Jeffrey Gold is President of Goldmark Advisers, Inc., the boutique investment banking firm he founded in 1985. In early 2017, Goldmark became an affiliated company of Young America Capital LLC, where Jeffrey is continuing to practice his successful consultative approach to mergers and acquisitions, as well as assisting mid-sized companies and promising new ventures in capital formation.
Jeffrey’s M&A and funding expertise – reflected in his track record of nearly 100 transactions – focuses primarily on publishing, media, food, beverage and health care businesses. Simultaneous with his leadership of Goldmark Advisers, Jeffrey served for 20 years, through 2012, as Chairman of the U.S. subsidiary of The Quarto Group, Inc., a publicly held international illustrated book-publishing company, helping the London-based company to grow through several significant acquisitions.
Before establishing the Goldmark firm, Jeffrey was Executive Vice President & Chief Financial Officer of Esquire, Inc., a NYSE-listed publishing, technology and communications company. In that role, he also served as the company’s principal negotiator when it was sold to Paramount Communications. After the acquisition, he was named Executive Vice President in charge of corporate development & strategic planning for its Simon & Schuster Division. While at Paramount, Jeffrey initiated the contact that led to the acquisition of Prentice-Hall, the well-regarded textbook and professional publishing company. Earlier in his career,
Jeffrey was Vice President and Corporate Controller of National Patent Development Corporation (now known as Wright Investors’ Service Holdings), which, among other activities, pioneered the development of the soft contact lenses. He began his career at Main Hurdman, which is now part of KPMG, the Big Four accounting and professional services firm. A graduate of Pace University with a degree in business administration, Jeffrey has guest-lectured on corporate and financial subjects at the Columbia University Graduate School of Business, and served on the Board of Directors of Lighthouse International.
He holds Series 79 and Series 63 licenses.
Listen to this episode as Seth and Jeff discuss:
Identifying the ideal client.
Some of the biggest mistakes middle market firms are making when it comes to thinking about their acquisition and exit strategies.
How the landscape of the industry change since the COVID pandemic.
Joel S. Isaacson, Founder and Chairman Joel Isaacson & Co
Founder and Chairman, Joel Isaacson, is considered by many to be a leader in the industry, helping clients and their families achieve their goals and sharing his knowledge with colleagues and the next generation of industry leaders. As a teacher as well as a practitioner,
Joel is active in many industry organizations, having served on numerous boards and speaking on topics to share his insights, including: the New York Chapter of the International Association for Financial Planning, now FPA; Chairman of the Personal Financial Planning Committee of the New York State Society of Certified Public Accountants; the American Institute of Certified Public Accountants and the Estate Planning Council. He has taught financial and tax planning at New York University, The New School in New York City, and Iona College.
He holds a BS in accounting from Lehigh University and a MBA in financial planning from Golden Gate University in San Francisco, where he was recently honored as their ‘man of the year’.
Frequently named one of America’s Top Financial Advisors by Worth magazine, Joel is often quoted in financial publications such as the Wall Street Journal, New York Times, Business Week and Fortune, as well as on radio and television.
Listen to this episode as Seth and Joel discuss:
The key factors that lead to the unprecedented growth of Joel’s firm.
Getting recognitions and accolades in press.
Post Covid challenges in the financial advisor industry.
Team Building and getting the most out of your staff.
The most common challenges that the industry faces now.
Seth Greene: 1:14 Let’s go back in time, how did you get started in the business?
Joel Isaacson 1:32 Wow, it was a different kind of a business back then. But I was I was working in San Francisco for an accounting firm. And one day I looked in the paper and there was a MBA in financial planning at a school in San Francisco Golden Gate University. At the time, it was the only one in the country offering financial planning as a degree. Back then I think the CFP, you could take, I don’t even think you had to take an exam. I don’t I think it was sort of like, you know, pretty straightforward. So I wanted to get the education. And I left my job with a big eight accounting firm, went through the grad school, and then came back to New York and, you know, took a job as an entry level position there.
Seth Greene 2:14 And then I’m sure the longer version is in some of those articles or the books, but then how did you get from there to where you are now.
Joel Isaacson 2:22 So when I came back to New York, I worked for so and I took a 50% salary cut, you know, because again, it was an entry level position. And you know, and I probably learned more in that year of what not to do, it was someone who was one of these people that charges a lot for the plan, and then didn’t have the ongoing revenues to you know, keep it going. And these were the days, it’s a little embarrassed to say we used to do plans by modem used to cost us 1500 hours each plan to do by modem to get them done. And so I started with this person. And while I was there, I got recruited. My background was accounting firms, I got recruited by one of the top accounting firms in New York to start their practice. And I believe we were the first one to register as an investment advisor was in 1985. And, and that was great, it was really good chance to, you know, kind of use the NBA use the opportunity to start a practice and I was only 26 at the time.
Seth Greene 3:24 And then how did you get from there to the you know, I mean, you’re a leader in the industry, how did that transition? How did that growth curve happen?
Joel Isaacson 3:35 Again, yeah, so you know, when, again, it was a, it was a great chance, because you know, as well as things where I started bringing in clients, but you know, when you’re an accounting firm, one of the things you you know, you always get promised by all your partners is they’re gonna keep bringing you clients and bringing your clients. One thing I really learned and I also started teaching back then I started teaching the CFP. But one thing I learned was don’t depend on your partners for business. So I started, you know, being able to bring in business. And then at the accounting firm, where they made me a partner after 10 years, I also saw how much the managing partners were making. And I said, there’s something wrong here. So I went out on a we went on my own with two of the people from the firm, you know, as partners, we started, and it started with three people and it just built up, you know, slowly by surely by always, you know, putting the client first. You know, we would never on the sales side, you know, always the planning side. And, you know, again, just a lot of hard work client by client building up, you know, to the point where now we have I think over $6 billion in assets under management.
Seth Greene 4:38 That is absolutely incredible. How have What do you think, have been some of the biggest factors responsible for such amazing growth?
Joel Isaacson 4:47 Yeah, I mean, I think, you know, again, also is like sort of was, to a certain extent, some of it being early, you know, back then I think it and I’m not sure I would say we’re a full profession yet. You know, I think that we still have to do more at the college. levels to get education into the schools for financial planning. But I think it was being early, I think it was also having a CPA and, you know, experience back then. And I also got involved with, you know, with teaching at schools, I got involved with the FPA back then it was called the ISP, I was present in the New York chapter. So it’s constantly hustling and networking, we didn’t do any marketing. But it was just really an opportunity to, you know, develop clients in New York, you know, and again, it was really one at a time, a couple things where we got into when I was teaching, I got introduced to some people that worked in the Benefits Office at IBM. So we got an opportunity to, you know, go off to some corporate programs, and some of my students did there. And through contact, we also got involved with equitable life insurance, which at one point, we probably had 20 executives from there, and they used to have a financial planning program. So you know, those type of relationships, and that’s really what it was, it was all relationships or referrals from, you know, people we met in the business, and they looked at us as a firm that was, again, fee only, you know, high quality. And, and I think also having the tax practice gave us a, you know, an edge also in being able to kind of be more of the one stop shop for individuals.
Seth Greene 6:18 That makes a lot of sense, how you’ve garnered a lot of press accolades over the years, how have you been able to get that recognition?
Joel Isaacson 6:28 Yeah, you know, again, nowadays is a lot tougher. But in the beginning, you know, part of one of the people got involved with was involved with the New York Times. And so back in the 80s, you know, and, and the journal, you know, we knew some of the people there also, but it was really just, you know, a lot of networking opportunities. So one that the times took a, you know, liking to me, and he used to write a column every Saturday on your money. And back, then it meant a lot to be in the press. Now, there’s so much press, and so much out there, PR wise was there. But if you got involved with the times, and you got that kind of prospect, then it became a good catalyst to other press and different things. And then I think, you know, again, a lot of the organizations were involved with with the right ones, you know, we were early, involved with nappo, with the FPA. And, you know, and again, it’s, you know, is always one of those things like we weren’t in this for the short run, we weren’t looking to make a big hit, we were in this for the long run. And we always felt if we took care of clients, that the rest would come there. And that’s also I think, part of the way is every time we got involved, like, we also didn’t find fire, the brokers we didn’t, you know, bring in new lawyers, we got to know the lawyers, we got to know the brokers. And some of those people that we met through clients actually became great referral sources to us over time.
Seth Greene 7:45 How has the COVID pandemic affected your clients in your business?
Joel Isaacson 7:52 So I think, you know, it’s, well, I think it’s changed our business fundamentally, as to how we deliver it, I think, you know, for a lot of our clients, you know, the zoom feature is something that I think they like, so, you know, that’s there, we also have a lot of young staff that are having babies. So we had been trying to, before the pandemic, figure out how to do remote work, and for people to be accountable for it and different things. And obviously, we get thrown into the fire with that. So it’s worked out? Well. Our business has been okay, you know, is, I mean, as the, you know, I would say the third big, black swan event in the last 20 years, it’s, I think it was more taxing this time, you know, from some of the other ones. And, you know, especially around New York last March and April, the kind of that dread and the you know, that it felt like the black cloud over the city in the whole country and different things, was a tough one. So I think we’ve, you know, we’re more valuable to our clients in tough markets than we are in a good market. 2019. You know, the market did amazing clients were happy, you know, no big deal. I think getting through clients through the tough times, these black swan events are, are the key for what we do, and to have had a build lasting relationship. And probably, I would say, this pandemic, for some reason, because I think, you know, it just hit people so close to home net, probably more people panicked a little bit this time than in the past. and stuff, but, you know, businesses, again, is we grow our top line, probably seven to 10% a year. So last year was a little bit different in, you know, the new business part, you know, we still, we still grew nicely, but I would say, you know, not necessarily referrals, but new business slowed down a little bit only from a standpoint of, you know, all the lunches that you have, and seeing people that I think, are a good catalyst from that stuff, but we’re starting to see it pick up again, and I think, you know, for our clients, a lot of it became is figuring out life, you know, do they stay in the city, do they, you know, they move the Hamptons, I’ve always spent a lot of time we deal with tax issues in New York and everybody thinks it’s easy to get out of New York. taxes because they’re living in Connecticut for a year or, you know, upstate New York or things like that. So, you know, sometimes we have to be the bearer of bad news on certain situations, but our clients been amazing, you know, they, they are our greatest resource. And, you know, I would say, you know, again, we got them all through good, I don’t think at the, you know, the middle of the pandemic, you know, back last March, April, I don’t think anyone would have felt that it would finish the year up like they did, it was a, you know, crazy year overall,
Seth Greene 10:31 absolutely, who’s an ideal client for your firm?
Joel Isaacson 10:36 You know, we, you know, it’s a, you know, for us somewhere, just someone that really could use kind of that one stop shop of, you know, having, you know, things all in one place, so, from corporate executives, to doctors, to lawyers, to anyone in the five to 25 million ranges, that kind of our bread and butter, and then probably 20% of our clients are in the 25 and up category. So, again, it’s, you know, for us, we also try and do sets a little different is, you know, fair fees for clients. So in that in a you m shop, generally, you know, so we try and do fair fee. So wherever we can add value for the money, that’s the most important thing, because, you know, what we find is with that kind of relationship where it’s more retainer based, that, you know, clients look at your as their advocate, and and, and that is an adversary, which I think sometimes with the IOM, you know, you’re always trying to take assets away from someone else with us, we don’t care what the assets are, as long as it’s the right thing for clients and the people that are handling money and doing the right thing. And again, you know, it’s, it’s, it’s nice sometimes to have co pilots on things,
Seth Greene 11:44 you’ve achieved so much success over the decades, what’s your biggest challenge now?
Joel Isaacson 11:50 Um, you know, I think part of this, Seth is, you know, and for some of those on the back nine, I think, you know, it’s, you know, like, right now, we are transitioning, like, I turned over a CEO role last year to one of my younger partners, because I think it was necessary on some of the technology and different things. And for me, to kind of get back into the, you know, into the area of just, you know, dealing with clients and mentoring staff and things like that, I think the biggest challenge going forward for the industry is finding good professionals, you know, people that, you know, want to make this into a profession want to have a career with this thing, and go forward. And then I think, you know, what we saw also is like, I don’t know, probably in the last few months, just the whole Bitcoin, you know, Reddit rally, you know, just dealing with clients who all sudden their kids are geniuses, you know, that a buying GameStop and different things. And everybody all sudden became a risk taker, you know, with the, you know, the Tesla’s of the world and all the, you know, all the crypto currency and everything like that. So, you know, it’s really, I think the challenging point now is just to really for clients to understand fundamentals, and that valuations matter, and investment fundamentals will be a sense, to me, part of it is, you know, whether, you know, on the investment side, you know, things change radically and every time you think that they do they kind of tend to you know, revert back to the old ways of doing things.
Seth Greene 13:14 Your Passion is obvious, what do you like best about what you do?
Joel Isaacson 13:19 You know, it’s, it’s, it’s an interesting one, because you kind of think about stuff in life and say, like, did you do you make a difference on things? You know, I’ve been doing this for 40 years. And, you know, you, you know, you see all these people that are doing things in the military or in science, you know, Dr. Fauci and everyone fighting this virus, and you say, you know, are we just making rich people richer? But, you know, I think part of that I would say, Seth, is our relationship with our clients is that type is like, you know, like, I’m in the middle one of my clients died three weeks ago, where I’m the trustee, I’m the executor and now dealing with her, you know, her nieces and sister in law in different things. And it’s that kind of trust that people have in us in the relationships we have that are there. I mean, sometimes it’s, you know, it’s above and beyond certain things, like, you know, just dealing with having to watch someone, you know, slowly die is not an easy thing. But, you know, the intimacy of our relationship is is hard to, it’s hard to be, you know, it’s just that and I think that part of being, like being the client advocate and being on that side, I think, is the part that really is the driving force. And I you know, I think the pandemic for me set it up so that I look at this and say like, my dad retired, never really retired. He, he liked working, I mean, his clients started retiring, and dying off and different things, but I really like working with people and helping them and and i think that part of, you know, just seeing, you know, the family relationship and kind of working with people to get them like, again, another one my favorite clients was from publicity. In the 80s we were in the Daily News and someone that probably never made $60,000 or more than 60,000 our life she was a secretary of the firm and I don’t know I helped her with a, you know, project last week, she got very emotional about and stuff. But you know, someone that was just, you know, save scraps and you know, little bit in the 401k. And she’s, you know, she’s probably worth three or $4 million. Now, I’m not sure we would have taken her on as a client, like we did in the 80s. Now you know, where we started with it, but to see where she is, and be able to tell us go buy a car, don’t worry about it, you know, you don’t have to worry about money and different things and to see, you know, how smoothly we made her life has been very rewarding overall,
Seth Greene 15:30 that’s beautiful. You’ve also built an incredible team, how do you get everyone doing what they’re supposed to do at the right time? in the right way? How do you how do you develop yourself as a leader, because I know, you are always improving, you’re kind of committed to learning and committed to growing talk a little bit about that aspect of the business. You know, I
Joel Isaacson 15:54 and thank you for all the nice things you’re saying. So that’s, I think the part of, you know, for, you know, IT staff is, I think, for staff, a lot of it is that, you know, the on the job training, you know, that there’s not a lot of the people that came to us that necessarily thought of financial planning as career but through friends or, you know, relationships, they still work for us. And then I think the way they saw us treat clients and their relationships for clients was, I think that, you know, that’s our, that’s our greater resources, those relationships with clients. So it was always you know, was it you know, like, you see in some of the boiler room stuff, you know, where they treat him, like, you know, this is just way to get money and take money from people. In ours, it’s really the respect, that’s client in that part. And now, you know, I see the next generation is the relationship, our staff is having babies, and the clients are sending them gifts, and, you know, it’s like, it’s just a nice family relationship there. So I always treated you know, I think staff to learn, brought them into client relationships, I’ve had some people like, you know, within the first six months to sitting in meetings, and it’s just a, I think, a chance, and then, you know, they see these very high level executives and doctors and, you know, hospital, people that are running companies, and they, they see their reliance on us, and it’s a it’s a very heady thing, and it’s, it’s intoxicating, to, you know, to work with people and for them to listen. And, and again, we also learn from clients, I’ve, I had my anniversary, I actually thank my clients, because, you know, over time, I just seen their ethics and, and the treatment and the way they handle things in business, and they’ve inspired me.
Seth Greene 17:35 What else do you want to share that we didn’t think to ask you?
Joel Isaacson 17:39 Um, I would just say, you know, again, from a standpoint of the field, I do think that, you know, aspects of the field that there’s still more to be done with the schools, I don’t think the professional organizations necessarily do as much with the schools, but I do feel like with accounting, you know, the big thing will be is more and more of the undergraduate programs, and then, you know, kind of the job placement. So I think they try, like, again, there’s programs here, but it’s always kind of like dependent on who’s running the program and who they have relationships with. But I do feel like for the field, that is more and more that at the undergraduate level be helpful. And I think for people in school, you know, if they saw it that way, I think it kind of goes in a cycle to take it to that next level is profession. To me, the CFP is nice, but I don’t I don’t consider passing exam as really the thing that’s there. I think people need to learn more. And I’ve taught, and I remember when I used to teach, and I’d get off the curriculum a little bit, try and give practical knowledge. People didn’t really want to learn that way. They just really wanted to pass the test.
Joel Magerman brings Insight Into Cannabis Investing.
Joel Magerman of Emerald Park capital is a successful investor, principal and investment banker with over 30 years of experience. During the course of his career, he has been involved in closing over 150 deals representing a total transaction value in excess of $6 billion. Listen to this episode as Seth and Joel discuss: Why the cannabis industry has been neglected and underserved by capital providers. Why this may be the new ground floor of cannabis. The vetting process and due diligence in providing finance to the cannabis industry. Identifying bad risk in the cannabis industry. The most common challenges that these cannabis companies are facing other than access to debt … and much more.
Joel Magerman is a successful investor, principal, and investment banker with over 30 years of experience. During the course of his career, he has been involved in closing over 150 deals, representing a total transaction value in excess of $6 billion.
For almost 20 years, Joel has been the CEO of Bryant Park Capital, where he has led clients and deal teams through complex financing and M&A processes, across both traditional and highly regulated industries. From 1995 until 2001 Joel was the President of Associated Venture Management where he oversaw a family office that invested and raised approximately $250 million of transactions for its portfolio companies. Portfolio investments included investments in the specialty finance, software, technology and healthcare services sectors. From 1991 to 1995 Joel was the Senior Vice President for FCA International, LTD (FCA:TSX), where he headed corporate development, M&A, and US sales, marketing and customer service. In that capacity he founded and was President of Structured Financial Capital, the second largest purchaser of structured settlements issued by the state of NJ. He also was a founder & operating partner with Reliant Partners, a firm that purchased over $1.5 billion of non-performing assets from the Resolution Trust Corporation.
Prior to FCA, Joel was one of the founders and board members of Odyssey Golf, the number one putter company in the world that was later sold to Callaway Golf. Earlier in his career, Joel was the Director of Finance and Technology for Citicorp Diners Club. Joel has his MS from the University of Pennsylvania and his BA from UCLA. He serves on the boards of ValueHealth LLC and Maccabi USA Sports for Israel, and has previously served on the boards of other for profit and not for profit organizations.
Seth Greene 0:00 Welcome to the podcast. This is your co host, Seth Green’s had the good fortune to be doing interviewing Joel Megaman of Emerald Park capital. He is a successful investor, principal and investment banker with over 30 years of experience. During the course of his career, he has been involved in closing approximately 150 deals representing a total transaction value in excess of $6 billion. Joel, thanks so much for joining us. Thanks for having me, Seth. So let’s go back in time a little bit, howdid you get started?
Joel Magerman 0:33 So long ago, I started working in on the business side of new business opportunities in the early 80s. And sort of saw how interesting it was in new business formation and sort of follow that path. circuitous route that followed it over the next, you know, few decades.
Seth Greene 0:53 I’m sure the longer version of that story could probably fill a book somewhere, if it hasn’t already. Tell us a little Europe, just some really interesting things. Tell us a little bit about Emerald Park.
Joel Magerman 1:04 Yeah, Emerald Park is a provider of capital predominantly debt, but also can provide equity as well in the cannabis sector. And it was very interesting does because it’s a sector that has been growing exponentially compound annual growth rate of 25 to 30%, over a 10 year period, but was significantly underserved in its access to capital. And we thought that created a unique opportunity for us to to raise a fund and actually be one of those capital providers.
Seth Greene 1:37 So why do you think for our folks who may not be aware Why do you think the cannabis industry has been neglected and underserved in this department?
Joel Magerman 1:47 Well, I think I think there are a number of reasons. Number one, there’s there was initially federal legislation that made people uncomfortable providing capital in the space, a number of things have happened over the last five to seven years, including 42, states that now consider it legal. And a number of things that have happened under under federal guidelines that provide greater comfort, but there’s some ambiguity in that. And that ambiguity has caused a number of companies and firms to be uncomfortable providing capital, they’re still, even though a increasing number of folks have continued to get comfortable and more and more capital is coming into the sector.
Seth Greene 2:32 And it’s not just debt. Right. It’s also that historically, there have been issues getting, you know, merchant processing, credit card processing bank accounts. Yeah, literally everything. Why do you think you’ve been quoted? Why do you think this is the new new ground floor of cannabis? Well, I mean, we’re, look, we’re
Joel Magerman 2:51 in the very early stages right there. There’s, if you sort of think of the evolution and think about alcohol that, you know, right after prohibition, by example, right, we’re in the early stages, because right now, there are states that it’s still legal, there are states where it’s legal, but only for medicinal purposes. And their states where it’s legal for medicinal and adult use recreational use. And so we’re still a long ways away from, you know, it being approved at a federal level, where can be used in every, every state across the union, based on each one of the state’s laws and the Fed, approving it. And so we’re, you know, we’re probably, you know, some number of years away from, you know, that happening, and then people need to get comfortable with the usage of it, like, like anything else, you know, when you have something that is, you know, initially, for example, approved for cancer patients, or there’s a number of drugs where cannabis is approved, it’s people still don’t necessarily understand it, and nor do you know, state and federal government. And so once everybody gets comfortable, I think there’ll be a continual growth in that.
Seth Greene 4:04 Absolutely. Now, you chose to predominantly focus on the loan, the debt part of the sector, why did you go in that direction, as opposed to you know, equity?
Joel Magerman 4:16 Again, I think it was of the, there are two reasons really, number one, I think it was more underserved. There was less access to capital on the debt side than the equity side. Um, number two, I think that our bias, our personal bias, and we have a lot of money in the fund is that we sort of liked the risk reward arbitrage on the debt side. You know, if you financed a non cannabis business that looks call it small to middle market between depending on what you’re financing, let’s say you’re financing real estate, you might get a 5% loan, and if you’re doing Junior debt, you may pay 15 percent in the cannabis sector to take that same economic risk, you’re probably getting three to five times your potential returns. And so we thought that was a great risk adjusted return profile for us. And it was an underserved spot in the marketplace. And so we thought it was a good place to be further underserved. And that being said, we’ve also made a couple equity investments as well. So we’re, we’re very supportive of helping companies grow, whether it be on the debt, or the equity side of the balance sheet, but we prefer debt.
Seth Greene 5:31 That makes total sense. Now, with there, it seems like every other day, there’s another company popping up, um, in some way, shape, or form in this space. Talk a little bit about your vetting process and your due diligence, because you’re kind of known for making really smart decisions.
Joel Magerman 5:49 Well, I mean, one of the things that, you know, being old means you have experience and seeing lots of things. So we’ve seen lots of deals and transactions over our lifetime. And we have certain things that we think are important to focus on. And we incorporate that in our vetting process. Today, we’ve seen in excess of 725 deals, we’ve invested made eight investments. So you know, that being said, we’ve probably bid on two to three times that number of transactions and for various reasons, either we learned something we didn’t like, or they maybe got better pricing, whatever the case might be, but we’ve you know, we’ve we have a pretty rigorous process, we want to make sure that we at our investors get our money back. And as a result of that, you know, hope is not a plan, right. And so if people don’t have the things, you need to be comfortable, we don’t want to just hope we get our money back, we really want to have analytics and comfort that says we’re going to get it back when we really, we really try to be thoughtful in our approach and understand the company well, which means you need to do a lot of work. And some of these companies didn’t have and don’t have the infrastructure, the people to support to give us the information and the data, we need to be comfortable.
Seth Greene 7:09 What our menu, if I heard you correctly, you had about a 1% rate in terms of the deals that you actually bid on an accepted. So what are some of the things that are warning signs to you to stay away?
Joel Magerman 7:26 Lack of internal controls is a is a major one. You know, people don’t have financial, financial, the appropriate financial systems, and that’s critical in this sector. That you mentioned banking, relationships, those are those are much less of an issue than people think. But some folks don’t have it. Very few folks have audited financials, which is a big deal for us, we want someone to have a third party review those financials and get comfortable with those. And you know, some of its the sophistication of management it you know, coming up with an idea and and so hot making this up but someone to say I want to build a chain of 50 dispensaries. Well building one and operating one dispensary does take some skill, but building an operating 15 centuries is a different skill set. And so some people are skilled in opening an operating number one, but they don’t have the wherewithal to open 50. And so some of it is just the breadth and depth of management.
Seth Greene 8:27 What are you finding are some of the most common challenges that these cannabis companies are facing other than access to debt?
Joel Magerman 8:40 Well, access to capital overall has has has been a concern, but it’s less of a concern now but still remains a concern. The markets are very geographic focused on a state by state basis. So there are certain states where the ability to grow is there’s there’s not enough licenses, it’s a Limited License state. There are hypothetically going to the state’s going to issue 50 licenses if you’re not one of the 50 you can’t play. So you know that’s a major hurdle. Having people that understand, right i mean if you think about cannabis as a particularly, it’s different types of uses, you know, you think about someone needs to understand how to cultivate and grow this and produce it in a large scale fashion. And, you know, just because someone grew it in their basement in college doesn’t mean that they actually know how to run a cultivation facility. So having people that are skilled and understand how to be a cultivator how to how to maximize you know the the efficiencies of the growing cycle and take advantage of that is another important is another important skill. And then once the business gets to the point where it’s thinking about growth in a meaningful way, how do you attract skilled management and You know, a lot of people think, Hey, I got it up and running on the entrepreneur. I don’t need other people, I know how to do it. But the reality of it is that, I mean, if you if you look at Bill Gates, he knew he needed to bring in Steve Ballmer on the business, he might have invented Microsoft, but he needed someone to run the day to day. A lot of these folks think they don’t need those people or they think just because someone worked at a big company, they have this skill set. And really, it’s it’s attracting the right kind of people the right kind of capital, and the right resources to really create a successful enterprise.
Seth Greene 10:35 That makes a lot of sense, your your passions obvious, what do you like best about what you do.
Unknown Speaker 10:41 Um,
Joel Magerman 10:42 I love working with passionate people that and I’m really trying to help them in their journey to to attain a much greater level of success. I mean, that’s, that’s what’s rewarding, right? It’s, it’s hard, you know, being successful with a new idea. And creating that new idea into a business that can be successful and rewarding is a lot harder than people think. And being part of that journey and helping an entrepreneur be successful. And that is something that we love to do.
Seth Greene 11:13 What has been some of the biggest lessons you’ve learned along the way in the 30 years of investment banking and m&a experience? Wow.
Joel Magerman 11:25 That’s a, that’s a big takeaway. I think the most important thing is don’t underestimate the importance of people. A great manager of a business can make a bad business successful, and a poor manager of a business can make a successful business failure. And so if you’re really investing in people, even though there’s a lot that goes around it, you’re all you’re ultimately investing in good people.
Seth Greene 11:52 What do you think the time horizon is for cannabis before it gets to the point where a lot of these hurdles that you’re benefiting from, you know, kind of get erased and VA becomes more commonplace? Um, we won’t call you.
Joel Magerman 12:07 I know, I think it’s, I think it’s a it’s a multi step process. Um, a lot of people thought when Biden was elected, that all these barriers going to be knocked down, and all of a sudden, a lot more capital came into the market, they thought all of a sudden there was going to be federal legalization. That didn’t happen. What everybody’s sort of learning is that’s going to be a process in and of itself, when they figure out federal legalization. It’s not going to be all of a sudden that things change. And there’s a magic wand, right? All of a sudden, all the federal agencies that now touch this are going to do what they do, right? If you’re a regulator Your job is to regulate. So you think about when hemp was federally approved, all of a sudden the FDA came out and said on March 19, of 2019, we’re going to tell you how what the regulation is to ingest a hemp derived product CBD effectively, we’re still waiting. almost two years later, we’re still waiting. So I don’t think people have realized that there I mean, totally comprehended that even federal legalization is going to require the federal, you know, arms of government, time to figure out what all that means. And until sort of all that gets cleared, I think we’re gonna have to see all that happen. Before you see a cannabis business look exactly like a consumer packaged goods company that’s selling sneakers. And we’re just so we’re some number of years away from that.
Seth Greene 13:38 You’ve achieved an immense amount of success and worked on some incredible deals over your career. What’s your biggest challenge now?
Joel Magerman 13:47 Actually, we have the same challenge that the companies have is access to capital. The biggest ones in cannabis would be deemed the most the tiniest funds in the non cannabis world. There are dozens and dozens and dozens of firms that are multi billion dollar funds in the regular world. There’s not a single one in the cannabis sector, a big fund is a few 100 million dollars. And so access to capital is is is an issue for process providers and capital, as well as for the companies and and all of that’s getting better. You know, but I think that, you know, until all the gates sort of open, it’s easier for someone to open a gate and write a check in many ways, other than maybe the top dozen companies to us because we can show an institutional track record. And they’re one step removed, let let us do our job. But you know, until that sort of goes up and down the whole life cycle, we’re we’ve still got a ways to go.
Seth Greene 14:54 What How are you attracting investment capital for your funds at this point?
Joel Magerman 15:00 We’re telling the story, we’re telling you the same story that, you know, we’re outlining to you it’s and people, people get it, right. It’s a, it’s a, they understand the size of the market, they understand, or hopefully they do after we speak. They understand what the opportunities are and the growth that’s happening. And they’re, they’re willing to take, effectively a little more risk for a greater return. And if they believe that risk reward quotient works the same way we do, then we’re lucky and we have we have investors and we’ve, we’ve been fortunate, we’ve been able to trust attract some great investors. And but we’re always looking for more.
Seth Greene 15:41 With all that you’ve shared, is there anything you want to share that I didn’t think to ask you yet? Um,
Joel Magerman 15:49 I guess, I mean, there are a couple things that I think are sort of interesting. I mean, you know, number one, I think a lot of folks sort of think about cannabis, and they, you know, they may try to tie it to alcohol. When you think about cannabis, the three major uses from all the surveys are out there or for pain, relief, anxiety, and sleep, they’re really much more medicinal than most people think about, Hey, I’m going to go get drunk, or I’m going to go get high. So number one, I mean, there’s a big medicinal aspect of this that I think is overlooked. And that’s what the vast majority of the products being used for number one. Number two, there’s a whole new world of pharmaceutical experimentation that’s going on using cannabinoids. And there are a number of drugs that are FDA approved from cannabis derived products that are incredibly successful. And there is 10s of millions of dollars being spent in research around the world, that I think we’re going to come out with some really exciting new drugs. And I think people don’t necessarily appreciate the the the medicinal and wellness benefits that the the actual cannabis plant represents. And so I think that’s worth noting.
Seth Greene 17:10 Absolutely. where can our folks who are interested in learning more about what you’re doing go to learn more.
Joel Magerman 17:16 So we have a website, Emerald Park capital, there’s contact information on there, they can also go to LinkedIn and look up Emerald Park capital or look me up, as well, but happy to talk to any interested parties. And we’d love the opportunity to share what we know.
Seth Greene 17:33 All right. Well, we greatly appreciate your time. We know it’s incredibly valuable. This has been Seth Green with Joel omegamon of Emerald Park capital. Joel, thanks so much for joining us. Thanks, Jeff. Have a good day. Thanks, everybody, for watching or listening. We’ll see you next time.
Preferred Return Private Equity Preferred return is the part of the distribution waterfall and it gets calculated on the Invested amount based on no. of days until …
What is Preferred Return?
Preferred Return, often called ‘pref’, is a minimum return that Limited Partners in a fund must receive before any carried interest can be distributed to General Partners. A preferred return is expressed as an annual rate of return and can be thought of as the minimum expected return for the investment.
Limited Partners will receive 100% of their gross distributions until they have reached a certain rate of return on their investment in the fund. Once this rate of return has been met, General Partners will start to earn carried interest.
How is Preferred Return calculated?
Each Fund’s Preferred Return calculations are defined by the Limited Partnership Agreement that governs the fund. Fund’s calculations can vary in several ways. The most common variations are in the compounding periods of the preferred return rate, and the method for calculating elapsed time between periods.
For example, Fund A might specify that preferred return on any given capital call starts accruing when the call is funded and stop accruing when the applicable distribution of preferred return is made. Fund B might specify that for preferred return calculation purposes, any capital call or distribution is said to have taken place on the last day of the calendar month in which the capital call or distribution occurred. Now imagine a scenario where both Funds call capital on January 1, 2020 and distribute proceeds on December 31, 2020. In this scenario, Fund A investors are receiving preferred return based on 365 days of accrual, while Fund B investors are only receiving 335 days of accrual since the capital call is considered on the last day of the month.
Investor A contributes $1MM into Real Estate Fund 1, LLC on December 31st, 2020. On December 31st, 2021, Real Estate Fund 1, LLC announces a distribution. Investor A’s gross share of the distributable proceeds is $2MM. Assuming the following structure, what Investor A’s preferred return, and total distributions?
Marcus Magarian is Managing Director at Chatsworth Securities, LLC. Marcus brings more than expertise in technology and data analysis experience to the investment banking industry. Marcus works with multinational corporations in origination and placing capital for private equity, feeder funds, and private placements, between the US, EU & Latin America for Real Estate, Energy, Oil and Gas, Infrastructure, and Corporate interests.
Listen To This Interview as Cliff and Marcus discuss:
How data analysis of customer behavior in e-commerce drives investment advice.
Examples of what data points to consider in pricing derivatives.
Trends in the e-commerce space that affect your investment strategy.
How COVID-19 has impacted the investor/advisor relationship dynamic with new clients.
How data analysis works in determining risk or predicting ROI.
phone: (203) 340-2827 Ext 122
Cliff Locks 0:02 Welcome to the private equities profits podcast. I’m Cliff lox your hosts who With me today is Marcus Magarian, Managing Director of Chatsworth securities, LLC. Marcus brings more than expertise in technology and data analysis experience to the investment banking industry. Marcus works with multinational corporations in origination and placing capital for private equity, feeder funds, and private placements between the US EU and Latin America. For real estate, energy, oil and gas, infrastructure, and corporate interests. Mark is welcome. Please share with the audience a little of your backstory.
Marcus Magarian 0:40 Hi, Cliff. Good afternoon. Thanks for having me here. The pleasure. I’ve been watching a lot of your previous interviews, so very excited to be here. I’m a native New Yorker been here all my life, you know, started out working at my dad’s store at the time square area, got my first job at derivatives at Morgan Stanley Merrill Lynch. After that, then Business School, we opened a Brazilian bank in New York and London doing natural resources, private placements, when that whole thing died off, I was lucky enough to get a job at a tech company doing UX analytics for about three to four years. And coming back into banking, we’ve been focusing quite heavily in things in the payment space, analytic space, everything involving data, which is we’d like to call the new oil.
Cliff Locks 1:23 Very true. How does the data analysis of customers behavior and e commerce drive investment advice?
Marcus Magarian 1:29 The most important thing about data is that it’s free. And it’s so telling, I always like to tell my customers or prospects like you know, it’s kind of like, if you have people in a focus group, it’s like you like Coke? Or do you like Pepsi? And then give us your advice. The first person that speaks, they’ll say, I like Pepsi, or they like Coke, it’ll influence everybody in the room. And what happens with data is that like, it’s completely naked, you know exactly what the people are really thinking, without, you know, ever having to ask them, you know, this I gave an example of this was when we were working with Electrolux, we, I told them, like, Hey, 99.98% of your customers don’t want to buy an air conditioning system. And they have no idea why it’s because the most important thing is that the data told me that this was the case. So we are able to change things increase their sales is about 100 times. I mean, it was easy when you do and you have hardly any sales. But every but using that skill, those skills today, you could basically go to any company and say, okay, you have a million people going to your site, let’s say your average order value is $100, you have about a 2% conversion ratio. So I’ll do $100 times 20,000, you make $2 million. From there, we want to know exactly what their goal is, you know, they’re looking to buy a company, sell a company expand by market share, etc, etc. So, very good. It’s very telling. And it’s a way to advise clients without having to ask them questions.
Cliff Locks 2:56 Can you give us examples of what the data points you consider in pricing derivatives
Marcus Magarian 3:00 with derivatives, I mean, that’s I the one thing I love about derivatives is that it’s very similar to analytics. So back in 2000, when we saw and I started working at Morgan Stanley derivatives, were priced kind of like just taking market data, just same way you would take on through a Google Analytics or some kind of analytics capturing tool. And you know, you want to volatility, you want to know exactly what the buzz is on the stocks or some kind of technical analysis. And today, you have, you know, I use those skills from 30 days in order to price companies. Because everything with digital companies is dependent on data flows. And so like, it’s kind of the example I gave before you have a person that comes into a site, I know how the traffic is behaving, but the most important thing I have to know is where’s that traffic coming from. So if I’m selling fishing equipment, and I’m bringing my traffic from the Wall Street Journal, my sales won’t be as good as if I drove it from another site. That was where the person came into the site, thinking about fishing equipment. And it’s the same thing with so everything with data, it’s how do you manipulate the data, which is really the individuals that are going into your website or to your app, the same way that people engage in the stock market.
Cliff Locks 4:19 I’m excited you’re going into a forensic analysis on those companies that you’re looking to help raise funding at this point. But really understanding what drives revenue. And the sources of that traffic. It’s critical at this point for sustainable sale. What trends are you seeing in e commerce space that affect your investment strategy?
Marcus Magarian 4:40 Right now with COVID? Right now, actually, I have a group out of the UK that I’m a board member of here in New York. It’s called it’s a retail group. And what we’re trying to do now is take possession of stores on Bleecker Street and make it into a COVID store. So it’s it’s important because everything we’re doing in e commerce Everything is becoming more omni channel. So what does a store look like in the future with COVID V is put out a report saying that you had 60% of people were paying by phone or the stores have the ability to pay by phone. Now it’s like 85%. And everything is digitally transforming to this contactless payment world and all these things that didn’t exist before. So what you’ve really had is a really massive acceleration in that market, the digital world online shopping has really converted over into the brick and mortar side. Amazon was way ahead of this when they had the thing where you could go into a store, which, you know, there’s more to it, but you go into a store, you can only go in if you have a phone. It’s a problem. If you don’t have a phone, surprised, no one’s saying about discrimination. But if I go into the store, I could walk out without even talking to a cash register person or paying or pulling out a credit card or anything like that. And the concept that we’re trying to do is saying, okay, 70% or 60% of stores on Bleecker Street, are empty. There’s all these things happening with moratoriums, landlords aren’t getting their rent monies. And Nope, because I was walking in safer give stuff stay home because of social distancing. And all those things. Let’s take stores and do virtual fitting rooms and fulfillment centers. No, no inventories are items that stores and make it like an e commerce store, but with a physical presence. But when you have all that information, you’re collecting the data on your customers store. The way this used to be done when we were much younger, used to see guys in the corner of the streets tapping on these little metal things. And what those guys are doing was counting the foot traffic going left to right. Nowadays on you that everything is digitally tracked, you have you carry a mobile device, the beacon captures everything. So in business school, they were went to business school in France. So we obviously the Louis Vuitton case study, when somebody walks into the Louis Louis Vuitton store one on shawnzy, the likelihood is that a Westerner will turn left. So they put their most expensive and most popular items there like women’s handbags, the ones that you see whatever men’s stuff was to the right. And all the way in the back right was smaller handbags, which were more popular for Asian communities. And so they took an old way of doing a method, which today everyone can do, because it’s very expensive to have someone sit there and click all day. And you also have to understand that the data probably won’t be accurate, if someone’s clicking themselves manually, versus a computer collecting all these things.
Cliff Locks 7:32 So how has COVID-19 impacted your investor advisor relationship dynamics with clients,
Marcus Magarian 7:40 we’ve gone from less private placements to more m&a. And I prefer m&a versus it’s harder to do. Because everything. It’s it’s like a marriage. Because the thing is that a private placement, you’ll probably most people will accept 10% 20% of the company. There are those that one like you know more than 50%. But like because of the acceleration that we saw from like those things like the visa reports or contactless payments, or how people are using more digital means. There’s so many players that are completely out of the market. Now they have no choice but to consolidate. And so right now it’s a rush, because it’s like, like, we’re focusing very heavily in the payment space. A lot of our European clients, what’s happening is that they know that they’re having some kind of adverse event happening. But then you have companies like you know, I mean, toast is a bad example. But a company called lightspeed, they’ve raised so much money, they go in, and they just buy out markets. And they’ll overpay, they’ll pay massive multiples. And we’re seeing a lot of those things because and the problem with that is that if these companies don’t sell, because raising capital, forget about it, like because it’s just they’re not gonna be able to be fast enough. This other company, though, they’ll they’ll they buy one player, they’ll have, you know, 10,000 stores or 5000 stores was installed in there with a technology, and then we’ll just start cannibalizing market share, kind of like that scargo thing that, you know, that Walmart did when they first opened and started expanding through the United States. Right now we’re seeing massive land grabs happen. And it’s the Luddite players that either have to move, or they’re going to be out of business. And there are many people that we speak to, who are who know that because of COVID, you had this massive jump in technology, that they know that they have to move somehow it’s either going to sell the company or they get integrated into another company. And we do like a stock swap kind of thing. And that’s really been the play.
Cliff Locks 9:38 I really do get it you have to disrupt yourself at this point.
Marcus Magarian 9:42 Like when I I was an engineering student in college and like I didn’t touch coding for a long time. But I will not go into a deal with I go into a deal I never asked for a pitch deck. I think it’s a waste of time because it is marketing puff and having worked at it. The problem with working at a tech company when you come from an investment bank They have FINRA, so everything has to be transparent, clear. And all these things, how does data analysis work in determining the risk or predicting ROI? It really with data, or with a website, it’s all about your goal. And it has to be very clear. Like, if you take a company like WeChat, they do everything in the United States, WeChat wouldn’t really work. And so the closest thing you have is like Facebook, or like an Amazon, which is not really, it’s still pretty specific. When you work with data analysis, the first thing you want to know is what the purpose of the data is for. So like, if you’re capturing data from a pharmaceutical company versus a cosmetic company, the purpose of the data changes significantly. And this goes back to a point that I was trying to bring up before is that an investment banker today really has to understand database language. So I don’t ask for presentations when I asked for schemas. And I want to know what data you’re capturing and how you’re capturing. Because many times when you’ll speak with a company that’s like in the healthcare space, they said they want to do something with analytics. Great. Are you allowed to get that data? The answer is no. So then you can not do anything with that data, nor will you capture any of that information.
Cliff Locks 11:11 It’s interesting, because we’ve had some conversations with an organization called burst IQ. So it’s the blockchain, HIPAA compliant. And then I’m working with a team and I’m on their board. And we’re using an activity band, you something you and I would like it. And I will watch from Apple at this point in that data is being uploaded to the blockchain permission granted by the user at this point, and then we’re putting analytics against that. And then there’s a chat bot that goes back to the individual to try to motivate them to be more active. And they will actually reward that individual with tokenization, meaning similar to a cryptocurrency, yeah, to be more active than they can convert the crypto to buy organic food products in our Shopify store. So it’s an ecosystem, but it’s really about the wellness of the individual that is our customer at this point, utilizing the app.
Marcus Magarian 12:04 So yeah, like, one thing that you mentioned I love was the tokenization technology, because it prevents credit card fraud. It’s a way where you basically say I want to do a payment. But instead of sending the credit card information, you send a token. It’s like those little grasshoppers used to get back in the day, it’s like you want to log into your email from random country, you had to use the token, despite having to know your username and password.
Cliff Locks 12:29 The technology is accelerating. And the cost to actually build something is decreased substantially, which is somewhat of an equalizer, but you need brilliant people like yourself, Marcus, to step in and analyze, do we really have a market at this point is addressable? Is it going to be vibrant? Do they have the ability to pay? You know, what’s the vision of the future look like? What’s the vision of success, and then work it backwards at this point, it’s got to be profitable, it’s got to iterate. It’s got to be fun, you got to have a really strong team around, you know, when you’re building it out, it’s not just engineers, you need to know business, you and I had a conversation there, you know that the CEOs really need the vision Plus, they got to be able to run a business and allow the company to flourish. And the engineers are really more on the product side and the seamless in the user interfaces. It’s an exciting period of time. That’s the way I look at it. At this point is we digitalize in pretty much everything we’re touching at this point. Yeah.
Marcus Magarian 13:22 But I think because of where we are in the market today, this is why like, now you’re just seeing massive consolidation, or you’re seeing companies that received way too much cash, trying to go public. I haven’t seen as many IPOs since my days, like, you know, Merrill Lynch, where they’re having like an i one to five IPOs a day almost every week, that was like dude, just throwing them out. And what was interesting is that like, the reason why I find it interesting is because there’s the index called the Wilshire 5000. Sure. And it used to have in 1997 7500 stocks on the market. Us USA Today, a couple years ago came up with an article saying like today that 7500 stocks is now 3500 stock, less than half, or at least it’s around half a little more than half. It’s telling because what does it say? The IPO or the publicly traded company isn’t as well, it doesn’t have the same value as did before. So what does that mean? Take, you know, we have the credit crisis in 2008, you had the mortgage backed security. And those things were put into one piece of paper securitize. And yet, let’s say a million mortgages be broken up into millions of pieces and send it to a bunch of pension funds in Scandinavia, Europe or Asia. Today, if you want to manage those mbss there’s a tech company which will cover every single thing for you using analytical data. So you’ll buy the mortgages individually and you say I want specifically these kinds of mortgages, so you no longer have to buy these pre packaged mortgage backed security things. And the way it works is You go to like a bankrate.com, I need a mortgage, you put the mortgage, they sell the lead to a loan provider. The loan provider is like crossover bank. And their job is to structure the mortgage provide the capital in three months, they’ll resell that to a hedge fund. But the hedge fund obviously needs to track it using this technology, which friend of mine actually was one of the founders for its company called pure IQ. And they and so the the, you know, then you could track every single thing individually, but because the computers doing it, and they have a very homogenous way of looking at it, the computer just has to track everything over and over and over again. Did you pay that you’re not paying foreclosures? And what are the risk profiles? When you customize,
Cliff Locks 15:48 strong analytical tool in the right hands?
Marcus Magarian 15:51 Yeah, and you basically it’s like, you invented dishwashers, or washing dishes. And that gives you the opportunity cost to do something else. It’s like hiring a secretary or, you know, getting a car to get you to point a to point b faster, or using a plane to go to another country.
Cliff Locks 16:08 Describe the culture and the philosophy of your firm.
Marcus Magarian 16:12 Well, we are a firm that’s been around for over 30 years. It’s got a lot of great people we had, it started out really as a big IPO shop. And over the course of time, it’s obviously been transforming to now we’re doing tech deals started to become very successful. And the great thing is that you have a lot of people that are very willing to grow. And it’s interesting because a lot of the players come from very top end Ivy League schools, they were founders of divisions at Goldman Sachs worked at UBS worked at family offices, like the Qatari family fund, and a lot of a lot of very intelligent people. About the opportunity today is taking that knowledge and transforming it to something more digital for the younger generation at Chatsworth, what we’re trying to do, make it more, make it younger. And so like, the great thing is that they’re very open to it, we’ve been successful at it. I know it’s very exciting. I can tell you, it’s better than having a nine to five job at a bulge bracket bank, because you but you have to have a group of people that are open to going next steps,
Cliff Locks 17:19 describe your approach to helping companies structure their corporate direction, great strategy, preparing them for long term and capital stack.
Marcus Magarian 17:28 A lot of the times today on top of all those things that we do is a lot of times CEOs are looking at things at a very granular level, they only see their company’s day to day problems like problems that we will never know. And a lot of times it takes months or weeks to fully understand what a company is going to because people like CEOs exaggerate. They’re afraid there’s a performance factor and the CEO, you know, as we said before, he’s the number one sales guy or company. So he’s he’s selling even if he’s not supposed to sell to me, because my job is to be the buffer for him with investors or buyers. Nowadays, it says we mentioned before, it’s all about acquisitions, for you to be a company, you know, looking to do a startup and do some new idea, etc. It’s a little more challenging today during the Age of COVID. Unless you’re doing some it’s very COVID link, but we’ll have continuity after that. A lot of times we’ve had opportunities where we’re working with the CEO, one CEO for 10 years was paying over 20% cost of debt. Like how do you survive, you’re selling, you’re selling airplanes. And when I looked at the balance sheet, I started noticing they’re putting things like on their current light current ratio, or the current liabilities, making the current ratio going on, like 1.7 or something. And what happened was, I was like, well, no one’s gonna give you a loan. Because you look like you have terrible books. When we restructure the entire balance sheet. We got no current ratio of like four and a half, which is ridiculous, because you’re basically, you know, you’re destroying the value your company, got them alone right away. After 10 years, we cut the cost of the debt from 20 something percent like 22%, down to like 910 depending on what the line of credit was. And it was all because of format. And it was the reason was we had to get rid of the the bookkeeper or the accounts and hire new one restructure the thing cleaned it up.
Cliff Locks 19:18 It’s a millions of dollars worth of savings there.
Marcus Magarian 19:21 Oh my god. It was crazy and getting too specific on what the who the company is. They were not an American company outside. They were operating out of the United States.
Cliff Locks 19:31 What do you love about what you do? And what do you find most rewarding personally,
Marcus Magarian 19:36 at a place like Chatsworth, it’s kind of like a sandbox, you have a lot of free rein to do what you want. It’s very important that we focus in a very specific sector. So we were very focused on things like in the payment space, which payments means everything. It starts with payments, because it’s credit card processing, which became digital banking, which became things like you know, digitizing things like Western Union and things Like analytics companies, which is just, you know, data flows all about the law of large numbers, solving those puzzles for those CEOs is the best, the hardest part is getting cost that barrier where like, you don’t, you can’t tell the client that they’re doing something wrong, you have to give them the idea for them to come up with the idea and then solve the problem. But usually, it’s something that it becomes a difficult thing for people in positions of power, is that you have to do things in a way that makes it seem like it’s where we’ve transformed, we’re doing things very successfully. And we’ve been successful at it, we’ve been transforming those things. And it’s a lot of fun.
Cliff Locks 20:41 So it’s really a partnership between you and the client at that point. 100%.
Marcus Magarian 20:43 Okay, 100%. And the clients use it on an understand like, in the beginning, they’ll have an idea of how things are supposed to be done, when they actually go through it. It’s like, like, I’ve had my last deal, I, we had a, we had an issue with the lawyer, if the lawyer comes, once we pass the deal to the lawyer, it becomes no longer our deal, we have to be polite to the lawyer making sure whatever. And then you have to make sure the lawyer has experience, I’ve had three or four deals where like they hired the wrong kind of lawyer, or they mix the one lawyer to do something else. So simple things like, you know, registering things with the Department of State to transfer the share with the ownership of the shares, or declare that the transfer owner shares the state, you know, lawyers not knowing how to do that, because they’ve never done it never done it before, or lawyers creating adverse things in order to increase billable hours or, you know, sometimes before everything is happening, the client starts getting worried about things like fees. But and I always tell them, it’s like, you haven’t even sold the company yet. So you have a long, long, long way to go. And there’s the issue with clients, the buyer could go away. And then you have to, there’s a lot of massage. So it’s very complicated.
Cliff Locks 21:58 So you had to hold the deal together. That’s really what you do. But you have to make it seem seamless, very positive. You know, I’ve had the privilege of building three companies and selling them and you really, it’s people like yourself and your fine organization that allows these deals to get done. But there’s a lot of emotion involved in it, you know, especially for the entrepreneur. And it’s a privilege to work with professionals, and deals get done now. And that’s the exciting part. What will be your personal legacy?
Marcus Magarian 22:28 My personal use, just enjoy it. That’s it, there’s no The most important thing is not having ego in this business. So like, legacy just got to be make sure you have a good family that you pass the education along and move things forward. The culture of everything I think has changed significantly. Like one thing that Chatsworth used to be was a very private bank, the world has done Facebook and Instagram and Tiktok now and etc, etc. The way you have to present yourself as changed significantly. Like try joining a private club. With a family. We don’t have to just join Facebook and everything shared private clubs have social media things, putting pictures of their parties in there. Things like that. So old legacy systems, or legacy social circles have changed significantly.
Cliff Locks 23:15 I look forward to being back with you shortly for another episode of the private equity profits podcast. The show is produced by market domination, LLC.
In this episode Cliff and Martin Saenz discuss Managing Risk In The Secondary Mortgage Market.
Martin Saenz is Managing Partner at BeQuest Funds, and a best-selling author. Martin brings, social good, into smart investing. Renowned as a thought leader, in the mortgage note investment industry, throughout an extensive and accomplished career, Martin has demonstrated a proven ability to grow asset values, income, and knowledge not just for his company, but for his investors, borrows, proteges, and readers as well.
Listen to Cliff and martin talk about:
The risks of note investing.
Martin’s process of finding or identifying investment opportunities..
The percentage of risk that is imposed by foreclosure.
Cliff Locks 0:02 Welcome to the private equity profits podcast. I’m Cliff locks your hosts and with me today is Martin signs, Managing Partner bequests funds and a best selling author. Martin brings social good into Smart Investing are renowned as a thought leader in the mortgage note investment industry. throughout an extensive and accomplished career, Martin has demonstrated a proven ability to grow asset values, income knowledge, and not just for his company, but for his investors, borrowers protegees and readers as well. Welcome Morton, thank you so much for taking time to talk with me. Let’s start at the beginning. Tell me how you got started and what attracted you to private equity?
Martin Saenz 0:41 Sure, it kind of all started when I got out of business school with my MBA 2001. So I landed a corporate job in consulting, I was in corporate America for a few years, until I got fired. And that was probably the best thing that ever happened to me, because it made me realize that that the corporate America was not for me, it wasn’t what I thought it was, it never resonated with me. So from there, through a series of reading business books and trying to figure out what type of business to launch, I started a small business, which is how most people come in to the to the business community, they launched a small business for my wife and myself that small business was a federal government contracting company that provided museum exhibit display displays. For the federal government nationwide, what I learned from business ownership over the years was that it’s brutal. And, you know, making payroll, the day of, you know, paying bills late, you know, just trying to survive, and while working 100 hour weeks was it’s just it weighs on you. So I didn’t find that freedom that I was looking for. So I turned to landlording. And my wife and I, we started accumulating properties in oh eight commercial and residential, what I found with landlording, and we still own the properties and manage them today. But what I found is, it’s a great annuity play, it’s great as you’re paying down the mortgages, with the rents that are being paid. And you’ll ultimately have a property you can sell with seller financing and make all these great creative moves on the back end. But in terms of cash flow, that sustainable is meet one’s financial aspirations. It wasn’t there, the connection wasn’t made. So from there in 2013, my wife and I, we sold our company kept our properties and I made a decision, I became more spiritual, I became connected with God, I went on a mission to say I need to, I need to create a business opportunity that focuses on servicing others so enough like about chasing the dollar, making x, y, z, and you know, having this material possessions, it was just about Let me serve the most amount of people and something good is gonna come out as a result of that financially and otherwise. And so that’s how I stumbled upon the mortgage note industry. I started learning about it because I did have a real estate background. So I learned about the mortgage side, which is the flip side of the real estate coin, I started acquiring distressed mortgage notes on properties whereby the borrower had not made a payment in four or five plus years. These are mortgages. And yes, these mortgages exist, more than most people know in the secondary mortgage market space. And I just started acquiring these mortgage loans and learning about how to work them out. I’d say Initially, the first lesson I learned is that is when you buy a mortgage loan that’s distressed, you know, the borrower hasn’t made the payment, you’re exiting two ways. Either you’re exiting through the property, and you are going through foreclosure taking possession of the property, or working out a deed in lieu whereby the borrower sent signs over the property ownership rights to you. Or you’re exiting through the bar in the form of a loan modification or reinstatement or pay off something to that effect. I learned early on that it was more in line with what my principles were to exit through the bar, whereby I would work with the borrower and create solutions that help keep them in their homes while making a profit for myself. And that’s really how it launched.
Cliff Locks 4:39 I’m proud of you know, non performing assets are a challenge, you know, Ario the banks. At this point you’re stepping in as a benevolent, but business person to help that individual borrower at that point to find a solution, a long t erm solution for them and their family at this point. Tell me about bequest funds.
Martin Saenz 4:59 Sure.
bequest funds is a 506 c reg D Income Fund that houses a portfolio of seasoned performing mortgages through that we receive borrower payments in on a monthly basis. And we in turn pay our investors on a monthly basis. So it’s an income fun. But prior to explaining bequest, or even just touching on it, it’s really important, I believe, for the audience to understand the roots like how I worked up to taking on requests and launching that in March of last year, through the course of the years I had acquired and personally worked out whereby I talked to the bars I created loan agreements, you know, I worked out short sales and or discounted pay offs and everything else with over 1000 loans. So for myself, it’s on the fix and flip side someone said Well, I I fixed and flipped 1000 homes. So it’s really through the course of of that growth, and really kind of going through and really ironing out my due diligence process. I got to a point and I’m still a large buyer of distress paper. Don’t Don’t get me like we purchased 25 million in distress paper in the past 18 months, so we’re still a large buyer of it. With that said, my roots come from helping people that need to be helped stay in their homes, while making a profit for myself. Now, bequest funds is on the other side of the fence, we have a portfolio of bars that are making their payments on a monthly basis. We only purchase performing mortgages that go into the Income Fund. So it’s more of a management and daily monitoring process. So that we can be reactive if we have to do any outreach and connect with with folks and help them if there have any special occurrences that’s that’s really what bequests funds is about. So it really touches on the risk side, my background touch touches on how we mitigate risk on the bequest fund side because I’m used to the rough side of the fence so to speak.
Cliff Locks 7:20 Note investing can mean different things. Tell me what it means to you.
Martin Saenz 7:25 Sure, what’s important is to talk about the secondary mortgage market space when you’re talking about note investing, someone just pictures, a person that wants to go buy a home, become a homeowner go into a bank or some lending institution, and they apply for a mortgage. And that mortgage application goes through an underwriting process. And from that a promissory note and a deed of trust or mortgage is drafted upon approval, of course. And so the promissory note says ay ay ay so and so Joe Smith promised to borrow this money and pay it back given this certain set of terms. And the deed of trust or mortgage is the document that ties that promise to the property in the form of collateral collateralizing that that promise and so what happens is, after that mortgages originated,
there’s a pool of them that will sit with that originator or will sit with some company they sell it to and a portion of those those loans in the pool will become defaulted. Something happens in a borrower’s life.
That is typically deals with love a divorce happens, loss of job underemployment or health. Those are really what we hear a lot what we hear most often. So something happens in someone’s life a hiccup and they stop paying their mortgage. And so what the bank does, or lending institution, they will bundle those defaulted mortgage loans into a tranche and they’ll sell it into the secondary mortgage market space, which is similar to a flea market, whereby you have hedge funds and lenders in that are buying and selling these distressed mortgage loans. Now there’s also performing mortgage loans that the same things occurring but in this case, we’re just focusing on the distress distress mortgage when you take a hedge fund that will buy a pool of these defaulted mortgage loans, they will make contact with the bar. Now mind you, it may be a few years later, the person got remarried, the health got better, they got their job back and something happened on the positive side. And they they got reestablished the bar got reestablished. So if the hedge fund has a good operation, then they will work out payment terms with the bar because they bought it at a discount, mind you they may have paid 20 cents 40 cents on the dollar.
For this paper, so there’s room to be creative and to be compassionate. If a hedge fund operates as such, then they can create a payment plan that works with the disposable income at the bar. And borrowers will actually be appreciative based on the relationship and based on the understanding that they’ll make their payments on time. Once those payments become seasoned over time, a company like mine, which is bequest funds, will go out and buy those performing mortgages in a performing state and place them in our fund. Which, which is why we consider bequest funds, a low risk, high yield fund.
Cliff Locks 10:43 That leads me to my next question is how risky is note investing?
Martin Saenz 10:49 it? Gosh, I mean, I could answer that a few ways. But I’ll say it is as risky as someone’s knowledge level. what’s what’s fascinating, and I’ll clarify that in just a second. But what’s fascinating is that the mortgage note industry
deals with money. I deal with money all day long, 10, big calculator, you know, calculator here, Excel spreadsheet, there is numbers all day long. However, that’s actually probably, if there’s if there’s a list of 10, things that are critical and the mortgage note space for success. That’s probably number eight. There’s so many other factors. The first and this was in my, in my book that I wrote two years ago, note investing fundamentals, where I where I stated deal flow is king. in this industry, I can’t speak for other industries, I can only speak for the industry that kind of bleed for and that is deal flow is critical. So relationships with sellers and having a thorough underwriting process by which you vet assets, having a professionalized acquisition process where, where you’re taking down deals, and you’re doing what you say 100% of the time, and then having a compassionate, yet very thorough Asset Management Division, where they’re making contact, and they’re making, you know, striking deals and arrangements with the bars, so that cash flows created. So the more someone has a business setup, the more they mitigate risk. And the less they have it set up to that extent, the more that there’s risky scenarios that will take place.
Cliff Locks 12:35 What is your process of finding and identifying inves tment opportunities,
Martin Saenz 12:39 I say with humility today, I’m going to speak to how it was a few years ago. But how it is today is that we have relationships that are so close to hedge funds that are so close to major lending institutions that were fed on a regular basis. So we receive in distressed debt on a regular basis on that side of the fence we receive in opportunities for performing assets. Now, that may change, nobody’s taking it for granted. We’re very respectful and thankful for that relationship, however, all speak for for individuals that may not be at that point, because that’s kind of best foot put in and
I wrote about this. And note investing made easier, which was my first book, and I’m not trying to plug my books, I’m just, it’s just what’s coming to mind. But I wrote about a sourcing lifecycle that needs to occur within the node space. First part of that source lifecycle phase deals with identity creation. When people come in our space, and I see it quite often, they go right to, Hey, I got a million dollars in the bank, you know, I’m a big real estate buying whole guy, I’m just going to go delve into notes, because I just probably have to shift a few gears and then I’ll be rocking and rolling. No identity is so critically important. Yet, it’s so often overlooked, you need to be seen in the space, as someone who is low risk, so meone who’s very competent, and someone who’s going to perform because if you don’t, then you’re risky to me, I’m not going to do business with you, if you’re going to go out and do something foolish or do something, you know, because you don’t know. And then you’re going to go catch me up in a bad way, some way down the road. So I have to know that you have a good process in place that you are fully focused on this industry and you know what you’re doing. So identity is about how you come off to other people how that’s perceived. And from that point, it goes into a whole marketing and branding effort. Because you have the identity now you have to go and portray that amplify that that message to the world to the note world. And from there. There’s a daily outreach, outreach math method that that I that we employ here, deals with CRM system, we have an outreach matrix.
W hich gives us metrics around our outreach approach. So there’s a daily sourcing effort that needs to occur when you first come in this space, and probably just needs to occur in general throughout your longevity in the space. The ultimate result is you’ll see deal flow, you have to transact on the deal flow, because none of it matters if you’re not transacting, because the industry is so small and tight knit, that if you’re not transacting, then you’re dead in the water. So from from a from a business perspective, there’s someone that comes to mind came in the business. He had $10 million liquid, he thought, you know, hey, I’m a big gorilla. I got money in the bank, I had the successful business, sent the message to the world, show me your deals, number of players showed them deals, he started nitpicking because he didn’t really know he didn’t have a good process set up. So he just turned people off. Nobody cares that you have $10 million in the bank money is so abundant in our into so much about your identity and so much about how professional you are from from a sourcing perspective. I like the word professionalism as what you bring into the industry. What percentage of risk is imposed by foreclosure foreclosure, it’s really on a state by state basis at this point. So COVID hit and moratoriums got issued around the country, and then the cares act got put in put into effect by the Senate. So if you just take the cares act, you know, from from a high level perspective, it sets measures in place for borrowers being able to obtain forbearance agreements with the lenders, however, what’s not was not stated is that the cares act is specific to government backed mortgages. So when you buy mortgages in the secondary space, they’re privately owned. So they’re not government backed. So actually, the care were exempt, as in it as a industry as a sector from the cares act. Now, with that said, We’re extremely conscious of what you know, what the cares act mandating expectations, you know, the whole PR end of it. So with that said, when a borrower calls in to us, and they say, Hey, we need we need based on COVID, we’re going to ask them a series of questions, ask them to provide documentation, because we can we found through COVID was that our our collectability percentage with our performing assets all over all our entities, was has been about a steady 92%. So 92% and $92 of every $100 is collected on a monthly basis. Now mind you, you know, we purchase these at a discount our collective portfolio and request sits at a 61% investment to value we have coverage, what when COVID hit, we anticipated that 92% to go down to 75%. We were like, you know, let’s plan for it. We went went from like a daily monitoring of our assets to like, hourly, we were like on everything Code Red. We were like, okay, we’re gonna get to 75. But how do we minimize how do we make it 80% which would be a victory, what we found is we were having communications with bars, and we were asking for documentation, we found that a majority of the bars didn’t have a COVID related need for forbearance. So it was just they heard it in the news.
You know, cousin told them Whatever the case, and so they just continued pain based on that. We maintained, you know, where the 96% collected today, we were about 93% all of last year. So we were above our 92% 90% the industry average industry standard rather, we’re we’ve been fine from a collectability standpoint. Now with that said there’s certain states that there are still foreclosure moratoriums in place. We have to be mindful of that. However, I’m going to say this and because if you’re going to if you would ask me Hey, what do you what are you most proud of this would probably be that nugget. We foreclose on our distressed debt side, less than 2% of our portfolio. I’m talking mortgages that have not paid in four or five years.
We foreclose so we’d go through the foreclosure take the take the property to auction, sell it to a third party or take it back Oreo less than 2% of the time. That is insane.
That is insane. It and that speaks to how conscious we are in diligent we are with our team members to go and work out arrangements with the bars to keep in line with our mission of keeping them in their homes. That is how significant it is to us as a company.
And I’l l tell you this too. I know I’m like soapbox, right? I’m gonna say this because this is like very passionate about this, it is sometimes more profitable to take back the property.
Because you get instant cash flow instant capital gains. And there’s equity in the property and you know, equity spikes in the country. So on, we are here for the cash flow, and we’re here to the for the cash flow being paid by the bar that are helping the community. I mean, that’s really important.
Cliff Locks 20:33 Yeah.
What happens if the economy turns down? I mean, you COVID was definitely an example of that. How do you handle that?
Martin Saenz 20:42 So when the economy when there’s a downturn, it generally means there’s more supply of inventory, and prices go down? Now, that’s not to be say, like, Well, let me be naive. Let me you know, pray for a downturn, any of that. But the fact of the matter is, our end secondary space increases with inventory, based on a market turned down. So right now we’re seeing a shortage of product in our industry shortage of product in prices have skyrocketed, but that’s everywhere, right. That’s across all asset lines, probably. But yeah, that’s that’s the anticipation the downturn occurs, and they’ll just be more more debt to be purchased.
Cliff Locks 21:29 What’s your advice for people investing in this sector? And what do you tell them to do before they make an investment,
Martin Saenz 21:36 it depends on the investment. So if they’re going to invest in themselves, start a note business and to create a better life or to create supplemental income or something to that effect, then they need to learn the fundamentals, they need to spend more time on education, there’s heavy compliance in our industry, there is there’s a lot of nuances, a lot of pitfalls, a lot of compliance, I’ll just say it deserves saying a second time, you know, one needs to be set up as a no business. It’s, it used to be when I started, where you could be a solopreneur, and be a one person show and do it all.
But those days are no more because there’s too much complexity with it. There’s licensed services you’re using, there’s compliance, there’s licensing involved, there’s debt collection, courses, there’s just a whole plethora of activity that’s going on. And you’ll never scale. And when you don’t scale your burn up and die from a perspective of someone that wants to just invest, set it and forget it, then be quest funds. We have, we pay, we have a few classes. Actually, as of today, we are attorney blessed the new ppm with two class additional classes. So I’m really stoked before we just had an 8% return paid monthly with a one year lock in period. Now we have that plus a 9% return with a four year lock in period and a 6% return with a six month lock in period. So we have more more options for individuals, you can go park your money, and just receive monthly income or let it compound at an increased interest rate. So there’s a few different ways that one can invest. There’s also joint venturing that goes on. But you have to be very careful because with sec laws, I mean to be a passive investor investing with an active investor, you know if sec could consider that a security. So that’s being sold to that passive investor. So you just have to be mindful of that and have attorneys review all documents, especially as it relates to joint venturing. Compliance is key.
Cliff Locks 23:52 Do you have any advice for people that are running startups in the sector?
Martin Saenz 23:56 Yes, you should only invest in assets or start businesses that produce cash flow, and that you have control over and I learned it from doing the opposite control. I’ll give you an example. My wife and I, when we started our federal government contracting company, we were an ant. I mean, we probably weren’t at when we sold the company to later, bigger and however that end customer, ie the Pentagon and other places we sold to they were our customer. Now it took us years to get there and we bled out to get the customers. They were our customers. We had control over the customer request funds. We get asked every week to be on someone’s platform. Oh let me get you set up on fidelity’s platform, let me get you set up on this platform. No thank you. We will build our own sales team and we will get to where we need to go that customer is going to be our customer. And that’s very important to us. Because once you just start playing with the margins and paying fees here and there that thatcreates risk within our fund. And we’re operating on a nice margin, where we’re very comfortable. And we’re able to recapitalize and purchase assets upon payoffs and whatnot. And so we don’t want to jeopardize the safety of our fund. The other thing is that it’s got to produce cash flow. So many people invest in assets, for appreciation, and that’s nice. But appreciation doesn’t pay for groceries, it doesn’t pay the m ortgage.
Cliff Locks 25:27 Well, so I appreciate where you’re coming from them. For your fund, what’s your investment thesis? what exactly you’re looking for?
Martin Saenz 25:36 I wrote another shameless plug, I My apologies, Cliff, I wrote a book last year during the pandemic called cash flow dojo, build your home on multiple streams of income, the whole the whole point of inspiration. And this is coming from someone you know, I have, I have several books out, I get royalties, I get I mentor, some people, I have hundreds of performing notes that pay me every month. So I’m coming from a place that receives hundreds of streams of income per month. My whole thesis was for the book is that yes, I people will say you can’t live off a single income, that’s outdated, right? That’s 1970s, the husband works and the wife stays home. I’m saying that you can’t live off dual income. Now. That’s dangerous. It’s not that it’s not a secret for the wealthy to say, hey, you need dozen streams of income, it’s mandatory for the middle class, in today’s market, today’s world that you need, if you are going to provide for your family, husband, wife, whomever, you need to ensure that multiple streams of income are coming into your household. And that’s the whole book. And that’s what I believe with request from the bottom of my heart. It is it is something I have my own money in there. I have my partner Sean has his own money. And so we launched it, we put our money, because who am I to tell you come to request when I haven’t put a penny Sean and I put a million bucks in, I mean, we to kick it off. So we have money and we have skin in the game. And so that would be the other thing. Don’t don’t invest, anybody who asks you to invest, ask them how much they’ve invested themselves, I think that’s critic, the whole idea of of one needs, one can u se a fun like bequest to bring additional streams of income to themselves.
Cliff Locks 27:27 I think you’ve got a very, very good message, you know, I’m impressed the idea of the multi streams of income, it’s something I share with my clients on a global level, I hope our youth will look at what you’re sharing at this point, because they have time value that can advance what they’re looking to do, buy your books and learn, you know, from the knowledge, you paid your dues. You’ve scaled a few companies at this point in time and you bring forth a very easy program in place, you know, through your funds, to be able to take that knowledge that’s already been perfected, and actually earn a very handsome return. So I want to compliment you on that.
Martin Saenz 28:04 Thank you.
Cliff Locks 28:05 What are some of the challenges you face
Martin Saenz 28:09 noise the noise out there it’s it’s brutal. I mean, I’m here in Sarasota, Florida, I’m in a in a skies building right across street from the Marina, it’s, it’s the most beautiful, it’s probably the most beautiful place you could ever see. I mean, I’ve water in every direction, in this buildings full with financial planners in financial firms. And, and I’m not knocking anyone, everyone has their own angle and their own their own thing going on. However, I’m competing against so much noise in this industry. And I believe in the heart, my heart of hearts that you know, we have a good product that can help deliver cash flow to to anybody who’s willing to invest with us. And so I have to fight through the Apple stock. Is that this the bitcoins at that? Yeah, it’s tough.
Cliff Locks 29:04 When you bring something that’s unique, it’s consistent cash flow on a month to month basis, backed by real assets.
Martin Saenz 29:11 Someone told me this week, someone told me this week, it’s boring, and I wanted to kiss them on the cheek.That’s, I’m like I am that’s us, we are boring.
Cliff Locks 29:24 How or why is keeping homeowners in their home the most profitable scenario?
Martin Saenz 29:30 Well, for one, it’ll, we never modify alone. And we never purchase a loan that’s not fully amortized. So that goes to the core of my belief that the homeowner should always have an opportunity to fully pay off their home and have it owned free and clear for themselves so they could have better retirement for themselves down the road. So for one, it’s just the right thing to do. I mean, we saw that oh, you know, mid 2000s. All the nonsense. The Ninja loans and you know, arms adjust after a one year and all this nonsense in which is what created a lot of you know where we are today financially from the borrower’s perspective. So the more that we are concerned or we are more, we are more considerate to what what our borrowers up against, We treat our borrower as a customer. That’s, that’s our mantra here. So so they’re treated like gold, because they’re paying us cash flow, they’re letting us ring the register. So we need to treat them with the utmost respect. So having that focus in what is in their best interest paying off that mortgage. Now, what happens as a result of helping them pay off their home and having a free and clear monthly streams of income for decades, perfect.I get this no other way to put it.
Cliff Locks 30:53 What are the benefits of individual notes versus a pooled note investments.
Martin Saenz 30:59 So it’s a portfolio game, you know, you’re gonna buy, it’s kind of different. When when you’re talking about performing mortgages, you’re talking about request funds, you know, we can we can do a one off, it uses our whole acquisition process and team to buy one loan. So we’re having you know, economies of scale when we buy pools. So from that perspective, we always want to buy pools, we could use our system to buy one note. But it’s more advantageous to focus on buying 15 notes at a time, which is, which is normal for us is like 30 to 70 loans performing mortgages at a time now from a distressed debt standpoint, you never know how the end results gonna play out. So you buy that you haven’t spoken to the homeowner for five years, you don’t know what it is they you know, are they going to drag you down a long road that’s going to be costly? Or are they going to go and refi you out in your cash out at par? You know, you just don’t know till it plays out. So buying and pools is almost mandatory from a non performing purchase perspective.
Cliff Locks 32:09 The COVID cause the note buying industry to contract.
Martin Saenz 32:17 No, no, it’s um, I mean, when you’re when you reference the mortgage note industry, my thought goes to supply and profitability. So from a supply standpoint, supply has been dwindling consistently over the past five years. So we’re still good we have access to deal flow. But on the retail side, they they have they have bear the brunt of all this the most there’s a shortage from retail buyers that buy the one offs, the mom and pop investors, that kind of thing. So So from a supply standpoint, COVID probably accelerated it, because you probably had more hedge funds that said, Well, let me sit on the paper and not sell it as a fire sale. And just see how it plays out plus equity spikes. payoffs are more prevalent in today’s world. Now from a profitability standpoint, you’re paying more for the asset. However, it’s you have more equity coverage back in the asset. So risk is minimized. So you’re paying, you’re paying more, but you’re also getting more value. So I’d say that profitability still there. However, what COVID has done, if any, has just allowed for hedge funds to maintain deal flow upstream, and not let it trickle down at the rates they did in the past. What are you most proud of what will be your legacy? To have, you know, bequest funds is a legacy play. We launched this as an evergreen fund. So to have something I can pass down to my children.
Cliff Locks 33:54 I think that’s important. Are you mentoring anyone in the office at this point? young people?
Martin Saenz 34:00 Yes, we have a marketing assistant and investor relations person. Connor who’s Investor Relations, he’s 21. And, and Sophie who works marketing is 22. So I’m mentoring both and actually just had a our weekly meeting this morning, we roleplay for our meetings. And And so yeah, we do role playing exercises and on top of a lot of other different training exercises,
Cliff Locks 34:28 That’s nice to get back and look after our youth and I look at it where we have a fiduciary responsibilities as our leaders to come in and put time and effort and look for opportunities to hire either new graduates, interns, and share with them, you know, our values and what our business does and hopefully hire you know, some brilliant young people to join the team and flourish right along with us, Martin, can I share your contact information with our listeners?
Martin Saenz 34:56 Absolutely. Martin’s email is at Martin
Cliff Locks 35:00 Add BBQ funds.com which is spelled ma AR ti firstname.lastname@example.org and their website is at B q funds.com. I want to thank our listeners. I look forward to being back with you shortly for another episode of the private equities profits podcast The show has been produced by Market Domination, LLC.
Dr. Patrick Maurenbrecher is the Managing Partner and CIO at Kontora Family Office.
Kontora Family Office is a multi-family office based in Hamburg, Germany. Established in 2006, the firm provides services to families, single-family offices, and non-profit organizations such as foundations, associations, and religious institutions, especially as an organized institution assets in Germany. Following the American Family Office business model and operating fully independently.
In this interview, Dr Maurenbrecher and Cliff discuss:
• What distinguishes Kontora from other advisory services in the space.
• Kontora’s approach to investing.
• What Dr Maurenbrecher means by “thinking and working in modular units”, and the benefit of that approach to his clients?
• How to identify the most objectively, suitable financial and service partners, for your clients.
• The main differences in the private equity markets in Asia, America, and Europe..
• Identifying risk factors that can lead to permanent impairment of capital.
• How to achieve transparent planning, analysis, and implementation without conflicts of interest.
• The key benefits of illiquid assets?
• The factors that determine or effect an asset’s liquidity or illiquidity.
• How Illiquidity Reflected in in Expected Returns.
Cliff Locks 0:00 Welcome to the private equity profits podcast. I’m Cliff Locks. your host, with me today is Dr. Patrick. He’s the managing partner and CIO of Kontora. family offices in couture family offices is a multifamily office based in Hamburg, Germany, established in 2006. The firm provides services to families, single family offices, and nonprofit organizations, such as foundations, associations, religious institutions, especially as organized institution assets in Germany. It follows the American family office business model, operating fully independently. Welcome, Patrick, thank you so much for taking the time let’s start a conversation with a personal note. How did you get started in private equity space?
Patrick Maurenbrecher 0:44 Hi, Cliff. Thanks a lot for having me on. At Kontora. We’ve been investing in private equity for 16 years now, actually, before I did my PhD on productivity aspect, while it was basically turnaround management in small and medium sized companies in Germany, so I’ve been attached to the space for many years, probably most of our families are invested in a with about 20% of their net worth in private equity. So it’s something that’s very close to us.
Cliff Locks 1:17 What distinguishes Kontora from other advisory services in the space,
Patrick Maurenbrecher 1:21 put it this way, I would say we don’t discriminate, distinguish ourselves a lot from the standard American model of the single family office or the multifamily office, it’s very different in Germany, most people get a financial advice in the banking space, they would go to Deutsche Bank, or to Goldman Sachs, or to some of these names, or a local regional bank, and just do some some bond and stock portfolio. And that’s that will be it at Kontora be very much believe in illiquid investments. So an allocation of our clients could be 60%, illiquid. So you will find a lot of real estate project development, you’ll find venture capital, you will find private equity, you will find some funny alternative stuff like, like a container portfolio based in Singapore, or we are invested in cocoa plantation in South America. So you will find a very international diversified portfolio and we we try to drive down the correlation between the assets to get robust portfolios for our clients, I suppose that’s the main difference to the other German players in the field,
Cliff Locks 2:36 you’ve carved out a very unique business model there, I want to salute you for that that’s a breath of fresh air, we take it for granted here in the US. But in Germany, it’s very, very different. It’s a privilege, and learning and listening. Can you summarize your approach to investing?
Patrick Maurenbrecher 2:52 Absolutely. Well, when it comes to investing, it’s basically two areas that we draw ideas from. The one is, when it comes to financial returns, the most important question you have to ask yourself is how do you divide your wealth between the different asset classes. So the so called strategic asset allocation is the the main driving point for robust and stable returns. So that’s the main thing and we look at the US, especially to the endowment model that has been pioneered by David Swensen at Yale, but also others, Notre Dame, MIT, and Seth Alexander’s also a big Professor hero. So we very much look at these guys, what have they done. And then we kind of adapted it a little bit for for Germany. But in the end, it’s the same ideas. That’s the strategic asset allocation. And when it comes to picking individual investments, we very much bottom up guys. Well, I would say it’s the value investing philosophy that is very at the at the heart and core of what we do. But we try not to stay at, you know, what has been Graham said, and what his numbers that he looked at, we try to like most good value guys nowadays, look at what does it mean going forward? For example, most guys look at what is the moat doing in the future. So we look at how will the competitive advantage develop over time? For example, if you look at the business model, like like Google, say, okay, is that moat growing? Or is it shrinking? Or is it staying where it is? And when it’s growing, it might, it might be a value perspective to say, Well, if this is actually a very undervalued company, versus the traditional value guy would say, Oh, that’s a very expensive company for some reason. Yeah. These are the two areas where we draw most of our ideas from Yeah, looking around Seth, Seth Klarman for example, speak here of US based in Boston very much looking at margin of safety for each and individual investment. We try to find investment with big monitor margin of safety. So mostly what we do actually, we always look at what can go wrong, and then try to get good returns from that.
Cliff Locks 5:08 So consistent solid returns. And looking at the risk profile, very good.
Patrick Maurenbrecher 5:14 Yeah, the funny thing is, when you when primarily look at the risk side, you end up with really good returns, we track it by, you know, precisely. So in the history of controller, we have advised our clients on 169 investments. So we can pretty much say what what are the returns of these four lots of the illiquid stuff that they still run. So I mean, if you do a product refund, and that runs for 10 years, and we’ve done the investment five years ago, we can’t finally say where the where the IRR will be. But for the for the investments that are finished already the IRR is at 14%, after after coffee, it seems to work
Cliff Locks 5:56 very positive. What do you mean by thinking and working in module units in what is the benefits of this approach to your clients?
Patrick Maurenbrecher 6:07 Yeah, that that might be an advantage we have here in Germany, because most competitors, they have a model where they say, well, client, I will do everything for you, please come to me, I do the number crunching for you, you can do investments with me, and you have an all in fee model, we adjust, we do all the administration and the investment, etc, etc. everything for you all model is different. And that we say it’s fine that people also single family office can come to us and say, you know, we have the administration in place already. But we really need deal flow for private equity or real estate in the US, for example. And then we could say yeah, that’s no problem. You just we show you our deal flow, and then you just pay for these services. And others might say, you know, we do all our investments ourselves, and we have 70 p phones funds, for example. And could you just do the administration for us. So we are basically there workbench, providing them with all the all the numbers and and you know, we we get the, the the quarterly results, and we do all the bookkeeping for them. So that would be a different approach, working with Kontora. And then other families come and say, you know, we have four kids, they have no idea about investing, we are all fine, you know, maybe the husband, he has built up his wealth. And he says, well, but my kids will inherit this at one day. And but they have no idea about investing, can you teach them? that’s actually quite a big thing in our whole portfolio of services that we provide an academy program where we vary individual, you know, some some say, Can you just do some education in the different asset classes? And we would say, okay, there’s one module where we explain how does listed equity actually work? And one will explain Well, how do you invest in real estate? And one would say, what about private debt, we would then go about explaining all these things, because we very much believe actually also be a German thing over here. Most asset managers, they come to the clients and say, it’s great that you’re here. It’s wonderful. Now you don’t have to worry about anything, just give me your money, and I will take care of it. And the typical entrepreneur in Germany will panic at this sentences, because, I mean, usually he did the decisions, and he was very good at deciding stuff. And now there’s somebody coming along who wants to take all this away from him, Well, we tried to do is say, look, what you’ve always done. I mean, this, this is for the kids, but also for for the for the guys, for the successful entrepreneurs, you have done your decisions very well in your space. And now suddenly, you want to invest in venture capital, for example, or real estate, which you have never done before. So we will kind of teach you all you need to take the decisions in the future on the same solid ground. Yeah, that’s pretty much our approach.
Cliff Locks 9:02 Prouty, what is your approach to identifying the most objectively suitable financial service partners for your clients?
Patrick Maurenbrecher 9:11 I think it’s a it’s a two way process. On the one hand, of course, when it comes to investments, like private equity, for example, you have your league tables you have you know, everyone, it’s very transparent. What’s the best track record? Who are the guys who want to invest in? I don’t know, for example, venture capital, well, you want to invest with Andreessen Horowitz or Sequoia or benchmark. And then your only problem is, will they give you allocation or not? Well, that’s the easy part. So you work on your network, you try to you know, get the connections to be able to invest with the best guys on the planet. But then, when it comes to stuff like listed equity, we are more contrarian in the contrarian side of of who we like to give money. So for example, most asset managers I think that’s actually globally will say Well, you know, we have a diversified portfolio of 30 to 50 companies, and that’s a very concentrated portfolio. And then that’s when I panic because a concentrated portfolio is something between 10 and 15. Companies, you don’t find that in the in the normal institutions like a bank, or a huge asset management firm, but you do find it with one Captain ships, we look for these guys who, who, you know, have a setup, where they do their investments, but basically, they concentrate on investing in a concentrated portfolio. And they have spectacular returns. This is purely basically getting to know the guys trying to find these guys at conferences value x in going to Omaha, I mean, I didn’t go the last two years. But you know, we go to Omaha, meet guys at the Berkshire AGM and and you you get your network of guys who actually do these style of investments have to do a lot of explaining when when the families come to us at first, because I mean, they have heard the whole day year all their life, that you need 30 to 50 companies in a portfolio for it to be meaning portfolio. And so that takes a lot of education, actually, but most most families end up in the style of investments.
Cliff Locks 11:22 That leads me very nicely into what are the main differences in private equity markets in Asia, America, in Europe?
Patrick Maurenbrecher 11:29 Well, that’s a very broad question. But very good question. I mean, for me, the the best private equity managers are still found in the United States. I mean, this is where it originated, this is where the best guys are, and where the innovation Actually, I mean, the structural innovation, how to invest in the private equity space comes from, I would always tell our families, when you want to invest with the best productivity guys, you need allocation, the United States, then in Europe, you have some very able managers, probably the markets are not priced to perfection, the way it might be in the United States. But then again, I always think most of us, most families have a home bias that’s everywhere on the globe. But we have the same in Germany. So I always tell the families rather do a little concentrate your productivity portfolios, rather, in the in the United States or in Asia, because you have enough assets in Europe anyways. So So I always work against the home bias and try to I mean, that’s a very personal thing. I mean, you have people, they say, Well, the only place to invest money is in the US. And others say, Well, you know, this is this is all cowboy country, and I don’t like to invest in the United States. And well, for me, for me, personally, I would always feel very comfortable having at least 30% of my worth in North America. So I rather have an over allocation in the United States and in Asia. And then I mean, you also asked about Asia, in Asia, it’s definitely still an emerging base there. But that can give you spectacular returns, we had the experience. Also, like 678 years ago, when I talked to clients about investing in Asia, they were like, well, if I invest in Asia, it’s more risky than investing in Europe or in the US. So I want more return. I totally understand this thinking but it was not possible, you could not get a higher return in Asia. And nowadays, the discussion is totally different. It’s more risky not to invest in Asia than to be invested. We go there we we do due diligence in in Hong Kong in Beijing. And we try to get a feeling on the ground for the right teams. And yeah, we found some really good managers, large and small. So we we do quite some allocation over there.
Cliff Locks 13:58 Like I’m sure. What is your approach to identifying risk factors that can lead to permanent impairment of capital?
Patrick Maurenbrecher 14:06 Oh, that’s a very good question. Also very difficult question. Yeah, I’m sure you have. You’re familiar with the Warren Buffett quote, rule number one, never lose money. Rule number two, never forget rule number one. I mean, that’s just the art of compounding. And if you want to do compounding, he should not lose money on the way. So that’s very difficult. And that’s where the margin of safety comes comes into, into play. It’s at the heart of what we do try to identify what can go wrong. And that that doesn’t matter if we’re talking about product which he or listed equity or real estate or whatnot. It’s always the same question, we have to look at eight factors that we always apply no matter which asset class and for example, one first question that we always ask, does the manager that we give money to has skin in the game I mean, this very old, silly in a way aspect, but it’s the one that is so important. And if you get the right answer on that, and then you have alignment of interest, that’s a very, very positive. I mean, in Hamburg, you know, we are shipping city. And I mean, it’s a very good example here, because we have lots of shipping companies here. And they used to be a time when the guys who run the shipping companies, they would run, for example, 20, or 30 ships, and then they would have the equity and three of these 30 ships, and the rest would only be with other people’s money. Now, you guess, which ships never lost money, you know, and it’s, it’s so funny. I mean, even in the biggest crisis, the ships that had the money of the of the of the entrepreneur somehow came through, and the others didn’t. And it’s a simple, simple factor, but we always follow this. So we probably lose quite a lot of interesting deals, because there’s no skin in the game or too little. But we’re fine with that. Because the risk side is so important for us. Well said,
Cliff Locks 16:12 How do you achieve transparent planning, analysis and implementation without conflict of interest?
Patrick Maurenbrecher 16:19 And that’s a easy question for us. Because it’s at the heart of our business model, we are not an asset manager. I mean, that’s the problem. When you For example, it’s about listed equity portfolio, and you go to a bank and say, well, is your is your portfolio the best? Of course, it’s the best when you come to us. We are an independent advisory firm, you know, we don’t take any kickbacks, the only guy who pays us is our clients, they asked us question, we do a very neutral and independent screen of what’s available, who can kind of fulfill the the required criteria, and then we present them to our clients, whether, you know, if they get a 30 page analysis of what what are the risks, what are the chances to give this guy or that gay guy money with a strategy, and then it’s our clients who will decide there’s actually no conflict of interest involved.
Cliff Locks 17:11 So being independent is very, very positive. And that’s different than most firms sitting in Germany at this point.
Patrick Maurenbrecher 17:16 Absolutely. And, and also, also the, the structure of our company is kind of working in our favor. I mean, we are just three guys owning the company, nobody else has shares, we will try to give more people in our company, and we’re 70 people now. So we will try to give more people shares of the company, but nobody from the outside. It’s the entrepreneurial families that are our clients, they they’re very much like that, because it’s kind of from, I don’t know, they feel at arm’s length. They like to talk to other entrepreneurs in a way. And so it’s Yeah, it’s it’s, it’s an at the same level field somehow.
Cliff Locks 17:58 Sometimes, it’s also very interesting to look at deals that have not worked out the way you had hoped at the beginning. Could you tell us about the worst deal and what you’ve learned from that experience?
Patrick Maurenbrecher 18:10 That’s a great question, Cliff. And I love it. Because actually, that’s the way we think. I mean, you always have to try to learn from your mistakes. And well, there’s one example that comes to my mind, because it’s, it’s kind of the, I mean, it’s a real estate project that we did. And it looked really nice, it was building with the hotel, and it had some apartments, and it had a cinema, and it had parking spaces. And it sounded also good. And every one of these aspects had a manager who actually knew the field, the guy who did the cinema is kind of the leading cinema guy in Germany, etc, etc. And it all made a lot of sense. And then it all fell apart at some stage. And the main failure or the or where we didn’t kind of understand enough of the project was a was too complex. And when it came, came to building this. Yeah, this project. It was too complex to handle. So the costs were running out of the budget, and at some stage, they close the they made a forward deal. And so the project, but they hadn’t closed, all the cost side, the cost side was still open, but the sold already. And that was a huge problem. And I mean, we do manage a selection. So it was it was too late. We saw too late, the complexity of the project and the calculation could not work out. I was a big problem. And we’re very, very aware of this now and I’m sure that will not happen again. But that was the was really a big learning experience and we lost money on that. And and it, it felt really bad and it was bad for our clients. And yeah, it’s always nice to talk about, you know, 1420, whatever percent are good investments. But I mean, we have actually I, you know, we have six investments of the 169, that didn’t work out. And this was the worst. And then is one is minus 2%. And one was minus 15%. And it’s, I think, overall, it’s okay, but still, those were mistakes that we made.
Cliff Locks 20:36 Let’s go back to one of the earlier conversations we had Tell me more about the controller Academy, specifically the structure of the content and who is it for because I was excited to hear this, I think it’s really advantageous when I find a leader like you and your team, putting an academy together and what they can bring forth to the client in the community. Tell me more.
Patrick Maurenbrecher 20:59 Yeah, I love I love to talk about it, because it’s basically what makes us go round. I mean, we it’s all about learning, it’s about also teaching, but also we learn a lot from our clients. They’re very driven and intelligent and great guys, investing as a difficult area. And funnily enough, at least in Germany, investing is not taught at any university. Yeah, you have finance courses, etc, etc. But, I mean, something like what Columbia school that does not exist over here. So we have modules, where you learn about what is private equity, we have modules will learn, you know, all the different asset classes. But then most important module, from my point of view is the one that the co founder, Stefan book world health, and that’s about, is there something that over centuries, the successful families all done, you know, are they are there common rules that you can follow? And yes, they are common rules. And if you look at what families who have built huge well done over centuries, you always come to the same conclusions. And that’s so funny you don’t have to you know, advantage for you, you just have to be very disciplined and look at, you know, what others have done in the past and then try to apply it with the same discipline and for example, one thing that that you you’ll find that an old Jewish families, you will find that and, and and, you know, all over the world is the same principles, for example, diversification and trying to drive down on the correlation between risks is something that has been done for centuries. It’s all I mean, they had different names, it wasn’t called alternative investments, maybe it was the land you know, you have to own land or what what now for for us for example, listed equity, private equity or direct investment in companies is basically the same risks that you buy you you buy into future cash flows of companies find that family Fugu is a is an old German family, who he they made deals with the with the pope at one point, I mean, centuries ago. But that’s the same principle. They had some of their money in land some of the money in real estate and some of the money and companies. That’s what they did. And basically, it’s the same idea that we try to tell our clients or try, our clients try to have real estate than corporate cash flows and alternative investment, which is basically the bucket of everything else. It’s working fine. That’s great.
Cliff Locks 23:42 What are the key benefits of illiquid assets?
Patrick Maurenbrecher 23:46 I think it’s a bit counterintuitive, because most people think it’s great to have liquidity. But when it comes to successful investing, the biggest problem is not the market and it’s not intelligence or something. It’s having your own behavior in check. So illiquid investment help you because you’re stuck. For example, how many people have sold stock in in spring 2020 when the Coronavirus said a lot, a lot and then it took them and then they sold and then it took them a lot of long time before they re entered into the stock market. Well, that that there? Yeah, they messed it up. Because I mean, nobody could have foreseen that we get such a quick rebound, we see the illiquidity premium as something really valuable and it’s it’s helping everyone to have their own feelings and check in a way. So that’s what we try to, to to teach in a way most entrepreneurs that they they grasp this immediately. And I mean in their companies they’ve they’ve done it for years, because It’s, it’s what they do they always think long term and suddenly only because it’s possible to trade every day. People think that the stocks, it’s just a financial product, but it’s basically having a share in a business. I mean, you wouldn’t have the idea of because the prices of your apartment went up to sell your apartment The next day, you wouldn’t do it. But we’re starting to do it. It’s It’s funny, but that’s how human nature is. And I mean, Daniel Kahneman and others have shown as all that’s it’s all the problems are always. So yeah.
Cliff Locks 25:36 What are the factors that determine or effect the assets, liquidity or illiquidity? Okay, could you elaborate? When you look at an asset or an asset class, we look at liquidity, and then the illiquidity so you know, you look at it some private equity and venture capital. Some of the capital, it’s at points for the high net worth or ultra high net worth individual has a timeline the way they want to put those assets to work. So liquidity and illiquidity at this point does come into rolls. When do they need those proceeds returned to them? Where do they? So when you Yeah, okay, balance that takes place?
Patrick Maurenbrecher 26:18 Yeah, it’s all it’s always important. I mean, we advise our families to generally have at least 10% of a net worth and cash, no matter where rates are. That’s very important. And then, of course, you have to manage your liquidity. I would say most of our families, they, they they have about 50 to 60% of their investments in illiquid investments and the rest and liquid investments. And that kind of I mean, I’m well, but I must say, I’m talking about families with net worth north of 50 million euro, you know, so I mean, that’s a different kind of
Cliff Locks 27:01 problem. Burberry good. How is illiquidity reflected in the expected returns?
Patrick Maurenbrecher 27:08 Yeah, I’d say the I mean, we talked about it’s a it’s a illiquid premium. And and, I mean, I wouldn’t say it now is 1%, or it’s 2%, or how much it is. But it’s important, very much believe in the illiquidity premium. And that’s what our results for last 16 years have shown. I love investing in the stock market. So I I’m not a purely liquid guy, but you know, but I treat it pretty much like an illiquid investment.
Cliff Locks 27:38 Very good. What are the personal rewards for you in doing what you do? And what do you love about your career choice.
Patrick Maurenbrecher 27:48 It’s basically working with these hot driving entrepreneurs. And and that was makes me get up in the morning. And if I know I ever have a call, I have a strategic meeting with, with, you know, one of my clients, it just, it just makes my day because I always learn a lot from them, they make me think and you ways, I figured out a great investment, and I presented to them, and they they really get get to the heart of the investment and the risk reward profile within minutes. And then kind of getting them to, I don’t know, agree with me or disagree with me as something that that is very fulfilling for me.
Cliff Locks 28:31 So it’s a friendship, and a business relationship. It’s together.
Patrick Maurenbrecher 28:36 Yeah, I would say so. I mean, some of our clients are definitely in the in the top five. table for me, of people from whom I’ve learned the most definitely
Cliff Locks 28:47 very positive. Tell me about your legacy you’ve built?
Patrick Maurenbrecher 28:52 Well, I’m at the beginning of our conversation, I told you about the financial situation of financial market in Germany and the situation we have here, where I always feel very, very much behind what’s just the normal stuff in the US and and just, we’re just not a leading nation when it comes to investing. And if, if I were controller can help kind of do a bit of education that people over here also invest their money. Yeah, with the ideas that have worked for centuries. That will be great. If we could have, you know, that level of impact and help on that front.
Jennifer Katrulya is CPA, CITP, CGMA partner at Citrin Cooperman.
Jennifer has been recognized as one of the “Top 100 Most Influential People” by Accounting Today, and one of the “Top 25 Most Powerful Women in Accounting” by CPA Practice Advisor.
She is responsible for developing strategic and channel relationships for the firm, in addition to contributing her expertise as part of Citrin Cooperman’s rapidly growing business process outsourcing division. In addition to her 25 years of experience working with small-to mid-sized clients across the United States and internationally,
Jennifer has worked extensively with private equity and venture capital firms, family offices, financial service firms, commercial and residential real estate companies, and high-growth technology companies, to connect private and institutional investors with private deals and opportunities to collaborate.
These companies retain Jennifer to help them establish best practices across the company and to provide ongoing services as part of their sales and marketing, operations, accounting, and technology leadership teams, both in their companies as well as in the companies they invest in. She is frequently asked to help form and run company advisory boards, facilitate company retreats, and appear as a speaker.
Prior to joining Citrin Cooperman, Jennifer was a practice leader at a top Midwest CPA firm, and she was the co-founder of Block Small Business, a wholly owned subsidiary of H&R Block. Jennifer was also the owner of a highly successful CPA firm that provided accounting and advisory services to clients within the U.S. and internationally.
Citrin Cooperman’s Business Advisory Solutions Approach ensures our professionals primary focus stays where it counts – on building long-term client relationship. Our specialized team provides integrated general business consulting, accounting, and tax services to our clients. Rooted in our core values right from the start in 1979, our mission is to provide a comprehensive business approach to traditional services and proactive business throughout the lifecycle of our clients. When you are free to focus on what counts, business thrives.
Listen to this interview as Jennifer and Seth discuss:
What it means to be a virtual CFO.
The most common problems that Jennifer helps business solve.
Defining and recognizing “efficiency leaks”.
Some of biggest mistakes companies make when thinking about an eventual sale.
How the management of teams and our workforce affect sales and marketing strategy..