Luis Delgado: (00:04)
Welcome everyone to the RealAtom broker podcast series where you’ll learn about the brokers on the RealAtom platform and the organizations they represent. My name is Luis Delgado, an account executive at RealAtom. RealAtom is the industry’s number one leading tech service lending as a service platform, empowering real estate lenders like banks, credit unions, non-banking organizations to generate more CRE loans today. I have the pleasure of introducing Gabriel Silverstein, Managing Director at SVN. Welcome, and thank you for taking the time to present to us today, knowing that, you know, you’re the managing director of SVN, can you tell us kind of how you got to that point? You know, telling us a little about yourself, what got you into CRE and, you know, how’d you, how you ended up at SVN?
Gabriel Silverstein: (00:51)
I’ll give you the cliff notes version of that because the story’s probably a lot longer, but the abbreviated version starts in Russia in 1993. I went from investment banking into real estate early in my career in part, because I lived in Russia, worked in Russia in the early nineties. And effectively ran a hardware store, which, in 1993, didn’t exist in Moscow. It was the first of anything, even remotely of its kind, in post-communist Russia. And all of our clients were mostly American, but they were ex-pats from various countries, mostly Western countries, who were buying properties that people had owned.
Gabriel Silverstein: (01:55)
They had ownership, a vested title, to land, buildings, and apartments – that had never been part of communism. Because you don’t get to own anything in communism. True communism. And so these Russians were suddenly selling property for what they thought was lots and lots of money to Westerners, and the standards were very low compared to higher-end Western stuff. And so every company in the world, the top companies all wanted their peak people there. Deloitte and Touche had to have people there and Goldman Sachs had to have people there and the world bank had to have people there, but the accommodations that you could get were not really up to what we would think of as good standards. And so these companies, to get there, you know, convinced their people and sometimes their families to move to Russia, they had to pay any number.
Gabriel Silverstein: (02:45)
Somebody quoted them pretty much to rent something that actually was at the right level of quality and it was very hard to find. So everybody, all these guys I knew that were our clients were buying these properties from Russians for absurdly low prices. They were renovating them to a Western – I’ll call it a Western standard – high-end class. And then they were turning around and leasing them to these very large multinational companies for the employees and their families to come to. And, and they were turning these around and they were making all their money back in three, four months. It was incredible, the value they were creating. And they were making money hand over fist, profit-wise. I mean, that’s phenomenal payback on timing. And it was all because of the lack of transparency of information. Russians didn’t know how much these things might be worth and nobody else there knew how to renovate ‘em the right way to the standards that the Westerners would want.
Gabriel Silverstein: (03:45)
And, and that fascinated me and, and that theme continues even today in real estate, even though it is transformed, I think in the almost 27 years now that I’ve been in this business; it is a more transparent, far less opaque industry from an information point of view, but even when you get all the information, you still need to know how to interpret it and use it. But what I was most fascinated by at the time was the fact that the information was very hard to come by. And therefore, if you knew the information that was very, very powerful, people were making a lot of money on it. And I think even to this day now just into 2022, as we record this, commercial real estate to me is probably, I would argue, still the single largest effectively unregulated asset class in the world.
Gabriel Silverstein: (04:48)
It’s an asset class of tens of trillions of dollars in value. And while a few people, banks, insurance companies have some level of regulation and oversight, the majority of the industry is not regulated. It’s not like the stock and bond market. It’s not like even residential real estate, which is looked at a lot more closely because of the impact of individual consumers. And so here we have an industry, tens of trillions of dollars in value. Relatively unregulated can be good and bad in that way, but generally, it’s for the better. And it has the possibility for people to make many, many, many dollars, whether you value that in hundreds of thousands or millions or tens of millions or more, there’s an almost unlimited earning potential for people in all sorts of different walks of this business.
Gabriel Silverstein: (05:41)
And that continues to fascinate me. And even though the original thesis that I got into this with, which was the lack of transparency of knowledge and the power of information kind of has transformed in this industry with the information providers that are now out there, nonetheless, that overall opportunity is there for almost anyone, regardless of their background. It is based mostly on their work ethic and their intelligence and savvy – it’s really a fantastic place to be. I think it’s exciting. So it’s why I still love it. And like, you know, I still get up early to work late 27 years later, because this is just a fantastic place to be.
Gabriel Silverstein: (06:35)
So I ran a hardware store in Russia. That’s why I’m in real estate. It makes lots of sense. I know, but the dots do actually connect and I originally went into investment banking. I quickly switched to the real estate side of investment banking. And interestingly, now that’s still what I do. Our team, which is the capital markets team nationally for SVN, does really two primary things. One of those is investment sales for larger institutional size deals, 10 million and up. And the other is debt financing, mortgage financing sometimes. And, and also some equity, but primarily debt. That is still, that’s real estate investment banking. So 27 years later, ironically, still kind of doing the same thing. I started when I first got out of the University of Notre Dame, a lot of years ago.
Luis Delgado: (07:24)
Got it. Can you go off of that? Can you tell me a little more about the deals you guys specialize in?
Gabriel Silverstein: (07:34)
On the debt side? We do a lot of different kinds of debt, but we tend to work more on one or two categories. One is more bridge loans probably than perm. Although we, you know, we love easy down; I call it down the middle of the fairway. Funny, because I haven’t golfed in a long time, but down the middle of the fairway simple, if you will, long-term loans are great. We do a lot more bridge loans than perm. Okay. And we do a fair number of highly structured credit-based transactions, which are bond financings, credit-based financings. Even hybrids of that are, you know, a real investment banking, geeky kind of product that excites me because it’s really a level that most of this industry still doesn’t deal with.
Gabriel Silverstein: (08:31)
And again, it’s a place where we add a lot of value and I think bridge loans are the reason we’ve done a lot more, probably focus on bridge loans than perm loans get again, back more of the value story. Which is not to take away from either us or any of our competitors and colleagues who when, when we’re doing perm loans, but those are less complicated. They’re a lot easier. And to some degree, I look at it like that. We, at some level, I’ll say, add less value or we certainly add a different kind of value. I shouldn’t say less. We add a different kind of value. I think the value that a really good mortgage broker adds on bridge loans, transitional assets, is far more important and relevant than the borrowers. Especially as markets continue to, you know, fluctuate over time and the participants in that space ebb and flow a lot. So I think that’s probably how we ended up doing a lot more bridge loans on, on average than perm.
Luis Delgado: (09:41)
Do you have some examples of those bridge loans?
Gabriel Silverstein: (09:47)
Here’s two different deals. One’s an office building, a headquarters building in Charlotte. The next one here is an industrial building for over 1.3 million square feet in Anderson, South Carolina. Both transactions were a structure in which we do a lot of building the suits, you know, again, some place it’s a place we specialize in some ways then, because build the suit if it’s done correctly. And I think a lot of of people don’t understand it well in this business, but, um, the financing brokers don’t always understand the real estate side of the transaction, the real estate brokers don’t always understand the financing side, but really, done correctly, a build the suit is absolutely equal parts of those two. It’s really important to, again, do ‘em both well. These are two different transactions.
Gabriel Silverstein: (10:39)
This is for a company called Avidxchange, which actually works with a lot of the REITs and a lot of other real estate companies in our space about bill payments and expense payments on construction and billing operations. But so that was their headquarters across from the music factory to place in a section of town in Charlotte that was rapidly developing, called Uptown. And now that they’ve actually built them, they have a second building now, added to this. This was the original. Then this is a distribution building for a company called TTI, which is a very large, portable kind of battery powered power tools company, which owns almost every brand of power, portable power tools out there. Milwaukee tools that pretty much anything you find in Home Depot in the power tools section, they make it. They might all have different colors and different names on ‘em, but it’s all coming from these guys.
Gabriel Silverstein: (11:38)
So a Hong Kong-based company, this was to consolidate three of their buildings into one large complex – 33 acres under one roof. It’s huge. It’s one over 1.3 million square feet 30 again, to build. Yeah. It’s, you know, think about that. It’s like putting an entire, an entire field, you know, all under one roof. It’s insane. But the process we went through on both of these is the same. And we do this with 10 million up to a couple hundred million. It’s both a financing and an investment sale. In these cases, both of these were done where we pre-sold the asset for the developer. We also then finance a hundred percent of the construction costs, along the way in a creative way and the benefit to the developer.
Gabriel Silverstein: (12:41)
And you’ll see one of the comments I have in here. We call it our infinite IRR program. And if you’re a finance geek, you can think about the way IRR is calculated. Your first cell in the calculation is the amount of dollars you put out. And then everything from there is, you know, further dollars out or in until you get all your money back and you calculate your IR. Technically, you can’t calculate an IR. If you don’t have to put money into a deal, you just make a profit. And that’s, in fact, what we ultimately structure for a lot of developers to build this, you. It’s where they don’t put any of their own money on the deal. We finance a hundred percent of it and it’s sold in advance to the end.
Gabriel Silverstein: (13:22)
So they don’t have any risk, but it’s sold at a profit. And the profit is not just based on what the cost is – that profit is based on the cap rates. It’s based on the value of the lease here. We actually helped with the lease structure with the developer who had very little office experience. They were more industrial-based. And we structured that to make sure the value of the property was worth more later. Then we also financed all the construction for them. You know it’s interesting when you work for a developer and you make an effort to call the tenant and the developer says yes to everything the tenant asks for. And then I chime in and say, no, we’re not gonna do that. I have to override, you know, overrule my own developer, be it because of considerations for the future value or the financing.
Gabriel Silverstein: (14:09)
And that’s just one of a bunch of examples where we were privileged to work for years with the developer, putting this together. Where they trusted us to help them with looking out for what the value in the future and the financing ability was gonna be that they weren’t thinking of as they otherwise wanted to say yes, in the deal to the tenant and, as a result, they did much better. Now we do this on the flip side, we represent tenants sometimes. And, of course, we’re, you know, we have the opposite team on our RO; we’re on the roster of the opposite team and the deal, but the same methodology works. You know, we just, we still have to be sensitive to the fact that you can’t negotiate a deal that a developer can’t finance or can’t sell for profit, because then they’re not motivated.
Gabriel Silverstein: (14:56)
So we do a lot of those kinds of deals. Okay. Next slide. Here is a company called CBS rentals. This is actually a deal that we did a couple years ago, but I bring it up because it’s become interestingly relevant today. This was a sale leaseback. So again, it’s a combination financing deal. Which is really from the tenant’s point of view, it’s a financing structure. But it’s also a little bit of an investment sale deal. So it’s kind of, it’s a little bit of both. And the fact that our team does both, I think, is really helpful in these transactions, as opposed to the fact one team of people that does real estate and one team of people that does finance and they occasionally get together at the water cooler. If you look in the background in this, and I don’t know if you see my cursor where I kind of circle this while I do this, but on the screen share.
Gabriel Silverstein: (15:43)
But if you look in the background, what you’ll see is these guys rent to construction companies, they rent these big, tall, you know, cherry pickers and, and scissor lifts. And these equipment pieces are heavy industrial that have to be used when you’re building buildings. And what’s interesting is we did this transaction a couple years ago as a sales back of a whole portfolio, these assets for them to help finance their balance sheet, grow their company, right? Privately held group. But it’s relevant today because this is an asset class that back then people didn’t even think of as a new asset class. There was a different asset class that was just industrial. However, today we’re getting a lot of recognition that this is, this is itself a unique and interesting asset class.
Gabriel Silverstein: (16:34)
And it’s one we’re calling ISF, which is an industrial service facility. And it’s got an, an FAR of a building square footage as a percent of the, of the site of less than 0.2. So less than 20% of the site actually has a building on it. If you look at this, it’s a huge yard, it is upper parking, right? And so we’ve done half a dozen of these transactions, even just in the last three to four months, with a lot of these ISF facilities around the country. We’ve done ‘em in Minneapolis and Reno and salt lake and Denver, and several other places all in the last couple months, just because this has become very popular from an investor point of view. It’s an interesting challenge to finance because a lot of lenders haven’t yet quite figured it out, because they still look back at the building and they don’t understand that half the value is actually in the outdoor space.
Gabriel Silverstein: (17:28)
It’s because these are big ugly, machines, people put out here. And nobody wants to live next to that stuff cause it looks ugly. Right. So getting zoning for this is really hard – helping lenders understand why they should lend on something like this then becomes kind of relevant. But again, we do both the sale and the financing of this. This was a portfolio of almost 200 million VA building sites. We usually sell these for the same developer when they’re done. Here’s a unique one. And I talked about from a financing point of view coming for of an investment banking point of view this, this was a property that a top 10 national healthcare developer was building on a ground lease in downtown Chicago and Lincoln park, actually next to a hospital, they were building an ambulatory care or medical office, some traditional office, and it was gonna be multi-tenant.
Gabriel Silverstein: (18:34)
But most of the tendency was the hospital owner from the building next door on a ground lease with that same hospital owner. It was a hundred and I don’t know, 20, 130 million, project, senior loan, about 67 million with an insurance company, construction and perm loan. And, and this tenant came back, halfway through construction and said, we want you to provide us another 23 million for extra TIS. Okay. The developer goes, you know, so the first discussion, of course, is with the senior lender. And the senior lender says, I don’t wanna pay for TIS. I don’t wanna pay for TIS because first of all, I really like my basis in your loan to begin with. I don’t really need to make it higher. That’s great. I’d love it. If you put more money into the building, even better for my collateral, but I don’t wanna be the one to fund it.
Gabriel Silverstein: (19:33)
So that was the first lender’s reaction. And partly because the nature of this is literally tenant improvements. This is building lead and copper lined walls for the imaging center. This is extra heavy floor reinforcement for the same, you know, MRI machines and the x-ray machines and things like that. It’s a build-out. It’s stuff that when that tenant’s lease ends, if they don’t renew you might actually have to pay money to get it out of there. It doesn’t have a value. And so this is a really unique problem, and we’ve done this a couple times for different developers with good credit tenants, where we struck, structured, a bond. It was a bond structure. We structured a financing that ended up being able to be put into the lease document in a way that continued to make it part of the rent for the tenant, but it was $23 million that was to use for the tenants discretion on this improvement has no collateral.
Gabriel Silverstein: (20:34)
It’s not even recorded as a loan, really. Which, of course, the first lender loves cuz there’s no mezzanine loan now behind them that’s recorded. They have no, you know, recordation rights, in a foreclosure situation, the tenant loved it, because it built it into their lease and they just pay rent and they don’t have to take out a loan themselves. The developer loved it because they didn’t have to put any money into it. And it was financed at a bond rate for the tenant. So we’ve done this a couple times where we can. We can structure this really, really kind of thread the needle in the capital stack with something that logically makes sense. Based on the tenant’s credit as opposed to the collateral itself, but is very complicated because most traditional financing sources don’t know how to structure that and hold that kind of paper because they ultimately still need to go back to first lead on the building.
Gabriel Silverstein: (21:31)
Right. So that’s a great example. I think of the kind of stuff we do when we, you know, when we really get our thinking caps on and, and try to be fancy. Yeah. I like that one; it was kind of fun. I think it’s a great story. Really solved a problem for both a developer and a tenant. And those to me are great deals because, you know, again like those building suit examples, we usually work for one or the other, the tenant or the developer, but they both need to have a solution that works. Or the deal doesn’t. So finding a way to solve both of their problems at the same time is, you know, a very literal win-win. So we love that. I’ll give you one last one here.
Gabriel Silverstein: (22:27)
This is a, you know, traditional, it’s a student housing property. It’s not a traditional multifamily. We both sold and financed this property. And the challenge with this was that it was at a division three school that was about to become division two. I think they had less than 10,000 students, which was a really important number, both for the Freddie Mac Fannie Mae type financings as well as for buyers; we found some very unique buyers that had never owned student housing before. We got financing, but ahead of time, we knew we were gonna have some with that. It was a great property, best in the whole market, best in class property. But again, it doesn’t quite check the boxes for most of the buyer’s pool or for the lender pool.
Gabriel Silverstein: (23:21)
And so what we did was we went and spent extra time with a Fannie Mae underwriter relationship that we had on figuring out how to get Fannie Mae at a time when they really hated student housing, because they were having default issues in student housing, so we got them to say yes to a loan here, got them to underwrite and focus on the property even before we had a buyer. In fact, we ended up with two different buyers. We had one buyer who lost their equity partner after they went hard on some money. And we had to substitute a second buyer in. We were able to keep the loan in place for both because we had supported it on the underwriting, the deal ahead of time, and got Fannie Mae to approve that. So that when we substituted in the borrower, that was the secondary consideration.
Gabriel Silverstein: (24:10)
Usually that’s where you start, had a great, great underwriting partner on this deal that helped us get through that really well. But ultimately, not only did that help get the loan done better, but frankly it even helped us get the same property for the seller who had gone out with two other top five investment brokerage firms and failed to get it sold. And I think partly because of that same thing, so we kind of solved it, reverse engineered it sort of, you know, we financed it first and we sold it second, even though you normally have to start with the sale.
Luis Delgado: (24:47)
You guys see it the other way around.
Gabriel Silverstein: (24:50)
The two feet on each other very well. And that’s something, again, our team is really uniquely positioned team to do, because we do both as opposed to having a financing group over in that wing of the floor, and we have a sales group on this side of the hall, and occasionally they get together and, like, here it’s the same team that understands both sides of that claim. And it’s a really unique setup in my experience in this business, but it’s proven really valuable to a lot of clients.
Luis Delgado: (25:24)
Sounds like a huge value addition to bring to your clients, for sure. Having the ability to be able to do both of those things. Gabriel, as we wrap up, I do have one or two final questions. Do you remember the first deal you ever did?
Gabriel Silverstein: (25:50)
First deal, or first financing deal?
Luis Delgado: (25:53)
Gabriel Silverstein: (25:55)
I’ll give you the first deal I ever closed. I was only months into real estate. I was less than a year out of Notre Dame. When investment banking switched to real estate, I was representing Donnelly on a very large office transaction, a hundred thousand square plus square feet. And I was, you know, this young, very inexperienced and frankly, reasonably on not very knowledgeable, finance kid that I know on a team of pretty seasoned people because they were, you know, the sizable deals, it was frankly in a down market era, coming out of her bad recession and very senior people otherwise around the table. And then me and we couldn’t figure out how to get them in the building they wanted.
Gabriel Silverstein: (26:52)
They really wanted to be in this brand new, beautiful building. They were in this dumpy old building and the square footage was different and we couldn’t figure it out. And we were sitting in a conference room that we had just moved to. I was with Lasalle Partners at the time. We just moved from Lasalle Street in Chicago to what is now called the Aon building. On the east side. And we had all these brand new offices and in the middle of our floor, we had these conference rooms that had 10 foot high ceilings but clear store windows across the top. So it says two feet, a window around the top of the conference room and then dark walls. So you couldn’t see into what was happening in the room, but you could get a natural light in.
Gabriel Silverstein: (27:31)
And I was sitting there in this meeting, watching this deal die. You know, it was really kind of almost a post mortem meeting with the developer effectively saying; I don’t know how I can make my rent say any better. Like you can’t move to the building. And the tenant was bummed. And frankly, my senior manager’s boss knew the deal was dead. So he wasn’t in the meeting. He was golfing, which is terrible. And I sat there, and I just looked up and I was looking at these windows. I’m like, that’s kind of interesting. And in 15,000 square feet of this, 107,000 square foot deal was a library.
Gabriel Silverstein: (28:15)
And so I said, wait a minute. I liked having the architect give me the plans. And I’m looking at the basement level, the lower level, the building. I said, you know, could you redesign your building so the ground floor had these, you know, windows like this conference room for like two feet, a window before between, you know, right down near the ground. But, you know, that would put light down into the, into the lower level and the architect, you know, first of all, she’s a wonderful woman, she didn’t spit at me, but like I know her first thought was who is this 21-year-old finance idiot trying to tell me how to redo architecture on the building. But, but she, you know, to her credit, she stepped back for a second.
Gabriel Silverstein: (29:00)
She said, yeah, actually, you know what, if we could do that, that would work. We could put the library down there and be, you know, really cheap space and it’d be great. And she looked at the building, you know, so the building architect and the tenant architect looked at each other and they said, yeah, we could, we could do that. We could change our building. I don’t think we’d have much cost for the building. I looked at the developer. I said, Hey Randy, um, what if we did this? Would you give us the space in the basement kind of for free? He’s a great deal maker. Like, all he wants to do is make deals and develop. And he said, I’ll give it to you. You pay the cam, you can have the space for free.
Gabriel Silverstein: (29:37)
And the deal was done. An hour later, we went from a postmortem to signing a letter of intent. It was 107,000 square feet, which, you know, as my first deal is an insanely big deal to get to do is a 10 year tenant rep deal. And my boss got back from his golfing, and was, you know, to a rather pleasant surprise that he didn’t expect. So I try to encourage a lot of people in this business; there’s a lot of things I do including mortgage brokerage in this business that I did not come up with through the traditional ways in this business. I didn’t work on a mortgage brokerage team and learned how to do it the way they told me how to do it. A lot of the deals that I’ve done and that my team has done are things where they got done because we didn’t do ‘em the way we usually do.
Gabriel Silverstein: (30:25)
We just thought of other ways to do it. We tried to find a solution as opposed to trying to take what we know how to do and make it work. We tried to. We went backward and figured out how a solution could happen. And then again, reverse engineer as a phrase I love, but reverse-engineered how to make the deal, then work by doing it. And I think that’s something that’s fun to me. That’s why I get excited, still doing this 27 years later and, hopefully, a lot more to come. So that’s my first ever deal.
Luis Delgado: (30:58)
That’s an awesome story. And I’m sure you have many more stories to create. So with Gabriel, where can people find you, if they wanna reach out to you, your team? What’s the easiest way to get in touch?
Gabriel Silverstein: (31:12)
I’m pretty easy to find on, you know, LinkedIn. I don’t do social media other than LinkedIn, but I’m on LinkedIn. Our website for SVN, it’s easy to find. And through SIOR which is a great organization. I’ve been a part of it for a lot of years. I’ve been privileged to be on the board of directors for the last couple of years there. And the SIOR website will find me quickly too. And those are easy ways to find me.
Luis Delgado: (31:48)
Got it. Okay. Well look, thank you. Thank you very much Gabriel for being on the show today. If, viewers listening, you are interested in speaking with Gabriel, don’t hesitate to contact him directly or, you know, go to the website, check it out. If you wanna talk to me between episodes, feel free to send me an email, at realatom.com. If you’re interested in learning more about it or being on the broker podcast series, you know, you could visit our website. See everyone on the next episode. And again, I appreciate your time, Gabriel, and thank you for sharing your stories, and about your first deals, your first deal being closed, and how you got from Russia all the way to SVN.
Gabriel Silverstein: (32:31)
From Russia, with love.
Luis Delgado: (32:32)
Awesome. Thank you so much for your time.