Taylor Avakian
And so it's private credit. It's basically syndicators who raise money to lend money instead of raise money to buy
December 23, 2025 · 1 hr 9 min
Why Private Debt Funds Are Printing Money Right Now | Jan Brzeski
With Jan Brzeski — Co-founder, Arixa Capital
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Join Taylor Avakian on the No Vacancy Podcast as he sits down with Jan Brzeski, a co-founder of Arixa Capital and a leading expert in private credit and real estate lending in California.
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Episode show notes
Join Taylor Avakian on the No Vacancy Podcast as he sits down with Jan Brzeski, a co-founder of Arixa Capital and a leading expert in private credit and real estate lending in California. In this in-depth episode, Jan shares his journey building a massive commercial real estate debt fund, revealing the inner workings of private credit syndication and how lenders navigate today's shifting interest rate environment. Discover key insights into commercial real estate opportunities in California, including the impact of rising rates on property values, the role of private credit in bridging financing gaps, and strategies for underwriting strong loans in multifamily and construction projects. Jan breaks down fund economics, borrower selection, and why real estate private lending remains a resilient niche amid market adjustments. Whether you're an investor exploring commercial real estate in California, interested in private credit funds, or following trends from experts like Taylor Avakian and Jan Brzeski on the No Vacancy Podcast, this conversation offers valuable perspectives on building wealth through disciplined lending in today's dynamic market. Sponsor — Loan Titan Upscale your experience with: https://loantitan.com/Jan's Company:Sage Credit Investment Partners: https://scipfinance.com/My Newsletter: https://www.thegroupcre.com/newslette... 📈 Connect with me: Website: https://www.thegroupcre.com/ Email: taylor@thegroupcre.com X: https://x.com/TAYVAY_ LinkedIn: / tayloravakian
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Episode transcript
This 13,205-word transcript is matched to English (Original) automatic captions. Timestamps seek the episode player to the matching passage.
0:00–10:00
Jan Brzeski
buildings. They're probably looking at, you know, 1.5 billion a year of revenue
Taylor Avakian
minimum.
Jan Brzeski
In private credit, you can estimate the revenue of the company maybe 1 to two or 2.5% depending on the details and multiply that by the size of the loan portfolio. So a billion dollar fund that would be a $20 million revenue for a billion dollar fund. the the era of zero interest rates or effectively zero is gone. Historically, normal interest rates, you know, call it 4% versus zero. That is an enormously painful
Taylor Avakian
adjustment.
Jan Brzeski
All right, guys.
Taylor Avakian
Before we get into today's video, I want to give a huge shout out to Loan Titan, the exclusive lending partner of this channel. Loan Titan has been the number one lender in the Los Angeles area for years. Consistently trusted by both brokers and borrowers. They offer mortgage solutions tailored to just about any situation, whether it's Fanny, Freddy loans, nonQM programs, construction loans, multif family financing, or even land loans. They also offer in-house private money financing solutions for fast closings, distress sales, or if you just need access to your equity quickly.
Jan Brzeski
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Taylor Avakian
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Jan Brzeski
the channel.
Taylor Avakian
Now let's jump back into it. Welcome to the podcast. My name is Taylor Avakian and I am here with my esteemed guest Yan Breeski.
Jan Brzeski
Yan, thank you for being here. Taylor, thank you for having me.
Taylor Avakian
Great to see you. Of course. So walk us through, you were one of the co-founders of ARIXA, which is a massive debt fund. Um, what drove you to start the lending business? What, 15, 20 years ago?
Jan Brzeski
The the IRXA business. Um, wow. How how can I condense that into a short amount of time? I was working for a familyowned real estate investment and syndication company. And I kind of hit the ceiling there and I needed to start my own business. I kept working with my uh former employer mentor who's Sam Freshman.
Taylor Avakian
Oh.
Jan Brzeski
Yeah. I worked for Sam and I learned a lot from him. I learned the lending side from him because during the financial crisis, the first phase of the financial crisis, he was using his liquidity to do some lending to opportunistic investors on kind of commercial real estate stuff. And um and then I I had the opportunity to meet uh Trixie Weiss, who was the founder of Genesis Capital, not too far from where we are right now. And I really liked the loans she was doing. she was lending money to people that were buying houses in foreclosure or you know at the courthouse steps and I wanted to start a fund and I realized this would be an easy way to start a fund because the the check sizes were really small and also the the the investments turned over rapidly so I could build a track record. Got it.
Jan Brzeski
So it was really kind of a combination of things. I I would didn't set out to be a real estate debt guy, but I'm glad that I discovered this niche back in ' 09, 08, 09 because, you know, this is what I'm best
Taylor Avakian
at. Mhm. And explain to people who don't understand like what was a risker or what isa and uh what is that market exactly?
Jan Brzeski
Well, started out as my vehicle to just have my own business separate from Sam and originally had a different name which was sort of aligned with Sam's company name and then I had to change it because of a trademark infringement issue and so I came up with this name which is um actually based on it's a small town in in in Namibia in Africa because my wife was doing work there she was there for a trip and I was looking at the map and and I needed a new name. But what ORIX is today is um a lender. I I don't want to speak for them because they're not part of leadership anymore. I sold most of my interest about two years ago and I'm cheering on from the sidelines as a small, you know, passive minority investor now. But they they've now done six billion of loans.
Jan Brzeski
They've done a lot of single family um loans to builders and spec um spec developers. They've done a lot of multif family, town homes, apartments, um a lot
Taylor Avakian
of construction loans. So, it's private credit. It's basically syndicators who raise money to lend money instead of raise money to buy
Jan Brzeski
buildings. Yeah. I mean, syndicator is it's a fund management model. So, um there are lenders who do a loan and they bring together a few investors for that loan and then they do another loan. But that model I think has some limitations to it. So what I started doing in 2010 was we started a fund and that was my central goal was to have a fund where we could recycle capital and always be open for business and not have to hope that we could find some investors for this loan or that loan. But rather we said we're going to be a lender and we're always going to have um the ability to take in capital and we're always
Taylor Avakian
going to be open to lend money as well. How did you convince people to give you that first money for the fund?
Jan Brzeski
Well, the first investor in the fund was me, of course. Um, and I did what I could, which was small. I actually invested in three individual loans before launching the fund. And I also brought three people into those loans, one into each loan to sort of sanity check. Does this make sense? This really seems to make sense to me, but do you want to go 50/50 on this loan and then this loan and then this loan? And then those investors became my first three investors, or two of them did actually in the fund. Um, and then it was just a function of people I had met one way or another and I would say to them, "This is what I'm doing. I think it makes sense. We're not going to hit home runs, but I think we're pretty well protected on the downside." And the initial
Jan Brzeski
investors tended to be uh people I knew through working with Sam through the industry or people that I had worked with in my past jobs like I I worked my first job was at Goldman Sachs. So, I called some of the people from those days and let them know what I was doing and a couple of them said, "Yeah, if you're doing a little bit of this, I'll do some, too." Mhm. And then, um, I had some neighbors in there, you know. Um, I had I kind of wouldn't be pitching that I'm raising money for the fund, but if somebody appeared to be interested, I would tell them, you know, you're catching up with your friends or people, you know, you just say, "This is this is what I'm working on. This is my job."
Jan Brzeski
and and if they express interest, I'd say, 'Well, if you want to learn more about the fund, we'll send you some information about the fund. But I wouldn't I wouldn't push it because there's no reason to. And you know, I I it's it's sort of things happened organically over time. It was very slow though. I will tell you the capital raising was very very slow at the beginning because the amount of money I could raise per investor was about $100,000 or maybe 200. Oh wow. And so, you know, it's not a lot when you're lending out money. No, it's very much of a snowball kind of business. Yeah. Which is like you better not be counting on a lot of income
Taylor Avakian
in your first two or three years. So, walk me through the economics of like what was your pitch to investors? What was their return? How did you structure it? Were you getting a specific them a preferred return? Like, walk me through the economics of a fund, a private debt
Jan Brzeski
fund. Okay. Again, you're asking wide- ranging questions and there's we we ultimately did quite a few different vehicles there and they they now have grown even further um under Greg's leadership, my former partner and Seth. Um but the first fund did have a preferred return of 8%. We then um got rid of that for reasons that I could go into. We we decided not to have a preferred return. And um the economics for us are pretty simple. We would collect origination fees from the borrower and that was the majority of our income. Um there were some cases where some of that origination fee might go to the investors in the fund as well. But most of the time we charged you know call it a point and a half origination fee or something like that.
Jan Brzeski
And then that was most of our revenue and the rest of our revenue was an asset management fee that we charged to the investors which typically was about a 1% fee. Got it? So real simple economics is, you know, you're making maybe 60% of your revenue from the borrowers and 40% of your revenue from the investors in the
Taylor Avakian
fund. Got it. And what were the terms of the loans when you first started? Like what were you what were the rates you were lending out? What was the timeline on those loans?
Jan Brzeski
Yeah. So 2010 when I first started the fund, first fund, um we we were buying loans from Genesis for the first six months or so. Okay. And so I think I was getting at that time I think it was like a 1199 or 1299 was the rate that they would usually have. And then we had a we got a point. Um I believe that Genesis kept you know they kept a point and we and we got a point. Got it. And then I started originating loans directly because at one point um Genesis was not able to sell us the loans when we needed them. So that's when I met Greg actually um is you know he was a borrower. He became a borrower first and then he became my partner and now he's running the business. Got it. And um what was the other question Taylor that you asked about
Taylor Avakian
the the just the the economics of of the uh the loans? The rates. Yeah.
Jan Brzeski
The rates. Yeah. So, you know, that that changed and th those rates came down and down and down and down to the point where we were lending in the eights at one point, you know, to be competitive. And by the way, there's companies like Lone Oak that have been doing this extremely well for a long time and they would lend even a little lower rate than we would because their leverage point was a little lower and they didn't do any construction
10:00–20:00
Jan Brzeski
loans. So, our philosophy was always um let's let's charge a little more than Loan Oak, but let's make sure the borrower is getting real value for that and we could do some things that Lone Oak wouldn't do, but still safe. Got it. In our view. And um so, so the rates came down to the kind of the eights, low eights even at one point. Then they came back up into the tens and I think now they're coming back down into the nines. Got it. And in some cases there's back into the eights even though interest rates are a lot higher
Taylor Avakian
now. What is uh LTV typically on your first position loans? Yes, we do senior loans.
Jan Brzeski
Okay. And what what by the way I've been talking about what what what we what ORIXA does. Yes. I can't speak for them but this is to the best of my knowledge but I have my own business now too which we haven't talked about. a small new lending business that's doing somewhat similar loans and um smaller though and you know so I should probably speak to what can I what am I doing and how am I charging for it today because I don't want anybody to
Taylor Avakian
think yeah yeah yeah this is this is history yeah of course of course so uh are you lending up to 80% loan to cost like how are you protecting your borrowers I get I mean sorry your
Jan Brzeski
investors say so so my sweet spot spot is always around 75 loan to cost. Okay. If if I really like the borrower and I really believe in the business plan they're doing and the their projects and they have, you know, they've either got a track record or they've got a niche that's a very special niche where I'm confident they're going to make money. I feel like 75 loan to cost is okay if they're if they're going to get if they're going to make enough margin that we end up being around 65 loan to value when it's finished. Got it. Um, there are some cases in our industry where leverage points have gotten higher. For example, single family fix and flip loans in middle America or North Carolina where I started this business actually, my new business. Um, there are people advertising 90% leverage there. And I don't like that.
Jan Brzeski
I don't um I don't think that's a smart way for the industry to go. But we could go into why, but there are for certain types of loans there is higher leverage available now. Got it. But for me, 75 is kind of a sweet spot. We have pushed up to 80 um for some borrowers in order to win business if you need to, especially in North Carolina where you know where it's more common for people to be used to getting high
Taylor Avakian
leverage.
Jan Brzeski
Sure.
Taylor Avakian
And um and how what makes a good lender? Like is there are you really good at underwriting risk? Are you really good at generating business? Like where is the how do you differentiate yourself besides just the cost of what you're lending?
Jan Brzeski
Well, um, so what makes a lender really good is your question, right? Certainly, you have to have deal flow, right? You have to be getting good loan requests from good borrowers. So, I think the number one thing that makes a lender a good lender would be forging relationships with borrowers that you want to be lending to and having a way to systematically take care of those borrowers, do a great job for them so they keep coming back to you and then they refer you to other people. And then the other side of that which is you know equally important as a lender is you you have to perform and do what you said you were going to do every single time. Basically you have to find a way to not overcommit. And a lot of people, it's easy to say, but actually there's a lot of people that do overcommit
Jan Brzeski
and then they end up um harming their relationship in the market because they couldn't they couldn't perform or they retrade at the last minute or some investment committee in New York says, "Oh, actually, we're not comfortable with this loan, so we're going to cut the proceeds, you know, stuff like that." Um, I don't think you didn't ask what makes a good investment manager, but that's the other half of what we do, right? And so that's where avoiding bad loans comes in and and you know having a good track record and stuff like that. But this is one of the things I love about the business is there's two completely separate parts of the business. There's the one type of client which is borrowing money and you have to be great at lending for them and then there's another kind of investor who is just trying to place
Jan Brzeski
money passively and earn income and you have to do a great job for them also. And that that combination is what keeps it interesting to me and why um I can't, you know, I can't leave this industry. I'm going to do this for the rest of my career.
Taylor Avakian
I just like it so much.
Jan Brzeski
Yeah.
Taylor Avakian
This is this is what uh feeds you and you're good at it clearly. I mean, you're able to build a Rexa when you were there to one and a half billion, I think, assets under
Jan Brzeski
management. Well, I think I think we were we had more than a billion dollar loan portfolio when I stepped back and they're they're substantially beyond that now. Six billion or something like Well, they've they've originated they just announced 6 billion of loans. Jeez.
Taylor Avakian
Um since inception. That's crazy. So, let's um I want to talk about the new venture a little bit. So, essentially, you're trying to rebuild um a a new company, but ARIXA, it's a debt fund, right? How is this version different or how is it improved?
Jan Brzeski
Well, um I don't want to compete directly with a lot of different reasons. They they are great company. I'm friends with the everyone on the senior team there. I'm still an owner of the business and that's an important economically to me that that I protect that investment that I have in the business. Sure. Um, but at the same time, when I was in North Carolina, you know, a little over a year ago, trying to figure out what's the next phase of my career going to be all about, I did come back to this niche because I wanted to be able to work on a business where I knew how to do it. And I knew that I wasn't going to be um kind of making it up as I go and learning tough lessons along the way, right? Because one of the things about starting a business is that um
Jan Brzeski
you learn tough lessons along the way, right? I found that decisions have consequences and when you make decisions that that don't work out, I didn't want to have that happen. I didn't want setbacks that were like, "Oh geez, that was, you know, that was a that's a huge setback." I just wanted to feel like I was steadily being able to make progress. So, I did come back to doing similar kinds of loans but in North Carolina because I was living in North Carolina at the time and that worked pretty well. We found some borrowers there that needed the kind of service that we offered and the loans we offered. And so, I got the fund going there and then uh I lived there for about a year and a half. Uh and then 6 months ago um and that was for family reasons.
Jan Brzeski
6 months ago, my wife and I moved back to LA to our house here in in LA. And so we've been um pretty active in Southern California as well. And when I say active, I mean small scale compared to ARIXA. I think I think we're you know we're comparable to RXA in its early days
Taylor Avakian
now.
Jan Brzeski
Okay.
Taylor Avakian
What what is the size of the fund at the moment?
Jan Brzeski
So the fund is probably in the neighborhood of $12 million or so of of capital invested. Um we do have loans that we've sold. So we allow investors to participate in individual loans. Okay. And we might have another similar amount that we've sold, maybe another
Taylor Avakian
12. What does that mean when you say you sold the loans?
Jan Brzeski
Well, so so I originate a loan, let's say it's a $1 million loan, and I can turn around to investors that like to invest in loans and say, "Would you like to buy 75% of that loan?" And then we can sell them a loan participation and they they get their share of the income from that loan. Got it. And and so you free up some capital. It allows us to recycle the capital that's in the fund. It also has a little bit to do with my um agreement that I made with Orixa to limit my assets under management to a certain amount. So I I have a I have the ability to do more loans if I sell some of the loan production that I do. So that's a little different than when when I did a RIXA. um we were really doing at the first several years we
Jan Brzeski
only lent what we could hold on balance sheet through maturity and we didn't sell loans because there wasn't really a market for that at a time either and um this time around I'm selling you know I am selling actively you know maybe half or a little more than half of
Taylor Avakian
our origination so then the way that you're making money is you're originating the loan so you're getting a a point and a half or whatever on the origination so a million dollars you're getting what is that $15,000 000 right up front. So then you have a million dollar loan and then you're going and selling 75% of that to someone at $750,000 or is there a discount to it?
Jan Brzeski
No, it's it's at par. Um they do not typically participate in the origination fee. Okay. Since we've already funded that loan and it's on our books and they're um and they we we do charge a servicing oversight fee to them, okay, of 50 basis points. Okay. So that's how that's how our model works.
Taylor Avakian
And then because you have asset management fees as well for the for the fund, right?
Jan Brzeski
But yes, but we when we sell a loan, we're not charging an asset management fee to the loan buyer. Okay. Because we're not managing those assets. They are managing their own assets.
Taylor Avakian
They directly own a portion of that loan. So So you take less So you're getting less uh asset management fees when
Jan Brzeski
you sell loans versus keeping them on the books. Yeah, we get a different type of fee. It's, you know, I call it a servicing oversight fee. Um, but it's it's a smaller it's a smaller percentage and it's a um it's really designed loan sales are designed for larger investors that want to pick and choose which loans to participate in. Got it. And I think that investing in a fund is for people that don't want to be as actively involved in the decisions of which loans to do or whether
20:00–30:00
Jan Brzeski
to extend a loan or, you know, it's it's sort of two different types of investors
Taylor Avakian
typically. What do you think went wrong besides obviously interest rates going and jumping up as much as they have uh over the last like 3 four years? Why do you think there's so much quote unquote distress or lack thereof in terms of I'm this isn't '08, right? It's not It doesn't feel like that, but interest rates yet have it feels like it's a crazier change than it was previously. Like what do you think's happening there?
Jan Brzeski
Well, um the interest rates have gone up substantially from and and they're not going back down. And and that's I'm not the only person saying that. Um I like to follow Howard Marks from Oak Tree and he he um he's been saying that for a while as well. The the era of zero interest rates are effectively zero is gone. And so the the adjustment from that assumption that interest rates were super low and going to stay there to oh gez they're not that be that low. They're going to be more normal historically normal interest rates. You know call it 4% versus zero. That is an enormously painful adjustment. If you own any kind of income property, the the value of your property dropped substantially when the interest rates adjusted up, cost financing adjusted up, and cap rates adjusted up, which means values adjusted down.
Jan Brzeski
So that's number one. If it's a developmentoriented property like a a parcel, an infill land parcel that's designed for redevelopment or something like that, you also have the issue that construction costs went up. So, not only did the value upon completion go down, but the cost to build it went up for all the reasons that you know, Taylor. So, so that's a squeeze and that's why if there is um if there are loans that that aren't performing um it might be for either of those reasons or a combination of those types of
Taylor Avakian
things. Are we headed for more pain or do you think things are going to get easier with the macroeconomics? the Fed, they said they're going to reduce the rates like but there's still a lot of distress coming on. What does it actually mean? What do you think is going to happen if in the next 12 months do you think the Fed's going to reduce rates? And if they do, what do you think that's going to mean for the overall market?
Jan Brzeski
Right. So, I um I have my what I call my circle of competence and projecting what the Fed's going to do is outside of that. I'm not I'm not um I don't like guessing and so but I will I do have a point of view as to you know will there be more pain. I think that that um yeah, I mean commercial real estate in California is is in a painful spot in a lot of ways because I think it's not just all the stuff that we've been talking about, but there is concern about policy and and will will California voters and elected officials choose to pursue more policies that are anti-developer, anti business, right? Um, and that's a real
Jan Brzeski
threat. Like, will will Los Angeles go the direction of San Francisco and try to be more practical or will it go the direction that New York might be going, which is less practical. Let's go back to, you know, let's go back to the policies that we tried in the 70s. Well, they didn't work very well in the 70s, right? So, I think I do think that a lot of investors are saying California is is a is a challenging place to to invest. And I'm sure some of your other guests have talked about, you know, seven years ago, you say, "We're in Los Angeles. We're doing real estate investment in Los Angeles." And the the interest level was high. It's one of the top cities in the US. It's a place people wanted to be. Now, it's kind of the opposite. I think when when big investors when you
Jan Brzeski
tell them Los Angeles, they're scared. And and I think they should be. I mean, I think they should be a little scared until our elected officials turn it around and start being more practical and and showing that we can solve problems, you know, showing that we can do things as a as a city. Uh, and not just always pointing a finger at people that are doing well and saying they're the problem, you know, they're not always the problem. They're creating jobs. They're being entrepreneurial. They're doing what entrepreneurs do. And if you continue to to villainize those people and demonize them and say that because they're doing well, they they're bad and we should tax them more and we should, you know, make it painful for them. Well, some of them are going to leave like Elon Musk did. Yeah. And I I think LA was lucky to
Jan Brzeski
have Elon Musk come down here from Silicon Valley when he did and he created a lot of jobs and he's created some really interesting companies and now he's gone and that's you know that's too bad. We want to attract people that are doing cool stuff. So I'm I kind of went broad with your your question broader answer but I think that I think that lending will continue to be very active. I think real estate investment will continue to be active because California is such a huge economy and there's a lot of these properties that are just aging and need to be rethought. They need to be re-imagined. There's SB9 which is I think very promising for smallcale development in residential neighborhoods adding a few units in the backyard or a couple units. I think I'm very bullish on that. But I do think that the era
Jan Brzeski
of, you know, big projects in urban infill LA, I'm not expecting to see a lot of that in the years ahead. Yeah. Um I just don't know if you can do a big a big project, why would you choose LA to to invest large amounts of money when what if LA passes some rent control thing where or vacancy control worse? That's a that's a too much risk.
Taylor Avakian
It is a big amount of risk and I think that's sentiment is really what is uh keeping the prices low in my opinion because at a certain point most of I'm selling deals that are positively leveraged day one right and I couldn't say that for Los Angeles my whole career this wasn't around and um so it's in I think the reason of that is because of this uncertainty regarding it no one can predict the risk of what's going to be happening so are you telling me that if rates hypothec ically, right? You're not predicting, but let's say rates do come down 75 basis
Jan Brzeski
points. Which rates?
Taylor Avakian
10-year treasuries or short-term rates? Let's just say that the Fed funds the Fed drops their rates 75 pips. And obviously, most of commercial is is pegged on the 10-year Treasury note. So, just because the Fed funds rate comes down doesn't mean that the 10-year Treasury is going to come
Jan Brzeski
down. Not not at all. In fact, the 10-year Treasury is is kind of the benchmark that I think is most affects income property values, right? Because it affects permanent financing, long-term financing rates. And the 10-year Treasury is more linked to what is investors confidence in treasuries, in sovereign debt. You know, do they believe we're going to solve our budget problems as a country or not? And so I don't think short-term rates and long-term rates are are linked or correlated that much. And um again, I mean, unfortunately, I think there's risk there, too, in terms of we haven't been able to solve our budget problem nationally. Yeah. Right. And when Doge tried to cut cost, Doge was ridiculed and the people involved in it, you know, I just think again there's a lot of times where as
Jan Brzeski
a society we kind of demonize anybody who's trying to cut costs. And the reality is we have to cut costs. Yeah. We have to find a way to bal come bring the balance budget more into balance. We can't just keep piling on national debt. And if we do, at some point, the investors are going to find something else to invest in safe that they feel is safe as well. And then our long-term rates could be higher. And then that would affect, you know, uh, mortgage rates on
Taylor Avakian
perm financing for apartments as well. So, you're saying that you think are values going to go up?
Jan Brzeski
Well, yeah, I do think values can go up over time for a lot of reasons. Um, because this is complicated, but, you know, I'm I'm happy to go there because I'm very interested in this stuff. Yeah. Um but it's it's very likely that there will be inflation pressure again and we we had a little reprieve from it. It popped up and then we had a reprieve. But long term there's a lot of reasons to think inflation will come back and that will lead to higher rents unless there's rent control, right? Mhm. And that will lead to higher values cuz ultimately the rent and the income are are the driver of the value and the cap rate as well. Sure. And I don't think cap rates are going to go way up from where they are. I mean, I don't know if it's a six today.
Jan Brzeski
I don't think it's going to be a seven or an eight in the future. Yeah. It could go down to a five, right? But but the bigger driver is what's the income going to be. And I think the income will be higher because I think that inflation will come back and everything's going to be higher.
Taylor Avakian
Mhm. So, you think next year, because I'm having this conversation cuz LA has been locked up for like the last since 2023, the beginning of 2023 when rates started jumping up. My business velocity just was like right in LA. everything was down 50 60% year-over-year in terms of number of transactions because buyers could not get uh their hands on the values and prices that sellers wanted from you know the the
30:00–40:00
Taylor Avakian
previous decade and era. So what I'm hoping is that we get to a place where I can sell deals in the five cap range because I think there'll be sellers there, right? And if the numbers make sense, buyers are willing to buy there. Do you think that happens in terms of the economics? Do you think the numbers are going to make sense if something happens with the rates or are you saying that you think the current uh debt rates that are happening right the the six five five and a half to six and a half from more perm debt is going to be there even if the federal funds rate comes
Jan Brzeski
down again um I feel like I'm outside of where I'm comfortable having a strong opinion on that but the core question you're asking was was whether there you know will transaction volume return because there's sort of a there's a bid ask spread that's too big right now has been too big um and I I don't have the answer to that I mean I think just using my observations of being in this industry since I worked for Sam in the early 2000 early 2000s one of the things that drives apartment values is people have seen it as a good thing to invest in for retirement right? Affluent people either own a building or participate in a syndication on a building. That's been it's been a very popular thing to own. I do think that our policy
Jan Brzeski
um in a lot of ways in LA and also beyond LA and Southern California, the policy makers and voters have been signaling that they don't care too much about investors. I mean, ULA is an example. Yeah. That was awful. I mean, for investors, that was just a way of it's it's almost it's put a huge damper on transactions and on development. Yeah. Because 5% of your sales price is probably about 50% of your profit. Yeah. And it's probably about, you know,
Taylor Avakian
20% of your equity gone to new tax.
Jan Brzeski
Yeah. So, that was one signal. Um, and and then I think this whole rent control thing I again I don't know what's happening with that. You would know a lot more than I do, but there's a general feeling of us versus them that I'm that I'm feeling out there. And it feels like um a lot of voters would vote yes, even if the consequences are terrible for real estate investment. I think there's a lot of people that would vote in favor of some sort of rent control or even vacancy control. Mhm. And and there's not, unfortunately, I don't think we believe in the free market as much as we used to. I mean, we used to say, let's let the market take care of this. It'll produce what we need. Um, I'll say on the positive front, sorry to blab so long, but on
Jan Brzeski
the positive front, um, I do think that SB9 is a very positive policy change, okay, that will encourage production of housing.
Taylor Avakian
Can you explain SB9 to people who don't know?
Jan Brzeski
Yeah, I mean in short, this was passed back in late 2021 and it lets you build a couple of ADUs in the backyard if you have, you know, assuming you have room for it and a lot of houses do have room for it. And it was a way of getting more residential units into the urban infill residential neighborhoods. It didn't really get implemented very much because the cities were still figuring out what it meant and I think developers hadn't figured it out yet. But I'm starting to see now there is a growing number of developers who are coming to the cities in different cities and saying under this state law we can do X and this is our plan to do it and the cities are starting to to approve that and in some cases they may have no choice but to approve it because
Jan Brzeski
it's state law which trumps local law for the most part. Got it. So I think it's encouraging for production of housing which will help on the margin. And I think it'll help with affordability of housing and it's dropping housing in the right places. It's also competition for apartments which is interesting which Mhm. I think it's a superior investment opportunity to multif
Taylor Avakian
family. Why do you say that?
Jan Brzeski
Well, um if you buy land to build a 10-unit multif family property in LA, you're going to be paying how much for that land per unit?
Taylor Avakian
Yeah. I mean between 40 40 50 40 to 50 per door.
Jan Brzeski
Yeah.
Taylor Avakian
For just for land.
Jan Brzeski
Just for the land. So So maybe to build 10 units.
Taylor Avakian
Well, it depends. I guess depends on it depends on the the most people are not going to build 10 units on lots in LA because uh most lots are like 50 by 150, right? So it's 7500 ft. So you're going to try to build more density.
Jan Brzeski
Well, I guess what I'm saying is apartment land trades at a certain price, which has been pretty high. Yes. Per unit. You pay for the land per unit a pretty high price. And what SB9 is doing is it's making it so that um you can build units on the backyard of almost any residential parcel, especially if it's a larger parcel. and and and generally buyers are not having to uh pay such a premium for that that backyard land is getting thrown in for a relatively reasonable extra cost, not that much increment. And so they're getting they're getting land at below market value. And that's why that's why it works because it's it's allowing them to build a new unit and rent it out. and instead of having to rent it out for X, they can rent it out for 20% less than
Jan Brzeski
X and still make money because they bought the land.
Taylor Avakian
Well, so you think people are going to buy homes or duplexes or triplexes as investments, right? And then build those and and kind of make it like a quasi apartment complex.
Jan Brzeski
No, it's happening. I mean, they're we're lending to people that are doing this right now. They're they're building, you know, they're building forplexes, but they're building them in residential neighborhoods, not in multif family
Taylor Avakian
neighborhoods. Interesting.
Jan Brzeski
Do you have to lots split or is there any Well, you can. There's other laws that are allowing for You do not have to lots split, but but the ability to sell those new units, Yeah.
Taylor Avakian
as condos. Yeah. Wouldn't something pass? And I I don't think Doesn't the city of LA have to adapt that to then be able to because that was when it first came out. Uh people are saying you could sell
Jan Brzeski
ADUs and and in San Jose there are ADUs for sale right now. The first city to allow that is San Jose. Wow. And I'm watching that carefully. But I think I think this could be terrific for California because again it could be a way for people to own their own home. Their yard won't be as big as their neighbor's yard. But who cares? I mean if you want to live in California, raise a family, you have some outdoor space for your kids.
Taylor Avakian
Sure.
Jan Brzeski
You don't have to have a huge yard. Yeah. You know, New York City in Manhattan, people aren't expecting to have a huge yard and a lot of people want to live there. So, why do we have to have all this wasted backyard space that is grass when it could be housing for families that that have, you know, that have jobs
Taylor Avakian
here.
Jan Brzeski
Yeah.
Taylor Avakian
Yeah. It's interesting. I think um again, LA's in California is a pretty nimi state, I would say.
Jan Brzeski
Right.
Taylor Avakian
There's a lot of laws that are Newsome and and uh the state is trying to do a lot to make that not the case, but people don't I mean, you know, no one wants a six-story apartment building next
Jan Brzeski
to your single family home. Yeah. I mean, it's it's fascinating to see how the state laws which are yimi. Yes. In my backyard, yes. Pro- housing development, pro affordability through extra housing. How will that interact with the local nimi culture which has
Taylor Avakian
do been so dominant for so long?
Jan Brzeski
But I wanted to mention that because I said some stuff earlier in the interview that was concerning about policy. Right? This is a policy initiative that I think is potentially very beneficial and and it's very innovative thinking. It's a land use change that could allow us to have more housing which could on the margin bring down the cost of housing.
Taylor Avakian
Are there any policies you're tracking or that you think potentially could happen that would even improve that further?
Jan Brzeski
Well, I mean, there's a whole bunch of laws that have been passed beyond SB9. Some of which allows for, we were talking about, you know, sale of condo ADUs. Some of it may allow for lot splits into smaller lot sizes. Um, some in some cases it might be possible to build more than four units on a lot. And so I'm trying to understand all of those things and watch them and see how they play out. And we're actually doing a um we're doing a a virtual panel discussion with some developers from different parts of the state that are doing this. Okay. To talk about what's their experience, how's it going, you know, um what are the obstacles they're facing, what's working. And so if anybody's interested in that, um then message me and I get you the info about that conference.
Taylor Avakian
Yeah, that's super interesting. I'm I'm cuz developers are the ones who feel it, right? They're the ones risking capital. So, they have to figure out what makes the most sense. Where's the alpha in the opportunities?
Jan Brzeski
Developers are are putting capital at risk. They're taking, you know, putting enormous effort into these projects and we we want them to succeed. I mean, for them to if they succeed, that's
Taylor Avakian
good.
Jan Brzeski
Yeah. Yeah.
Taylor Avakian
I agree with you. I think it's uh funny how many times I have to repeat myself, but supply and demand still exists. And so if you want rents to come down, then just make
Jan Brzeski
more supply.
Taylor Avakian
It it works everywhere I've ever seen it be done. So if we can make it easier to have more supply, then all these rent problems, rent going up, yada yada yada. Maybe it's not great for the investors, but most of the people who are voting don't care
40:00–50:00
Taylor Avakian
about the investors as they've clearly said. Make it easier to build. Like that is the solution to all of your your problems uh or most of the problems when it comes to the rent at least. Can you tell me about the the palisades and the fires? you're I I was surprised to hear that you're doing like your own podcast series, but what's what's the fascination with that or where what's the story there?
Jan Brzeski
So, so I moved back to California um about six months ago right after the fires had happened and so it was top of mind and in my prior business at Orixa um I we had made a lot of loans especially in the Palisades to builders that were building homes there and so it immediately occurred to me that some percentage of these homes are going to be rebuilt are going to be built by developers not necessarily by owner occupants not everybody who lost cost their home is going to be able or want to rebuild their own home and move back in. In fact, I think the majority of homes will end up being um sold to developers and those developers will devel will will be the driver of spec homes. I think that I think that's going to be the driver of the rebuilding. Okay. A little over a majority. Sure.
Jan Brzeski
Or in some case maybe in Altadena quite a bit more than half. I'm not sure yet. But um it was very simple is you know first of all this is the city that I raised my kids in. This city that where I made my career in real estate happen and what can I do to be helpful in this moment of incredible challenge to our city and I realized if if I could be a lender to some developers in the fire zone on the margin that's going to help a little bit. So let me figure out how to do that. And in order to do that, I needed to get informed about what's happening with the rebuild and what are the big obstacles and you know how's it actually rolling out. And so I realized I needed to start talking to people and I decided that
Jan Brzeski
if I have these questions there probably other people have similar questions. I thought of doing some live events about it but then I realized doing it in
Taylor Avakian
an interview series was a good first step. So then what is your findings? What have you what have you discovered?
Jan Brzeski
It's still really early days. Um I've only interviewed four four folks. so far and I've got you know another maybe another 10 coming up between now and year end. Yeah. But um unfortunately I have become a little discouraged about the timeline for rebuilding through my initial research on this. Initially I was thinking give it 10 years and these communities are going to be thriving. They're going to feel like you know fully functioning neighborhoods again. Yeah. I'm starting to feel like it could be longer than that. Um, and that's that's unfortunate, but I think that the there's there's a great silence coming from our leaders and policy makers about the fires right now. I it it's and there shouldn't be. And again, I don't know how else to say it. There needs to be some leadership. There is there is a structural problem in the city of LA
Jan Brzeski
and LA County that there's not a strong executive function. It's very distributed power among city council members or county supervisors, but that is turning out to be not a good thing for rebuilding. We we what what I think we need is somebody to get out there and say we're going to make sure this rebuilding happens and we're going to whatever the obstacles are, we're going to find a way to blast our way through them. You know, bring me the next OB.
Taylor Avakian
What's the obstacle today?
Jan Brzeski
Decision made on to the next.
Taylor Avakian
What's the next option?
Jan Brzeski
Decision made onto the next. That is the opposite of what's happening. Yeah.
Taylor Avakian
Do you think Caruso is that person?
Jan Brzeski
Well, I again I mean I do think he runs his shopping centers well and so he probably would in a certain way be a good manager executive for the city and I don't want to get into politics and I don't want to speak in favor or against any particular person. I'm just saying to get a rebuild done you need an executive function and you need a visible leader in front of that. And that is very much absent right now. It's it's a dispersed um effort and there's not clarity on many of the big questions are unanswered and um so I've become a little
Taylor Avakian
concerned that it's going slowly. Do uh does any of this AI tech when it comes to like streamlining the rebuild effort is is it is it is it fugaz? Is it legit? Is it you know?
Jan Brzeski
Well, the the latest person I interviewed was um Kennedy Zach from the Los Angeles Business Journal, who's written a series of stories about Rebuild, and she's been following some technology innovations that that should be that might be helpful on the margin. Um I I have not seen anything where I said where I've said, "Wow, that could make a huge difference here." I I feel like our industry of development is still doing things largely the way it did um 50 or 75 years ago. Stick built, you know, like building a house is pretty much the same process now as it was 75 years ago, which is incredible if you think about it cuz think how much the world has changed in that time. Um I'm eager to see breakthroughs that change that, but I haven't seen anything yet where I would say that's a breakthrough. and and you know
Jan Brzeski
factory built um how building components and and doing as much of you can in the factory is has been the big hope for a long time that it would take cost out of the equation take time out of the equation but again I haven't seen it in
Taylor Avakian
practice yet where it's making a breakthrough it's maybe a little bit from what someone was telling me a developer they're like it maybe saves you a couple months on something but the costs are about the same it's not anywhere cheaper than if if maybe a little bit more expensive I guess um in terms of actually getting it done. Is is that what you're seeing too?
Jan Brzeski
Well, um I think the costs the costs are probably similar. Um and it could save you some time, but we wanted to we wanted to encourage innovation at at when I was at a Rexa when I was running. Um I I liked the fact that as a lender I could be a little bit innovative and back people that were doing innovative stuff that helped address our problems with housing, right? affordability, all all the issues that that you know about. So, one of the things that we we did is we lent money to some people that were doing um factory-built town homes. And in one case, what happened was the factory completed the town homes, but the foundations weren't ready yet. So, they the the developer was not ready to take delivery of of all the h houses that had been built in the
Jan Brzeski
factory. Right. So there was a big dispute that happened. Then the factory and we shouldn't be getting involved in this at all. But the factory was saying like we're not holding on to these. We don't have space for this stuff. We are not going to hold it. And the developer was saying it's not my fault that this foundation is running behind and I'm not ready to so factory built has those kinds of challenges. Interesting that that are not there with stick built logistical. Yeah. Logistical. And overall I would love to see innovation come into into our industry more but I am not seeing anything that I'm would say what a breakthrough that is. It's not like chat GPT you use that or the internet when it came around which is you know you would remember probably came around while you were a little kid but um
Jan Brzeski
when you when we saw those things like we knew this is changing the game big time. This is completely revolutionizing things. Yeah. you can feel it. Um, I don't see that in housing. I don't see that in construction and development. I don't see anything like that yet. I hope I'm wrong, though. So, tell me if I'm missing something.
Taylor Avakian
Message me and tell me about it. Yeah, I'd love to know, too. I think it's about time. Um, we're real estate is an old industry. We know that, right? We're behind 20 years for most other technologies. So, um, there's a reason it's hard and clearly there's a reason people want to put money into it because it feels like it's like about time to do that. But clearly there's there's other factors that make it just really hard to bring up to the times. Are you using any technology, AI, anything in your actual lending business? Like are you trying to figure out how to streamline underwriting or um valuing borrowers or are you are you doing anything from a tech from your actual lending business?
Jan Brzeski
Well, I I want to be a fast follower in adopting technology. I don't want to be the pioneer figuring out if it works, but anything that works, I want us to incorporate it into our business quickly. Um, I have a son that works in the AI industry in San Francisco, and so he and I have take had a couple of conversations about how might that apply into the lending business. Um, but I see our business as very much um, serviceoriented. And so the analogy we use the most is I use the most is in-n-out, right?
Taylor Avakian
Why do we Why do we both love going to In-N-Out?
Jan Brzeski
Yeah. It's not because they have some special technology. It's because, you know, it's clean and the person that takes your order smiles at you almost every time and the food is consistently really good and the presentation of food is amazing, right? It always looks perfect. Yeah. And those are the things they get right and that's why they win. And you know, they're not the only ones that win, but they win big. Yeah. In in my view. and fast food. They're they and Chick-fil-A on a different level than everybody else. And that's how I see lending as well is we're service driven. We have to deliver those things that the borrower or the investor care about and using technology may or may not help, but it's not what your customer ultimately cares most
Taylor Avakian
about. What What is it? What What do they What makes a good serer of you mentioned
50:00–1:00:00
Taylor Avakian
for your borrower, right? What makes a good lender? Like what are those things that they actually do?
Jan Brzeski
Well, I mean, first of all, here's my business card with my cell phone on it. Call me anytime if you have any concerns. Okay, that's number one. Yeah, like being having a direct access to a decision maker who can say, "You got an issue that's out of your control. You need some extra time on that or you, you know, you want us to this would be a default technically, but we're not going to make it into a default." That's what matters to borrowers, right? Um, I think that be be certainty of execution, getting decisions made quickly, being able to meet your lender at the property and have them show up on on fairly short notice and make a decision, tell you what whether they can make the loan or not. Obviously, rate matters. Um, but but it's not it's not the number one thing because we're all pretty similar,
Jan Brzeski
you know, we're all within a little range of each other. So, I don't think rate is the biggest driver for for our borrowers either. Um, what else makes a good lender? I mean, being able to perform and as a construction lender, that is easier said than done as well because when we make construction loans, we're committing to have liquidity when the borrower is drawing down their construction loan. Yeah. And some some construction lenders have gotten too excited about making loans and not worried enough about their future liquidity and not planned enough contingencies for making sure they can fund all their construction draws. So that is hugely important to our borrowers is can I trust Jan and his team that they sweated the details so nine months from now when I say I just did this phase. I need a $200,000 construction draw.
Jan Brzeski
What you don't want your lender to say is great. Um, give me a week or two and then we'll be ready to fund that. That is not the answer you want. Yeah. So, just being, you know, prudent and thoughtful about how to run the entire business
Taylor Avakian
is what matters. How what's your plan to to become massive again? Because I know it sounds like to me that you're you're pretty much you want to build something great again. You want to build that the next big thing. Like, how are you going to do it?
Jan Brzeski
Well, I being massive is not is not anything like the goal. I mean, I I don't think we need to be a big company. Okay. Um I like growth because it's fun to to have growth and it creates career opportunities for your team and um and it happens naturally when you're doing everything else right. It happens naturally just like In and Out, right? They're growing because why? because you go in there and they keep on they keep delivering the goods every time. If they screwed that up, they would not be growing anymore, but they haven't screwed it up. Yeah. So, they took a long time to get big, right?
Taylor Avakian
They were small regional for a long time.
Jan Brzeski
And that would be just fine with me, too, is we're regional in North Carolina, central North Carolina and Southern California. That's where we are. That's where we have boots on the ground. And I want to be known as a great lender to work with in those areas. first and foremost. Okay. And if it grows and gets bigger over time, great.
Taylor Avakian
But that's not the goal. So then, but let's say you do want to grow, right? Which which a little bit, but you don't need to be massive. Are you spending time going on investor meetings? Are you reaching out to brokers? Like who's bringing you business to grow the the the business?
Jan Brzeski
Yeah. Well, um, in order to grow, we need three things, right? And I spend time on all those things. One of them is we need borrowers contacting us. And I like doing events on topics that I think are interesting because it attracts the kinds of people that are potential borrowers. Yeah. Um I also think it's incredibly important to get referrals from your existing borrowers because that's a sign that you're doing your job right. Right. So you need that. You need capital. And yes, we are spending time talking to capital providers of various kinds and that's a slow process, but certain percentage of time goes to that. Um, again, I like doing a lot of writing. So, I find that that's another way to raise capital is to be considered an expert. Um, and sort of like let people know indirectly that I have
Jan Brzeski
a good track record as a as a portfolio manager. Sure. By writing about how do we, you know, how does this industry work? Um, so raising capital is the second part. The third part for growth is operations, right? And let's go back to In-N-Out. Um, it doesn't matter. Nothing else matters if you get your burger and it looks terrible. Yeah. It's like game over. Yeah. They they lost it. Uhhuh. And so you have to get the operations precisely right. And you have to get it right like 99% of the time.
Taylor Avakian
What does that look like? What is a what is a perfectly assemblylined operations from borrower contacts you
Jan Brzeski
to actually finding the loan and then well it's pretty easy in our case to to figure out if we did it or not because if you ask the borrower did we do a good job for you or not and they say you did a great job for me then we did it and if they say anything other than that then we didn't do it and um I'm very fortunate because with Greg who runs now we We kind of created our own formula of how we thought borrowers should be treated and it turned out to be a really good formula and you know I feel like I have a a vision in my head of how to service borrowers and how to do this whole business which we kind of developed together and you know I started it a
Jan Brzeski
few years before I met him and I gave him great service on the first loan I made to him. That was like the that was the template was driving down to Orange County on a Sunday morning after meeting him on a you know Saturday and calling him on the way back saying, "Yep, we can do this loan." And he remembered that. He impressed him. And that was our that's kind of our brand statement. And I think that we're going to stick with that. You know, we want to we want to impress our borrowers. We want to go the extra mile. We want to take care of them. We want them to succeed and and they need us to be really good at this for them to not have to worry about the loan part of this because there's enough other things
Jan Brzeski
they have to worry about like construction costs, getting approvals for everything, you know, um buying property at the right price and all those things.
Taylor Avakian
It's really hard to do what they do. Mhm. What does your back end look like when someone calls you and says, "Hey, I need a loan for this." Like what h what what parts move? Yep. When you get that initial inquiry?
Jan Brzeski
Yep. So, um, so if I have somebody contacts me about a possible loan, I will qualify it myself based on does it fit our model or not. Okay? You know, if it's a if it's residential, kind of under3 to $4 million, non-owner occupied business purpose loan, we're probably pretty open to it. Now, the location should be somewhere that we can get to easily. And if it's not, we may not be the best lender for that. And I like to refer to other good lenders if I can't do the loan. I find that that's that's a way of getting referrals back. Yeah. As well, right? We like referring to each other. Um but if it's in in our region in our strike zone, I'll bring in our head of operations, lending operations. Um and and also we have a local originator in LA. Um, so both of them I will
Jan Brzeski
introduce the borrower to both of them and say, um, we're we want to check this out. We want to let you know what we can do. Let's set up a time to meet you at the property. And then I'll show up for that meeting. I like to see the property myself and meet the borrower, but but in addition to me, our local originator will will do that. And then um our our head of lending operations will he knows to make sure that things need to keep moving. Communication needs to keep moving with that borrower
Taylor Avakian
or broker if it's a broker, right?
Jan Brzeski
And um we just need to consistently let them know where are we, when are we going to be able to get you a letter of intent, you know, are we on board with your closing deadline? If we're not, if we don't think we can do it on by the closing deadline, then we have to say no right away. We have to let them know right away, hey, you know, this closing in two days, we can't do that. This closing in seven days, we could probably do that. So, you can do loans in seven days because we probably could, but typically two weeks is a nice lead
Taylor Avakian
time. What happens? So, this is always what where inefficiencies for me, I'm like, why the does it take this long to understand if you can lend on a property? Cuz I can do I can value a property in about 30 minutes.
Jan Brzeski
Yeah. if less like you know I can I can almost look at something and be like okay this is gonna make sense. That's half the battle.
Taylor Avakian
Valuing the property is half the battle is that what takes the most time for
Jan Brzeski
lenders. Well it shouldn't take that long value the property. Um but the other thing that matters is is deciding is this a borrower we want to work with? Right. And like background checks. Well that that yeah we do a background check the first time we lend to somebody. But just is this borrower going to appreciate what we have to offer?
Taylor Avakian
Are they going to treat our team, you know, well?
Jan Brzeski
Yeah. Because we life's too short to work with borrowers that don't treat your team. Sure. You know, with any respect. So, um then there's also the execution part, right? Because most of our borrowers are doing um projects where there's construction involved. They're adding units, they're adding square footage, they're, you know, building something and or renovating or both. So then you have to get kind of get into is the execution um is is this borrower qualified to execute on the project the way they're saying they're going to got it. And if they can't do it themselves, have they built the right team around them? Like do they have a strong GC?
1:00:00–1:10:00
Jan Brzeski
And maybe we need to look at that GC's experience and maybe that compensates if the borrower hasn't done a project quite like that. Sometimes people want to do projects that are outside of their own uh circle of competence. You know, that's always a big red flag is is the the person that's been doing mill $1 million projects that suddenly comes to you with a $15 million project. They're probably going to get in trouble with that. Yeah, I've experienced that personally actually on a multif family um where someone had done a lot of smaller projects and then they got into a bigger project and they just didn't have the stuff they had worked out that worked for them before just didn't work on the bigger project. Yeah. And you know it is what it is. Yeah. And so you we're taking we're going along with the borrower.
Jan Brzeski
Choosing the right borrower is actually the majority of the challenge for us. Got it. Because if we choose good borrowers who who make money consistently, who who know their lane and stay in their own lane, they're going to make money most of the time and they're going to pay back their lender almost all the
Taylor Avakian
time.
Jan Brzeski
Yeah. And we're not lending 100% of cost. We're lending 75, let's say. So we have a margin of safety there where even if a project goes unexpectedly a different direction or the market changes a lot we should not lose money other than in the rarest of
Taylor Avakian
examples. So if I wanted to get money from you in seven days what would I what would be the best case for me to bring to you to be like okay this I can make this happen in seven days like what as a as someone who a borrower like what can I give you to make your life easier?
Jan Brzeski
Well, you know, if you have a project and it's closing in seven days, that probably means you have another lender that didn't perform and you're making a purchase, which is very advantageous. Something like that, right? Um, so I would answer, the way I would answer that is, let's meet at the property, give me the address, how how soon can you meet me there? Okay, we'll go down there. We'll check it out. We'll see what's going on. And you're gonna you're probably going to be saying, "This is an extremely advantageous purchase. That's why I don't want to mess with escrow. I don't want to ask for more time. I don't want to go back to my seller." Right? So, I I want to validate. You're saying you're buying it at a great price. Help me understand that. Help me see that you actually are buying it at a great price.
Jan Brzeski
If you're buying at a great price relative to market, that's good for me as a lender because it's more margin of safety. Yeah. Right. Yeah. For sure. And if you have a plan to do something with it, that's incredible value ad, that's good for me, too. And but you need to be qualified to execute on that plan,
Taylor Avakian
right? Do do the borrowers show you our broker comps? Like, do they come with you to with comps about, hey,
Jan Brzeski
here's Yeah, we love we love having comps, but um we also want to get our own independent point of view one way or another. So, you know, I might be calling you to get your opinion about a loan that somebody else brings me in the future because, you know, I know that you know multif family in LA. So, I think a lot of it boils down to having a brokers that you really trust and and I always like to tell them brokers or realtors in the single family area. I always like to tell them like if I make this loan and it doesn't work, the borrower something happens to the borrower and I have to get it sold. I need to know what will it actually sell for. Yeah. Not what's a reach value or we hope it could sell for this or if we find that one buyer, yeah,
Jan Brzeski
it could sell for this, but more like liquidate this for me in 60 to 90 days.
Taylor Avakian
What's that dollar number?
Jan Brzeski
Got it. Don't exaggerate. Don't tell me what you think I want to hear. I just want to know the real kind of market clearing price. Not a distress sale price, but definitely not a reach price.
Taylor Avakian
Got it.
Jan Brzeski
So, I don't know how we got into that. No, no, no.
Taylor Avakian
I I because I like to understand how how the cookie is made, you know, how how the dish is made because sometimes I don't get a look into why things take as long as they do or why someone says they need an extension. Like, I don't I'm not dealing with the actual borrowing of of the assets or connecting with their GC or all that kind of stuff that goes because I'm a broker. I do the sales stuff. So for me to understand what actually is happening behind the scenes, I think it helps me to then relay that information to the seller or to the buyer or whatever it is because certain things to me feel like they they take longer than it should be.
Jan Brzeski
But again, I'm not in there doing it. Well, I mean, a big reason that lenders take a long time is when there's multiple layers of decision makers and committees. Yeah. and then just organizing schedules and getting people to see it and write ups. That's why that's why I'm convinced that we can compete even though we're new in on this seeing his new company. um because I can personally show up and see the property and I am the investment committee right for my company and I'm also the biggest investor in our fund and so you know that's competitive that's that's valuable speed and in terms of your questions speed and certainty of execution right um the other thing you asked was what else has to happen if someone needs to close in a in a week or two after we've meet at the property together and I get a sense that
Jan Brzeski
this really is a good buy you really our borrower that I want to work with. There's a lot of stuff that has to happen behind the scenes, but it's our job to let you know this is what we're going to need. Get it to us quickly. We will turn it around and we'll make sure that we hit your deadline. And that's a big part of what again is part of the formula that that I worked out with Greg was, you know, let's make it as easy as we can on that borrower. But the borrower still needs to give us the stuff that we need like um you know, like your track record. We want to know if you're a first-time borrower from us, what projects have you done?
Taylor Avakian
What have you owned? How did those projects work out?
Jan Brzeski
Like share share that with us and hopefully you've got it organized in some way. and you know, we we can see that you're capable and and experienced. Um, not every borrower is super experienced, but it's our job to say once we've met you and said, "We like this loan, get you an LOI. We have a signed LOI." It's our job to say, "These are the things we need. There's no box checking here. It's just what do we really need to know that this is a safe loan for us so we keep it to a minimum and then get us that quickly and we can process it and turn it around and you know if there's anything in the background check that's going to pop out tell me about it up front. Yeah. Like I want to know now so I can make a decision about it.
Taylor Avakian
The last thing I want to talk about is the actual money because we talked about this on our prep call and it was just I like again how the how the cake is made. Let's have a billion dollar uh debt fund billion dollar assets under management. What is the money being made? H how does that typ and again round numbers right? But like how much money is a debt fund that's worth a mill has a billion dollars under management? How much are they making? How does the revenue work?
Jan Brzeski
Yes. Yeah. So I think in private credit and this applies to real estate private credit and other forms of private credit, you can estimate the revenue of the company that runs the fund and that that originates the loans by by taking a percent like maybe one to two or two and a half% depending on the details and multiply that by the size of the loan portfolio. So, a billion-dollar fund, if their model is that they have a 2% revenue on that, maybe they get a point from the borrower and they get 100 basis points a year from the investors on average, that would be a $20 million revenue for a billion dollar fund. And um you know, and there's there's big companies in private credit like Aries, one of the biggest, and they're here in LA, started here and and you know, that's a company has a lot of revenue.
Jan Brzeski
uh they have a more than 100 billion well more than 100 billion of private credit and they're so that means they're probably looking at you know one and a half billion a year of revenue minimum. Wow. On that 100 billion of of private
Taylor Avakian
credit and the profit margins are like 30ish%
Jan Brzeski
typically. I think it I think it varies. I mean um in the investment management field though 30% is probably about about where you want to be. Yeah. you know, I think 25 to 35 or even 40 is the range. But okay, whether you look at at the the big guys like Blackstone, which is public of course, or small companies, yeah, it's not you don't want to be running this type of business on a small small margin. And you know, because the key people that do these businesses are they are taking risk um in different ways. And so just like if you were doing a real estate project, you wouldn't want to do it based on I can make, you know, I think I can make 7% on my money there. Yeah. That's not good.
Jan Brzeski
You want to you want to go in knowing I think I can make a good margin on that because it doesn't always work out, right? Totally. You're going to have expenses that come up unexpectedly. You're going to have setbacks as a company. So you need to build in you need to aim for a healthy
Taylor Avakian
margin. So fascinating. I love this business. Yan, thank you very much for being here. This was awesome. I learned so much about private credit. I'm I'm excited to go back home and dig even further into it because it's just it's just fascinating to me. So, I appreciate you being on. Thank you for doing this. Thank you for sharing. And I'm excited to uh to see the new company grow. And maybe we'll be doing some loans soon with my borrowers and and who
Jan Brzeski
knows. It's my pleasure, Taylor. Thanks for having me. Thank you.