 

Brock Freeman: So, you mentioned about the 60-40. You're right, probably dead is not the right word, but there's going to need to be some changes, maybe not so much about the split, but certainly what was traditionally been put into that 40%. 

Chris Carsley: Correct!

Brock Freeman: Bonds aren't going to work. Now let's say that I'm an investor that has been holding bonds for a while and now it's either the bond fund, and those are a little easier to sell out at any time, or I've held some bonds and those are now up. Then I go look now and try to find that yield. What happens to those bonds or that bond fund if interest rates go up and I'm holding those? 

Chris Carsley: Yeah. That's the premise of where I don't think you can't pick up an article, and if anyone's looking for an article I've got a number from JP Morgan, Goldman Sachs, Morgan Stanley, that show all sorts of the same issue. 

"At no time in history", I think was the quote from this strategic asset allocator at Goldman Sachs, “have I been able to come in and say, if you're going to go into fixed income now with new money, you're looking at either capturing low returns or locking in a negative return.” What that means is right now interest rates are very low so whatever you buy into at this particular time you're going to be capturing a relatively low-interest rate compared tp historically. That's going to hurt your required return measures in your portfolio. 

But for people who are currently holding fixed income, even when you look at broad indices that were up fairly good last year, 7% plus, that is a return that has risk within it. If interest rates do come up, and I'm not saying when and if that will occur, I know there's lots of fears around fiscal cliffs, but when you do start to see interest rates go up, it's simple bond math. I mean, there's no way to escape as interest rates rise, bond values will fall. 

So, you'll see a deterioration of that, either unrealized value that you have in the current fund or you might be going in today and experience a negative principal return. Obviously, if you realize that it becomes a real return negative; but it will be on your book as an unrealized negative return going forward if interest rates rise in any material way.

Brock Freeman: I think the other thing that you and I had talked about a bit also was the difference between looking at some of the higher risks, bonds, or bond funds such as corporate debt, or even a new that's called junk bonds, versus possible risk in the real estate mortgage market. Of course, we're just one fund in that. There's a lot of different real estate debt funds in there, but in general, what's your opinion about the risks between those two?

Chris Carsley: Well, corporate debt, obviously you're dealing with some Triple B rated bonds and companies. So, you have a potential default aspect to that with not near solidarity of what I like on the real estate side that at least we've put together. If we write a loan, the back end to our loan being first-lien, full recourse; we have the right to income-producing property.

And you're looking at a situation where if LTVs were structured correctly, you're coming in at a pretty steep discount about 25% to 33% plus discount. A lot of things I like the risk profile of that because you're very well collateralized, and you're also looking at a situation. Everyone's always worried about default turning into foreclosure, most of the investors that we work with and even other people that I know that run funds. 

There's a lot of motivation to hold on and maintain the security of that asset. If I'm the borrower, the last thing I want to do is have to foreclose and walk away from it, so there's going to be a lot of effort put in to secure that and ensure interest payments were made. As a borrower, they're going to ensure that it is secured and moves forward for those lenders, so I like that risk profile. 

I don't think we're in a situation where you're going to see mass defaults and then leading to foreclosures. You might have a few things where there are extensions to loans; I think that happens far more frequently. And that's where I really liked that risk profile of having that asset, supporting this loan.

And your corporate side, and obviously you'd go down the curve of backed by the good faith of the United States government, you're dealing with treasuries. You can kind of see what happens to the interest rates. Well, as you're taking less risk and you're backed by the United States’ taxing power, rates plummet quite quickly. I think high yields estimated return this year is about 4.8%, and you're looking at 10-year treasuries just over two is the expected return. So, it's pretty dramatic. 

Brandon Walsh: A quick question, just to interrupt. Chris and Brock, as we're talking about the different risks and ratings of certain bonds, could you just tell me a little bit about the properties and risk profile that you approach at Kirkland? Because there's the A's, B's, C's, and D's, and everyone has a different A, B, C, and D, they feel like it's a lot of argument.

Brock Freeman: If you're talking about the properties, let me address that. Let me mention something first before I dive into that. I've heard it said several times by several people that one of the most low-risk places that you can put your money is an un-levered piece of property. Now that's an interesting theory. The challenge with that is that's not exactly true, because although you might not have the loan as pressure against that property, if the value of that property drops a bit, then you're going to lose on that.

We tend to think that even more low-risk is to do debt on a piece of property because if you're at a low LTV, which we are, we typically go up to only 75% on multifamily. We are still looking at some offices and some retail, we haven't done a deal yet. We haven't seen anything we liked, just because of what's going on this pandemic, and we don't think we're out of the woods there.

We're looking at maybe 55%-60% LTVs on those. That gives us a lot of headroom if something was to happen with that property. Then there's a lot of room for mistakes to be made from the borrower's standpoint or the buyer's standpoint for us to go back out there and recover that property, sell it, and recover all principal we have invested in that property as a loan. We think that really puts us at a far lower risk from the principal standpoint than any, even holding property by itself.

Regarding your question about ABC types of properties, we've chosen to focus on micro-balance. Since we do that, you're not going to see any Class A properties. That's just not going to be possible to build those for that. 

We don't do construction loans; we focus on income-producing properties or properties where that can be produced very quickly. Even if there are problems with the property that needs to be turned around, those are typically Class C. The reason those are good is that, for our typical borrower, they go in, they buy these from somebody, usually a mom and pop, who's owned them for 20 or 30 years, kind of let them go. Maybe there's some deferred maintenance; maybe they haven't had renovations in many years. And so there's a great chance to go in there and take what is a Class C property and with some renovations turn it into a very nice Class B property. One that looked, if you and I are squeezed on income a bit, that we would end up living in and be very happy to live in, and we feel safe in that area and in that apartment complex, in a place that's quality.

That's what we want to see, and that's the plans we look at when we look at these value deals from borrowers. We are seeing a few Class B, where people are picking it up. Maybe it's been turned around, and they're picking that up from somebody who has turned that property around. And now they need to season that a little bit before getting long-term financing, but honestly, we really believe in Class B and C. You can't build them for the cost of construction anymore. So, there's no one building Classes B and C; that's one reason why. And with what we see across the United States and most areas that there's still a housing crisis, there's still a lack of affordable quality housing for the middle market.

And that's what we're filling in there. We're taking and providing with our loans and in cooperation or partnership with our borrowers, who are buying these properties, producing more quality middle-market housing needed, particularly among people like our first responders that are so important in our economy right now. We have a focus on that with this pandemic.

Brandon Walsh: Great, thank you! I have some awesome illustrations of some of the portfolio theory stuff that we can look at in a bit. I love that you guys continue. We've got more, or I can start bringing some of those up?

Brock Freeman: Yeah, I want to kind of talk about it just for a lot of people that are looking maybe for the first time, particularly with investing in Rocket Dollar, or maybe they haven't even invested yet with Rocket Dollar, but they're thinking about, “I need to diversify, I need to get away and I need to find some more yield, I'm looking at alternative investments.”

But let's focus on a little bit around what someone should look for in a private debt fund in particular. The reason I want to talk about that is that obviously, we have some expertise there. Number two, some of these things will apply across the board for any kind of private investment. But if you're thinking about lowering risk and a non-correlation, there are some other things that you probably ought to consider when you're looking for investing in a fund or what to look for in a real estate debt fund.

So, I'm going to toss that to Chris because he has these twenty-five years of work in different Institutional funds and really knows the ins and outs of what can make a fund riskier, particularly operationally. I think that's one thing that a lot of people don't realize is that there is an operational risk there, and I'll let Chris talk about what that is for investing in private investments. 

Chris Carsley: Yeah. There are the risks that people take when you go into alternatives, you are investing with a team that is running a private fund. One of the projects I had for a multi-billion-dollar organization was to create an entire due diligence process around operations to effectively assess what was really risky operationally when looking at alternative investments. It's often a risk you're not compensated for. So, in the investment world, you want to understand what risks you're taking, and you want to make sure that you're compensated and the return you're getting from that investment matches those risks. Operational is usually not one of your paid for, and what I'm really getting at there is to make sure that they have process and procedure in place around the safety of controls of capital, making sure that you don't have one guy and some other family member, or something else like that in control of every single movement of capital. You want to make sure you've got interested third parties involved in that process, and there's some type of oversight for that fund. That may be depending on the size and nature of what you're working on, could be a third party for us, like a fund administrator, dealing with middle and back-office structures and oversight auditors. At least you know, throughout the year, you're going to have to be reporting and having that monitored.

And then having a clear dual control, even amongst partners, of who can authorize what. Regarding our fund, I can go in and enter anything I need to move money-wise, whether it's sending money out for a loan or paying management fees, or anything else. Every one of those steps has to be authorized by a second person, our CFO.

They can go in, and they can make sure that I'm moving money the right way, and they can verify that I'm doing correct things within the mandate of what we're supposed to do for the fund. Also, one of the things that I think is very important that I've always required throughout my entire career is transparency. Working with a fund and a group that understands what they can tell you, so they're not giving away any kind of secret sauce. It’s also important aspects that will help investors better understand how it will fit what they've already created as a portfolio. It would be almost impossible for an investor to assess.

Well, what is this fund really doing? I've told you what I've done, but I haven't really shown you, and you don't have a look through the window. And so you really should try to get that transparency that you need to help make an educated decision if that's a fund for you, and also it is one of those things that helps build trust. If I'm willing to basically show you and talk to you about anything that we're doing. Trust is a very important piece. There's got to be a transfer of information over time and so that trust can be built. It will also highlight one of the biggest things that a lot of alternative investment platforms do is some level of style drift, which is something of a risk. 

That's Hedge Funds, Venture, Real Estate, anything. I can tell you one day I'm doing something, and then all of a sudden, if you don't pay attention, a couple of years later, I'm doing something totally different, or a material piece of my portfolio could have changed.

So, there again, that can be alleviated through that transparency. Those are some of your biggest factors of that operational process and procedure, lack of style drift, and that transparency. Those are all key operational factors, and then obviously the ones that most people focus on, which is very important is understanding and background of who are the managers. These are the people that are managing and pulling the trigger and putting those investments together. I think everyone pretty much goes after that, but make sure you're doing it. 

You're getting that background check, make sure you're going in and really understanding that these people do have the knowledge, not only to understand the real estate but to run a fund. A fund is not easy to run. Some rules and regulations and aspects need to be understood because most fund failures, used to be upwards of 66% of alternative investment fund failures, didn't occur due to a problem with the investments. It occurred on the operational side because someone didn't know what they were doing. Someone tripped over regulation. There was some type of accounting mismanagement, something of that nature, and sometimes that's hard to be able to understand. But it's the kind of transparency in what you need to achieve operationally so that you can further mitigate your risk and make sure you're not taking on greater risk than you need to.

Brandon Walsh: Thanks so much, Chris! So, anyone in the audience who have questions for Chris and Brock on real estate debt I'd love it if you'd throw them out right now. I have some slides that really kind of go over a little bit of the portfolio theory stuff you might hear about, and how Alts. really fit into that.

We can get in those slides in a bit, but if you have a question, feel free to throw that into the chat or Q and A. Anything else before I get started, Brock, Chris, that you want to cover?

Brock Freeman: While we're waiting for some questions, which I look forward to answering, one of the other things is you want to make sure that you're really enjoying reading that PPM. 

Chris Carsley: Be sure to read your docs! 

Brock Freeman: Read your docs! I know they're not the most exciting thing. One of the other key things to look for in there is what kind of fees are you looking at? So, the fees, super important, there's a lot of difference. Before we put this fund together and as we were putting together our docs, Chris and I looked at a lot of different debt funds out there, and we were pretty shocked at some of the fee structure out there and what was being put in there and what was being charged to investors. 

We decided we wanted to be very investor-friendly upfront. We charge a 1.5% flat fee; we don't charge any kind of incentive fee. Chris can maybe mention why, but that is one thing we really encourage you to look deeply at when you look at these different debt funds is look at the fees. Look at how your managers are either incented or compensated because it will make a difference.

Chris Carsley: Yeah. It makes a difference to your return for sure. The other thing is, it's kind of weird to think about it this way as an investor. You also want to make sure that the fees are commensurate with where these guys understand their goal for the fund and the fund’s capacity. Well, if they're going to run a hundred million dollar fund does the fee structure that I'm paying as an investor going to enable them to run a business? Because if they can't run an effective business and just come in cheap, it also fails and has other stresses that cause a manager’s failure. So, then you're looking at that's going to create obvious stress for the fund.

So, there's two sides of that coin, one, you want to make sure their fees are commensurate with the management that's being offered. You’ve also got to remember you're assessing and working with a group of people running a business as well. 

Brock Freeman: We've got a couple of questions now Chris! 

So, let me dive into that. Anna Simpson asks, what are the returns to investors and what's the holding period? And I think that's very similar to Michael K's question about the expected liquidity of the investments made into the fund. 

First, we target 8.5% to 9.5% net returns; that means after both fund expenses and manager fee to our investors. Right now we're running at just above 9%, if you look at it from a yearly standpoint, although we just have nine months under us. So, we're coming in right on that target. We're super happy about that, especially during this difficult Coronavirus time. 

The holding period we look for is a one-year lockup. Now, this is another thing to watch out for too. I mean, obviously debt funds, and I'll let Chris talk about this a little bit too around misalignment of liquidity; it's a huge issue for alternatives, something Chris loves to talk about. But one of the things is we need to align investor dollars with the length of term for our loans. 

We make one-year loans, although most of them tend to be around nine months. So, when we make a one-year lockup, and then we say, hey, you can then come back and say, I want my money back or want a certain amount of money back within. Then we say, okay, we’ll do our best efforts of around 90 days to get that out. So, you got to look for that in the docs as well. Where's that liquidity, and what are they promising? Is that different? Is that a different alignment than what the actual investment is? Chris? 

Chris Carsley: Yeah, one of the biggest problems in '08 that hit the hedge fund world was a mismatch of assets and liabilities. Where people, simply put, “I'm investing in something that's long-term.” I'll give you some absolute horrible examples. 

People were locking into three-year private investments yet offering quarterly liquidity. When there was a run on the bank, after initial holding periods and locks were out of the way, all of a sudden, no one got their money. And what people experienced throughout 09' was what they call a gate, where funds basically came crashing down and said, well, “I'm not going to return anybody's money. I'm going to gate the fund because I've mismanaged the asset and liability.”

That is another factor you need to consider when looking at a fund is like. Now our portfolio with all our loans, we target 3 to 12 months. So, we basically figured a one-year lock. There are two aspects to that, one being a relatively new fund we need some solid legs under us to give us time to deploy money and work with investors and build the portfolio, but we also realized that it's after that one-year lock it's a quarterly liquidity with a notice period. 

So we feel that all loans are obviously not coming off at the same time. They're usually spread out over the year. In our liquidity analysis, we basically assessed that quarterly would be the best match after a one-year lock with the type of liabilities or assets we're going to be taking into play, which will range from 3 to 12 months.

Brock Freeman: There are a couple more questions here. “What geographies do you specialize in?” 

We do nationwide. Instead of restricting and saying we only do the Northwest where Chris and I live, we look nationwide, and we'll accept inquiries, or we'll accept loan applications nationwide. We look at secondary and tertiary markets. Now, the reason we do that is both Chris and I come from smaller towns. We're very comfortable with understanding the dynamics and the economics of these kinds of towns. That doesn't mean we'll do the loan. We look for the economics of that place where the loan is being applied for. Do they have a growing economy? Do they have a stable economy? Do we have broad-based employment? In other words, their employment is not based on a single large employer that if they go out of business, the town dies. So, these are some of the things we look at. I won't go into a lot of depth about that, but we don't necessarily specialize in a particular geography, other than nationwide in the United States. 

You do need to be an accredited investor, unfortunately. That you're investing via Rocket Dollar doesn't make any difference there. That is something that's an SEC requirement. 

Yeah, the minimum investment is a hundred thousand dollars. But for you guys on the call here or if you're listening to this, because you're part of Rocket Dollar, we will allow you to go down to $50,000. So, if you just let us know when you apply through Rocket Dollar that you're part of the Rocket Dollar deal we will accept starting out at $50,000, but normally it's a hundred thousand. 

I think we kind of answered pulling funds back into your retirement account. I think Chris, you answered that pretty well. We'll do it once the year is up; we'll do quarterly redemptions. 

One of the things to be clear about is that when you invest, you have a choice of getting the interest payment to you every month. So, that's the fixed income part of it. If you're nearing retirement, or this will be money you're relying on to live on we will send you an interest payment every month back to your retirement account, or if you're not retired or through a retirement account it just goes right back to your bank account; or you can choose to compound that. Whatever you choose in the beginning, you're not locked into that. You can always make a choice, and then I think it takes about 60 days for that to flip over. If you choose to compound at the beginning and then six months later like, “Hey, you know what, I need this money to live on,” then you can make that change and choice. 

Chris Carsley: We'll get you a K-1 that our fund administrator and our auditor run, auditors who are also working in doing our tax. One of the things that we negotiated with those two entities was to be what they call off-cycle. Two things that that achieves is it's a much lower expense to work with them in completing the accounting. And by being-off cycle, we're going to hopefully be able to get all our K-1s out to investors before the final tax period of April 15th. 

That's already in process. We already have full approved financials transferred a few days ago in the hands of our auditor and they're already working on that right now. So, we're estimating that by the end of February or beginning of March, we should have a full K-1s done. That's something that, being an investor that usually doesn't finish his personal taxes until October of all the private deals I work in, I'm aware of trying to be timely and ensure that we can get proper documents from the investors.

Brock Freeman: There's another question here about investing in specific deals or loans. No, you're not investing in specific deals. That's what you're in some sense, paying us as managers, professional managers, my 25 plus years of finance and underwriting and auditing, and leading underwriting teams, to look at those loans. You're not having to pick and choose among those loans. You basically look at our background, our fund and say, “Hey, that's what I want.” Then you invest money in the fund and look at your statements every month and be happy about the returns. You don't need to look at each specific deal or try to consider this one versus that one.

The other nice thing about that is your money in a fund is then spread among multiple loans. Again, this is one reason why we like this micro-balance loan space because you're spread among 10, 12, 13, and as we grow, that's just going to grow to 20-40 loans; and that reduces your risk versus being invested in any specific loan where something goes wrong with that, then you're kind of hosed.

Brandon Walsh: Different regions, different economies. 

Brock Freeman: Yeah! That's right. You're broad. You're broadly invested across a lot of these different places. 

Chris Carsley: Yeah. The actual structural accounting behind it is there's a rebalancing of the portfolio. So, if new loans are brought in, everyone's participating and achieving continued diversification and that's actually rerun every single month. One of the goals that I want to be able to create for investors is really having a growing pool of diversification across multiple loans, because if one of them goes wrong, then I want it that to be de minimis.

It's bound to happen for one reason or another. No one goes through an investment world with everything being perfect, regardless of the amount of effort you put in, but through that diversification of rebalancing every single month for every investor on a pro-rata basis is creating an ever-growing diversification. 

Brock Freeman: As Buffet used to say, and if I may kind of twist his words a little bit, "We're doing everything we can to not lose the effin money.”

Chris Carsley: Yeah.

Brock Freeman: Chris and I have a significant amount of our net worth and capital in this, and we're at a time in our life that we want to make sure that we are doing everything possible to mitigate risk in what we invest in and the loans that we make.

Alright! Another question was based on the economy of the town. What makes it a tertiary market? Honestly, this is a very subjective thing about what's a secondary or tertiary market. I guess in my mind a tertiary market is some market that's got maybe a 100,000 in like say the county area or some city that's sitting between a couple of counties where I'm looking for a 100, 200, 300,000 people. But I'm still looking for the broad employment factors. I'm looking for is that part of a major transport hub. 

Let me give you an example: I'm looking at an industrial place right now at a 55% LTV that sits in sort of that triangularity of Tulsa, I think it was Oklahoma City, and I can't remember the other city, but it's a little town of like 10,000 people, but it doesn't matter because it's right off the highway on a major thoroughfare. So, particularly for industrial property, that makes sense because your trucks can get in and out. They're not going to have a lot of traffic issues. It's right off the highway, right off an exit. There's several reasons we look at that and go, “Well, yeah, that's a tertiary market,” but it totally makes sense from an economics and property standpoint. Location, location, location, it makes sense for the property. So, hopefully, that answers your question on there. 

And then Chris, you want to take that next question? 

Chris Carsley: Yeah! We don't do a return on a note to the investors. You become a member, an interest member in the fund. 

Brandon Walsh: Yeah! So, we had a few notes, note presentations in the last year. So, we have a lot of investors that were talking about that and they go, “Well, I don't know. I don't know if I want to be doing this individual note; it’s right for some people. A fund is better for some other type of people.”

Chris Carsley: Yeah, it's very particular. I think at the end of the day it's about the risk profiles of how they're structuring that note and what you have exposure to and how they're utilizing the payment, given the risks you're going to be taking, is something you do need to be worried about.

I know some people out there go out and pay 8% to 9%, but they're taking risks at 15%-16%. That's a pretty big spread. So, try to get that transparency and understand what's the note you're being paid on, and what kind of risk are they exposing you to as an investor. It's one of the reasons where we didn't go that route. I understand the other aspect of being a note to note structure or a table finance aspect is I can get you a 1099. So, yeah! That's another advantage of that, but there again, you do need to understand the underlying investment and the structure that meets what you need.

Whereas in our fund structure, we're passing along the return minus management fee, that's it. I mean, so you're getting as much as we can possibly get you on a net basis. There are no interest rate spread we take.

Brandon Walsh: Alright. And any more questions in the audience? I had some slides to go through on some portfolios. I know we've had some great questions and engagement. I didn't want to stuff anyone, and I want to make sure they did get their question answered. Brock and Chris, you want me to just roll through some of that? I don't know if I'll go through all of it because we only got two minutes left. 

Chris Carsley: Sure!

Brandon Walsh: I'll just bring up a few things, just about the portfolio, because I thought that'd be really helpful. Since we're talking about real estate and debt as a bond replacement, I won't go through the whole thing here because I know we've only got a few minutes left. Can you see my slides here? 

Chris Carsley: Yeah!

Brandon Walsh: Okay, great! I'm going to skip the beginning, but something I wanted to say quickly, this is not investment advice. We're just going to talk a little bit about portfolio theory, but this is something to talk to an advisor about and talk to a CPA about. 

One thing that is frustrating, though, is if you run a stocks and bonds advisors, a lot of times they're just not going to have expertise in Alts. So, just know that. That is a really frustrating part, and sometimes, you have to talk to your advisor, and then you have to think for yourself as well. You really come to that decision. 

Alright so what is modern portfolio theory? Brock and Chris talked a little bit about replacing bonds, replacing income, basically means you're making a theory. How much risk are you going to take to construct a portfolio to maximize returns on a given level of risk?

So, the more aggressive you get, you're probably taking some more risks. If you pull things back a little bit you might have to accept the return might be lower. You might miss out on some crazy high weeks in the market or investments. However, you're going to feel calmer. You're going to be calmer when things go wrong.

This is what people are paying a lot of financial advisors for, to rebalance their portfolios and look at them. The S&P 500, everyone knows what it is; what I just want to let people know is everyone's trying to beat the S&P all the time. However, just know the S&P is a moderately aggressive strategy. The most aggressive stocks, some of the biggest stocks, a lot of them are still moving. A lot of people always try and benchmark every single investment against the S&P. When you know that when you're trying to compare things, just know you're comparing things to a moderately aggressive strategy.

So, if you're looking at a moderately aggressive investment, maybe that makes sense. If you're looking at something lower risk, maybe the S&P is a terrible benchmark. Maybe you're looking at something insanely high-level risking; the S&P is, again, not a great benchmark for that. Just looking at this modern portfolio theory, why are advisors doing this?

Generally, a younger investor can take greater risks when they're younger, can lose some capital, and take some hits. An older investor, especially near retirement; you look at older investors in 2008 and then even some just in March of 2020, they're trying to be as defensive as possible. They're pulling back from maybe being so exposed to certain high-risk parts of the market, and sometimes even the S&P as well. 

Brock Freeman: This is great stuff, Brendan. Here and important to think about, particularly with these older investors; as you get closer to retirement or where you're going to need that money, one of the things to realize is that the average of the S&P 500 is not you. You actually belong to anywhere; and it's really a gamble in some sense of where if you look at any particular, let's say 10 or 15 year period of the S&P 500, then you could either have made up to around 19% returns, which is wonderful. You think, “Oh, that'd be great if I could make 19% returns by investing in the S&P 500,” and there was a particular 15-year period where that was true if you time that market right. Problem is that's not you; then there's another period of 15 years where you lost money over that 15 years.

So, the key here is to realize, as you get closer and you're maybe 10 or 15 years out, that timing of the market where you could end up in and your money becomes incredibly important. As we saw it in 08', where we had a lot of people who were ready to retire and then needed to say, “Well, now I got to keep working for years.”

Brandon Walsh: Yeah, that's that time that people are looking when to pull out. Some people pulled out in March of 2020, and then now they're afraid of when to get back in. A younger investor could take some risks on that. They could throw in kind of aggressively at a random time, where someone in 55, 60, 70, 75 they have to be extremely careful what type of assets they're considering, and when they pull in and out of the market.

So, this is the very standard portfolio that you've always seen; this is something we said, is this dead or not? This is what people are usually looking at when they look at the general stocks and bonds portfolio. You've got conservative, just a lot more bonds in the portfolio. 

Sorry, they're all in blue. But a moderate portfolio, a bit more stocks, a bit more balanced in there. And then an aggressive portfolio that has a lot more stocks; you'll see a lot more S&P in there.

That was really what Brock and Chris were talking about. That was like the only slider; so many advisors have been using it for a really long time. Do we put bonds up, or do we put them down? And as bonds got into this risk level, a lot of investors just step back and go, “What am I doing?” “This is the only lever I've got?” “I need more tools in my toolbox.”

So, just a real standard answer from someone at Invesco. Everyone asks, “How much should I have in alternatives?” This is a constant answer. I will say real estate people generally tend to be higher in Alts. when they know real estate. But what does this investor say? There's no correct answer on how much to invest in alternatives, from this guy at Invesco. In his experience, investors typically allocate between 5% to 30% of their portfolios in alternatives. Many of the investment firms he works with are on the stocks and bonds side because they're at Invesco. A recommended allocation of 10% and 20% Alts.; this matters to compare to your risk tolerance and your comfort using alternatives.

This guy, Walter, believes that if an investor decides to allocate to alternatives, you should allocate a sufficient amount because it can have an impact on the portfolio. If the allocation is too small, it's not really going to do much or maybe achieve the goals you're trying to get by adding alternatives.

Brock Freeman: Let me add a little bit to this if you don't mind? I think one of the things I know, particularly for myself as I've been in the real estate industry for all my career, but I will tell you from looking at alternatives from the outside and talking with so many people is, don't be driven by fear.

You're looking at this going, “Oh man, I've got to put 10% of my portfolio in alternatives. I don't know if I can risk that. I don't feel comfortable yet.” It doesn't mean that you can't start very small. I would encourage you to go pick out something, maybe on the low-risk side to get started with on an alternative and put the minimum investment in there. Put $50,000 in there, and watch it for six months. You're going to learn an incredible amount by just investing maybe that minimum of $50,000 into a particular fund. It doesn't have to be ours, but you put it in there, you start getting statements, you start getting familiar with things.

It's amazing what the difference is when you know that your money is involved in something and how you start to pay attention to that. And as you build comfort in understanding how a typical private investment works, you can expect that you can start to ratchet up to that where you need to be, which is 20% to 30% or even more if you feel comfortable with it.

Brandon Walsh: I've heard traditional stocks and bonds advisors say as much as 40% now, and I think that has been progressing. Just so you know, and that's a lot of people work in stocks and bonds, they also charge them a certain way. So, Brock and Chris make money off real estate, and they're always going to pump real estate.

There's a lot of the stocks and bonds industry that charges from their stocks and bonds. So, the advisor would always go, "Put someone else, but don't take it all away from me!" There's always that fear from the advisor that all the money will go off their platform. So, just know a lot of people have great advisors. Some people have not so great. It doesn't necessarily mean your advisor is bad if they don't like Alts.; however, just know they charge them a certain way. 

They have their interests and you just kind of have to separate that and speak honestly with them, saying, “Hey, I want to put some in Alts., I'm confident. I want to have that conversation with them and see what makes sense in your current portfolio.” So, just looking at the portfolios of an average American compared to the ultra-rich, this is like a big comparison that pops up a bunch. This was from 2020 when I pulled this up. There's a lot of ultra-high net worth individuals, both in America and internationally, that put money into some function of a property investment. 

Is that directly in the property? Is that debt? Some type of real estate that they're going into, and they're putting their money into that asset. And a lot of investors, this is opening up now, but when you're not accredited, sometimes it's hard to get into these opportunities. You have a network, you have to talk to people, keep working up that asset level, keep looking for deals. If you're frustrated you can't find something, keep looking, keep networking, and you will find opportunities. The rich are often not just in the S&P 500 and a few index funds. That might be part of their portfolio, but they spread over many different types of assets and alternatives. 

Here is another old one, just because it's in the same pie chart. This is from 2012, so this kind of reflects, just looking a bit back reflects this one, which was more modern from 2012. Hedge funds were popular at the time. Private Equity, Venture Capital was just a small bit. Silicon Valley, people were trying to experiment there. You'll see real estate is down there, Direct Investment. Municipals were a big talk back then, just in that pie chart. So, you can think of your own portfolio in the pie chart and just think, “Hey, how do I take a slice of this? A small slice, diversify that?” Once you get more comfortable you can continue to bring that up to different levels. Just know some of these assets are higher risk, some are lower risk. 

You don't want to replace all your conservative investments like your bonds with super aggressive ones. You want to be looking for income replacements for your more aggressive investments. You want to replace them with other aggressive investments. You don't want to get your portfolio way out of whack when you suddenly put an alternative in it in your risk level.

Chris Carsley: Yeah, one of the key aspects of alternatives is that there are two primary goals you're looking for in alternatives. You're either looking for a return enhancement vehicle, so you're looking for a hedge fund or some other type of instrument that its primary focus is to really try to put up some bigger numbers. You're probably going to take a little bit more risk within that type of instrument. 

The other aspect for alternatives is a diversification to your portfolio. You will find some alternatives that will do a cadre of both, but you really do need to identify why am I adding that to my portfolio. “Am I return enhancing or am I diversifying?” And that will help you fit what you think you need and what you're replacing in your existing portfolio. 

Brandon Walsh: And one last quick slide of the portfolio. What was happening during COVID here? For the ultra-rich, usually they're kind of thinking from a capital preservation standpoint. They're trying not to lose anything. They were slow to put their equity back in. That happened across a lot of new Americans and different wealth levels that might've missed out. Lower risk debt, looking very carefully at their debt portfolios, where was their exposure, and their debt, and reevaluating that.

Gold and Defensive assets and then also like international stocks. And there's a lot of stuff going on in this slide, but I want people to think about just the top here. This is again from the guy in Invesco because they had a lot of experience in Alts. There are often a couple of goals that I hear people at Rocket Dollar saying, and in the next slide, I'm going to boil it down even simpler. 

Inflation Hedge, Principal Preservation, the ultra-rich were trying not to lose money; a portfolio diversification to get to some different types of assets. Equity diversification is about the same thing and fixed income. There's diversification not being invested all in the same bonds. 

When I talked to people, all the Rocket investors when they call me on the phone, these are usually the three things they're looking for. They're looking for yield or income, something to kind of replace their bonds in their portfolio; what we just talked about today, some type of stable producing asset. Something where they know what the expected return is, right when they enter that. Real estate is often giving you that angle. Alpha investors, these investors are the ones looking to beat the S&P. They're looking for explosive returns. They want to kind of shield that in our retirement account. And usually, this is a replacement or an add-on to their aggressive styles of stock picking. 

Chris Carsley: The better way to think about Alpha, Alpha is a term that many professionals don’t understand. Alpha is a basis and a derivative of the information ratio that's out there. You're basically looking at Alpha if you're looking for Alpha on your equity-based benchmark, or effective benchmark might be the Russell 2000 or the S&P 500; I don't actually compare. If you're looking at a debt fund and you're an Alpha investor and you want to capture excess return, that has the definition of Alpha; that return has no correlation to anything. 

That is literally the definition of Alpha. And so, if you're looking for that enhanced return that has no or little correlation, you need to understand the asset class you're looking at. It’s difficult in real estate to find a consistent index to compare yourself to, to find it, and build a benchmark.

If you are looking for an excess return, define what that means to you in your portfolio. If I'm like, “Hey, I'm a high yield investor, and I'm going to go make 5%, and I have something that may have similar risk or lower risk, but it's going to give me 9%.” Well, in your world, with a volatility adjustment, you might think that, “Wow, then my Alpha on that investment compared to my benchmark really is 3% to 4%.”

I just want to make sure that's apparent because Alpha is a pretty complex product. It's what everybody looks for, but being an ex-arbitrage trader for eight years, it's something I spent most of my career really working to define and help people understand because Alpha is generated differently. It's definitely something you're looking at, the basis of it is I am looking for an excess return that has no or little correlation to whatever my chosen effective best-fit benchmark is. 

Brandon Walsh: Yeah! That's a great description because the reason I put that specifically on the slide is because people talk about it and don't often know what it means.

Chris Carsley: It's a lot more complex than most people give it credit. 

Brandon Walsh: Yeah. So, I'll hear people talk on the phone, and that's why I kind of added these slides. These are a lot of simple things people throw out or hear advisors throw out, but they don't necessarily know what the background is. And the last thing here is just like a non-correlated asset. And that can mean a lot of things. Some investments could meet multiple of these things, these goals on the sheet, but it's something that really is not connected to public markets. So, Bitcoin has been pretty explosive recently, but people always said, "Oh, it's not correlated to the markets. It's like gold, and it's defensive, it's whatever." 

But for most of the year, the last couple of years, it was following the S&P. It was following the ups and downs of the markets quite closely. A lot of people get frustrated. A lot of other assets have been pulled in to just follow the same swings of the S&P, so they think they're in what they think is a non-correlated asset. People go into like a traded reap on a stock exchange, and all of a sudden, they watch it move. 

Chris Carsley: Yeah! Correlation is one of those things that, there again, it gets pretty complex. And one of the ways to analyze correlation a lot of people like to throw, here's my historical correlation over the last 10-years, depending on what kind of track record they have and the timeframe.

You really need to look and break it down, how did it actually do in a stress period? So, finding people who can look and say, “Hey, this is how my asset was countercyclical,” as another way of saying non-correlated in times of stress. So, like in '08, everyone suddenly loved Managed Futures and Global Macro because those are naturally countercyclical strategies. The long ball players, they were the other ones that were very popular.

And so, understanding how they perform in a shorter window around a stress period is really that true offset to your portfolio when you're looking at correlation. So, you can't just look at “Hey, here's what it was over the last 10-years.” It's like, “Okay, what was it within this 1 year period around a stress period?” It's a good added way to look at how your asset will perform from a correlation standpoint. 

Brandon Walsh: Great. Alright. Thank you, Chris! And this again, the same from this guy in the Invesco blog and what I really thought, this was interesting. Just look at the annualized return and the maximum decline. And I'm sorry, I don't have the year for this, but what I want you to just look at is the annualized return. This is like trading that risk for the potential downside risk. Some things have decent returns, but they have a lot of downside risks. So, you just have to really look at that when you're looking at your portfolio. Different goals, an asset can be doing just fine for you. You have to know where you're exposed.

And sometimes, you just don't want to lose your money. Not losing a ton of money can keep you just ahead in your retirement portfolio or building wealth over the long-term. And I'll just go quickly over, finish up here after this. This is where I hear people calling us up on the phone. They're looking for those goals we just talked about. What assets are they talking about going into? 

Yield Investors, Real Estate Debt, like we're talking about here in the webinar, Rent-Ready Real Estate, stuff that prepared, not like a risky construction or something in a totally unproven area. We have some farm investors that have come in. Performing Notes, notes that are protected and they're already income-producing in some way. Mineral Rights, we just did an energy webinar. This is basically paying rent on an energy property that's already spitting oil out.

You have none of the risks of oil exploration, but you're getting that rent. So, we like our mineral rights peoples. We’re not energy. We're real estate. Everyone wants to keep saying their real estate. What they're really trying to say is, we have some of the same similarities in risk level or types of the asset class.

So, there's some mineral right properties that are super safe. There are some energy exploration that is insanely risky. And we just talked about that in a few webinars, so I thought that was interesting to add. And again, the Alpha Investors, Alpha with asterisks here. You get Hedge Funds trying to beat the market, trying to do creative strategies; Private Placements / Private Equity, trying to go after private businesses.

People at Rocket Dollar will go into an LP investment Startups, Venture Capital, Crowdfunding. Venture Capital, definitely the most mature of those that I mentioned. Startups and Crowdfunding is much more of the rebellious, going into a small investment, taking a very high-flying risk. People usually do much smaller dollar levels than that compared to Venture Capital. We have aggressive crypto traders, they're just around. It's popular right now. It's been especially aggressive right now. You just have to know, that's replacing the very most aggressive part of your stocks, which should not be an entire part of your portfolio. Very aggressive real estate venture is trying to do some total flyers. New construction and unproven asset energy exploration. For a type of somebody who's trying to beat something going on in their other assets.

If you have anything to add Chris and Brock in the defensive assets, but low risk of eviction real estate. I had something like a Mobile Home Parks, Self-Storage, assets that are hard to lose your rental income that are coming out of that. Sometimes people will choose international investments because those move differently to the United States markets. However, we're in a very global economy. So, sometimes they're not always as defensive as people think.

Chris Carsley: If you have that correlation getting higher, stress periods, global stress periods, international investments are not providing their different return profiles for sure, and there's a lot more availability on the alternative side. You can now go from developed international to emerging market to now even frontier. Depending on what type of risk you want to expose yourself on the international, and the risky profiles and the returns quite different. So, yeah, and that's why I put it up here because this has been talked about as a defensive asset for a long time. When I first started as a financial advisor, international investments were constantly thought of as a defensive asset. However, when we hit a pandemic, when Brexit happens, when these, just like international events, we have very connected economies; And so one economy. 

When China goes down it can affect all of Asia. It can affect India. America's business going to India, investment going in there. So, all of these markets are more interconnected. So, some of our investors will go for a specific asset. Instead of going to the wide market, they'll go do an international asset more directly. 

Brock Freeman: I would certainly place types of real estate debt in here as well. I say types because there are certain real estate debt funds that do take a higher risk; ones that are funding, let's say more of the fix and flip or construction. Those are higher risk, but we've situated our own fund, and I'm sure there's other debt funds out there, similar real estate debt funds, that are particularly situated for that defensive asset allocation.

Brandon Walsh: Yeah! Crypto, stable coins. I just put there up because a lot of people will keep asking about them. One thing that makes sure that, maybe they're trying to pay to a currency or the precious metal, you have to make sure that coin is reputable, and that the money is actually there. 

So, we did a gold webinar a few months ago. There are all these old stable coins. However, when they audit the reserves of these companies, helping officiate that stable coin, the assets haven't always been there. So, Crypto was definitely a bit more wild West, and anything, even Crypto, considered defensive or stable, you really have to check who you're dealing with. What's going on with the asset, is it being audited or protected.

Chris Carsley: Just like any investment in precious metals, you must understand what they call allocated versus non-allocated. In the early days of ETFs, the gold ETFs, they would often mark it that they're fully allocated, which basically means in the Central Vault. Usually, it was JP Morgan Central Vault in Midtown New York. You had an allocated gold to your ETF; so, you were truly supported by the asset. And then there's just the boom of the amount of just sheer dollars flowing into ETFs, which is going to be the same issue of any type of other derivative structure around precious metals.

There are just not enough precious metals that can be allocated to meet the demand for all the currencies, dollars, euros, anything that's flowing into those. So, it is something you would need to have a catastrophic problem to read, to realize, “Oh my God, I'm invested in ETF that doesn't have 100% allocated gold,” but it is something to think about. I mean, you will be in an asset that you're basically marked through a derivative of security to the asset, but you are not supported by the physical allocated metal or asset. 

Brandon Walsh: Yeah. I think that's something, especially to check on bigger investments. When you're closer to our investment team, you can really kind of check exactly what asset your account is connected to. When you get to something more like public markets and funds, like Vanguard, has an incredible reputation. However, when we go look at all the funds across every single company, you got to make sure there's a lot of demand for these assets now because it gets continuing to see markets rise.

You'd have to make sure that your asset is backed. Is it connected to a real asset? Have they audited? How was that done under stress? Have they ever checked of what's happened when ton of investors pull their capital outs? I've seen some companies struggle with that or do well with that as well.

Last thing coming from a family that worked at McDonald's corporation franchises, we have a franchise partner now that we're bringing on. Something that was normally very stable, but the Black Swan event of COVID really, just something like a restaurant, a McDonald's, or Burger King Franchise. Anything could happen in the United States that still be producing income. They have a drive-through now. So there's some of them are still okay, but restaurants doing much harder. Something like a haircut franchise that people franchise out at different barbershops. Something very stable, now suddenly not so stable as people skip haircut, stay inside, but something definitely still an asset to consider that's maybe not as connected to the public markets because you're much more connected to a small business in an area that produces income like that. 

Brandon Walsh: And so just finishing up here. Thank you for everyone who stayed along. I hope anyone who's tuning into the recording as well. We're going to blast this out, both parts of the first and second parts. We can really talk about these different assets. You can get a $50 off, sign up at Rocket Dollar with Kirkland, and we start at $360 and $15 bucks a month. That'll knock $50 off the side of fee. So, any questions still around? Thank you for anyone who's sticking with us.

All right, we'll wait just a minute or two for questions and we'll probably close up. Thank you everyone that stuck around for the entire webinar! 

Brock Freeman: Oh, thank you!

Brandon Walsh: We usually clock out at an hour for each one, but when we have a lot of good questions, a few times we'd gone over. Appreciate everyone sticking by. Chris and Brock, thank you so much for stopping by!

Brock Freeman: Thanks so much, Brandon! We really appreciate it.

Chris Carsley: Really appreciate the time. Thank you, everybody! 

Brandon Walsh: All right, thank you! Bye. 

Chris Carsley: Cheers!