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Thank you to everybody for joining us today. We are live at Navigating Real Estate in a Shifting Rate Environment. We're in very unique moment here in the real estate markets. We brought three experts up on the stage to share their insights and to answer your questions. My name's Eric Cantor. I'm your moderator. I'm the CEO of Vincent. At Vincent, we're helping individual investors get smarter about private markets.

And our goal for today is to do just that. You can find us at www.withvincent.com as in invest with Vincent. The plan for today is as follows. We're gonna introduce our very experienced panel of real estate investment managers, all of whom will be speaking directly to you and answering your questions. Then we're gonna aim that they talk us through each of the opportunities and risks that they see in today's environment, sharing some insights and things they've learned along the way.

And last, we're gonna take your questions, hear what's on your mind as an audience. At any point as we go through this discussion, just drop a question in the Q &A tab at the bottom of your screen and zoom, and we will catalog those questions and pose them to the panelists. If we don't have time to do that, we'll just put together an email and we'll send it out with all those answers. So kicking it off, just to be clear, as always, this is not financial advice. You should consult with

your personal advisor on any financial decisions. Let's kick things off. First, we'll introduce each panelist. So for each of you, go through the panel. Why don't you tell us about yourself, your investment offerings at a high level, what kind of investors you cater to. Let's start with Charles from Equity Multiple. Yeah, yeah, thanks, Eric. I'm happy to be here. I'm Charles Clinton, CEO and co-founder of Equity Multiple.

Equity Multiple started back in 2015, really with the mission of making commercial real estate more accessible to individual investors. Today we offer a range of investments. You can invest in debt and equity. You can invest in individual properties or in diversified funds. And in terms of property type, we really focus right now on industrial and multifamily opportunities.

To date, investors have invested between 700 and 800 million via our platform into over $5 billion of real estate assets. So, you know, we've seen a tremendous number of transactions over the last 13, 14 years. And, you know, the last two years have definitely been a real interesting time and excited to talk about it today. Great. Welcome. Let's go to Carter from Anchor Trader.

Hi, I'm Carter Malloy. I'm the founder of AcreTrader. For the last six or seven years, we've been focused exclusively on farmland investing opportunities here, mostly within the U.S. across about half the United States. And why farmland? We get asked a lot. It's quite a bit different in terms of how it acts as an asset class. to summarize, the amount of farmland there is out there is finite and it is shrinking, while the demand for the products coming off of farms are growing.

So as a somewhat related result, a very related result, we have seen over time increased values in the farmland as well as increased values in the prices of the commodities coming off the farmland. investors look often to make money through compounding slowly with farmland. This is not a get rich quick scheme, but both through underlying appreciation as well as income that may come off of that. So again, focused.

Exclusive on farmland. I'll talk a little bit more about that asset class later and how that compares and contrasts and can work well in a balanced portfolio with some of the other things we'll be discussing here today. Great. Welcome aboard as well. And last but not least, we have Brian from GroundFloor. Well, hello. We started in 2013. In fact, I met my co-founder 12 years ago.

and we just celebrated our 12th anniversary of our first coffee. We took inspiration from Charles Schwab, who started his discount brokerage platform in 1974 as the SEC was deregulating trading commissions. And because Charles Schwab started that business and built it through the 70s and 80s, that long path in public stock market investing

has left us with the likes of Robinhood and dozens of other options, free trading, fractional trading, trading via ETFs, trading individual stocks, trading meme stocks, trading options on stocks that are now really part of me. There's a whole cable television channel around public stock market investing. We foresaw in 2012, 2013, we started the company, that the same thing would happen in alternatives. And the reason we ended up in real estate

is because we thought among all of the alternative investments that might take off and might be popularized. We thought real estate would be the most tangible. We then took another step and focused on residential real estate because that's the most familiar type of real estate. And we started off and have now broadened from this but into more categories. But we started off financing first lien residential real estate debt.

on loans that we make to investors. We financed about 8,000 houses all over the country for renovation and construction. We've done about $1.7 billion of retail investment volume on our platform since inception. And the product is really popular for two reasons. One, what it is and what it delivers. What it is is it fills a white space in most people's portfolio. It's a first lien debt investment.

that's fractionalized down to a dollar. So you can build your own portfolio, firstly in residential real estate loans that yield about in today's environment, about 12 to 13, maybe 14%. And they repay and recycle about every 10 months. So really fast repayment, a really nice high yield, a really low minimum investment. So you can have lots of them. The second reason it's popular is we don't think the world needs another REIT and we think that REITs are outmoded.

We believe that there's a better way to invest and through technology and regulation, most people can be their own REIT manager and don't have to pay for the overhead of REIT management, don't have to be subject to the draconian redemption policies that almost every REIT imposes by necessity of their business model. so we offer direct investing, but we also offer some portfolios that behave

in some pretty interesting ways that I'm happy to talk about. So that's the story of GroundFloor. Good to be with you guys. Welcome aboard to you as well. So now that we know who's here, let's just do a quick review of what our environment actually looks like. And then we'll jump into how to navigate it as an investor. So the headline here, as it's been for a minute, rates are higher than they've been for almost 25 years.

And for the first time in a while, we're at the start of a rate lowering cycle. And that brings with it a number of distortions that we'll talk about, a number of opportunities. This obviously has a massive effect on real estate markets. Overall, real estate has had a decent year, but there are a lot of differences between the different sectors that you represent, the different geographies that we all operate in. So we're going to drill into some of those differences and

They're pretty widely varied, as we'll see. There's also a lot of clouds on the horizon, a number of dominoes left to fall. We're in the midst of an election. Hard to believe we're actually a week out from an election. I'm sure that'll come up. There is the inflation battle. Some new news came in yesterday on that that was pretty positive. The rate cuts continue, and there's more geopolitical challenges happening. So there's a lot going on. It's an unprecedented time.

Our goal here is to help investors figure out what the best ways are to navigate that. So with that backdrop, let's start the questions to our panel. First question, what is your view on what's happening in the market? And I'd encourage you to drill down into your asset class since we just started pretty general. Why don't we start with Charles on this one? Yeah, look, as you...

I think anyone who pretends to know exactly what the future holds in six to 12 months at this point is lying. You know, the number one thing that we're focused on because it's so central for all kinds of real estate investing is interest rates. Obviously, the news in September of a bigger than expected cut really spurred the industry in a very immediate way.

You know, we are one of our corporate investors is Marcus and Millichap, which is the largest real estate brokerage by number of transactions in the country. So, you know, through them, we really get good data insight into what's happening, you know, not just in the part of the market that we're touching, but really in the market as a whole. And, you know, they basically saw immediate 30, 60 day kind of turnover in terms of

how many people are signing LOIs, looking at transactions, how many loans are beginning to close. That drop in rates really was the kick in the butt that the market needed after two years of extremely low transaction volume. Now the flip side is after rates came down by the Fed, treasury rates began to tick up. And I think that goes into

some of those other forms of macroeconomic uncertainty that you mentioned. think whether it's the election, whether it's other actions the Fed is taking in terms of monetary policy, the specter of global wars, all of that stuff is working in the background and across purposes to what the Fed is doing right now. So I think that the real estate industry is really eager to get going again.

after two years of such transaction volume. For us, we look at it through a couple of different lenses because we do have a couple of different ways that we invest in the market. So focusing first on the debt side, we have a bridge lending program that's done either through direct investments into individual loans or into a diversified fund. And I think similar in terms of term.

to what the ground floor offers, you're really looking at 12 to 24 month duration loans. And obviously for that group, being a lender, elevated interest rates are a good thing. So we definitely see a good 12, 24, 36 month run for that product of elevated rates.

But we're also getting really bullish in terms of the equity investment side. The fact is that valuations, even if there's been a slight uptick recently, are massively down across the board from where things were in 2021 and early 2022. And I think this window of uncertainty, it tells you you don't know exactly where the bottom is. It tells you that the turbulence may or may not continue.

But you can say pretty confidently at this point that you're buying at really attractive prices compared to where the market will be when it reaches a more stabilized point, whether that point is in two years or five years, I think is the piece that none of us can really know today. So, you know, we really like multifamily and industrial self-storage as a derivative of multifamily because we're seeing those things traded values that are 10 or 20 percent below.

what you could have gotten them for two or three years ago. the specter of lower rates for sale or refi in a few years says that even something that's for a simple buy and hold strategy, if you're buying it cheap right now, you can really do well in things that have a totally different risk profile than the kind of risk you had to reach for to achieve good returns a few years ago. Thanks. Carter, what's your take on where we are right now?

It feels like for an incredibly long cycle, well over a decade, rates were, generally speaking, a positive for business. The cost of capital was inexpensive. And in a very short amount of time, it became a negative. generally speaking, a capital formation or an investment activity or real estate. With the recent beginning, hopefully, of a long trend of a

correction back into the direction, it does feel like it's heading toward a world where rates are neutral or where we know the rules of engagement. And so I think a lot of the discomfort in the market has been removed from that. And to Charles's point, the outlook is brightened by that. And that we sort of have a more refined code of expectations of what can happen from here as investors across.

across asset classes and including within farmland. Our assets are a little bit unique and that we tend to be less cyclical within the world of farmland. And it's a very under levered asset class, like 14 % leverage across 13 across the entire farmland sector in the US. So it's a little less of an impact to us, but nonetheless, we do see it impact things like transaction velocity. And so we're beginning to see some regaining of

comfort of, again, like the, it's just like getting past an election, which we'll talk about. Like once you understand the rules of engagement, then engaging in business and making more astute investments seems to be the norm. Got it. Brian? I guess I take a different view. I think there's a bit of a narrative violation when the Fed cut rates by 50 basis points and the treasury market took a dive.

That was a surprise to most people because what it tells you is that the credit markets are expecting a resurgence of inflation. We're pleasantly surprised with how residential housing in the markets where we're operating performed through the high rate environment. think what's noteworthy

about the rate environment is not the absolute level of interest rates, which by themselves are not, from a historical perspective, exceptionally high. In fact, they would be more at a norm relative to history. What's exceptional is how quickly rates increased. That's what's exceptional. Now, a lot of people got caught off sides. you were a long-term holder of debt and you're on the wrong side of that trade,

We saw a lot of platforms blow up. We saw a lot of investment funds blow up. I think REITs were challenged to deliver returns in that environment because of how they operate. You know, we have remained very nimble. I'm grateful that we are in sunbelt markets where for the most part demographics are on our side. I'm grateful that we are generally below the median in most houses that we finance.

I'm grateful that these trades happen pretty quickly. High rates mean, high mortgage rates specifically in residential mean that there's less transaction going. Less transaction going doesn't by itself tell you what will happen to prices. And house price appreciation actually held up really, really well. A lot of people, if you go on YouTube, there are do-mers aplenty who at every turn have predicted

another 2008 housing collapse. I don't tend to believe that's in the offing, but I think it's worth watching HPA and see what happens. House price depreciation, what happens here? I think this is in a market where it's really good to be a short-term debt investor. We're happy there. have some equity-like products that we are cautiously investing. To look ahead and say what's going to happen to house prices

in any given market or any given segment, a year from now, we have always had a tepid forecast. We've always said it'll be even and driven by supply and demand as much as anything. I do think we all may be surprised at how high rates remain, not the rates that the Fed sets, but maybe the rates that the credit market set. And we're prepared for that, I think.

As a platform, it's just important to remain flexible and agile, as we've done through this kind of historically fast increase in rates. So I don't think the environment is necessarily set up to favor real estate generally. I think the environment is set up to surprise us, like it did last month. And I think that, you

Caution is warranted. think you want to be well diversified. I don't think you want to take outsized risk. I think equity risk is a tough. I love it that you guys at Equity Multiple are spotting places in the market where there's discounts. think that's smart, right? If you're an equity investor, you should be a value. In my opinion, in our opinion, we want to be value investors when we get involved at Equity. But I think...

There are several more cards to turn over in the coming years, and the credit markets are going to be watching federal deficits and federal debt very closely, and inflation as well. So my advice for real estate investors is don't become irrationally exuberant, certainly not now. And watch out.

So just digging in on investors, know, we've got more than a hundred investors on the call. You all deal with thousands of investors every day. How are your investors responding to today's conditions? know, what types of opportunities, messages, durations, assets have been compelling to them? What's been a turnoff? You know, just talking about these last few months. And if you were gonna, you know, guide them towards a way to protect themselves and, know,

continue to profit in this environment, what would you say? Why don't we start on this one with Carter. I think Brian had a couple of themes there. One is credit markets in the Fed and everybody has gotten it just about wrong at every turn for years now. And so certainly building your own macro economic forecasts could be a real fool's errand and or following the Fed or credit markets, which have both just been incredibly off.

The themes that we hear, and I think you said this a moment ago as well, Brian, diversification and security are things that we consistently hear on the phone with investors within the AcreTrader platform. And that's something that we're excited to offer. Farmland tends to be very non-correlated with just about anything that we can find out there. With the exception of maybe inflation, it can act as a hedge there. But also like we...

And it's why we're a little atypical in that we don't follow standard cycles. We have what looks like very muted cycles in the world of farmland. It just acts very differently. again, think that security often comes with diversifications and maybe they're related terms, but certainly we're hearing that a lot more. And it's driving a lot of interest in our product in particular. It's just this idea of having a portfolio of things that don't necessarily rely on rates one direction or the other.

as an example. And what are you seeing investors feel? Look, we're at $350 million in assets under management. In the world of asset management, that is very small and we're one of the largest platforms in the market. So I think a lot of the dynamics that we're seeing among investors are there are masses of investors, the early majority is just starting to arrive.

They're more just discovering this space for the first time and the ability to invest in this particular alternatives generally and this class of alternatives. So lot of what we see is people just getting oriented to that. Now in the process, we have some early adopters who have now 10 years of experience maybe investing with us or five years or something. And they are asking rather nuanced questions about, well, what do these higher rates mean for

you know, the asset class, what should I expect in terms of return? And among those, I've seen some interesting behavior that is responsive to your question. You know, those investors, we have a product on our platform, as a lot of platforms do, that's a short-term no product that is backed by a pool of real estate loans that we've originated and that will ultimately be sold to retail investors. And so it's a way to hold exposure at the beginning of a loan.

it's a way to, to sort of have a very broad based exposure. And we saw a lot of interest in that people were willing to trade yield. You know, for, a certainty around maturity, because the biggest risk in debt investing is really maturity risk, right? It's like, when are you going to get your money back? Right. We focus on maximizing the net return, not necessarily on delivering it exactly. You know, when it's due, right. We're willing to extend.

if extending is gonna make investors more money. So we saw a lot more interest during the volatile times around sort of that people will trade yield for more certainty around maturity and greater perceived security. That's interesting. And at the same time, we saw people who were being very adventuresome as we were going out on the risk curve and we have been, we're doing second lean product, right? For example, we're doing some equity investment product. We're doing some pretty novel product

that could be the future of where alternative, we don't know, it's a sandbox, right? We're testing. And we saw a lot of sort of risk appetite amongst our investor base, you know, who trust us, right? To go there with them, but they're very open. And I think there are people who are still trading crypto or trading meme stocks, and they're gonna show up to our platforms and they're gonna look for whatever the analog is, you know, in real estate, because it's all still new. We're psychographically,

We are attracting explorers, financial explorers. And so we continue to see that nothing in this environment has, know, until you see unemployment around six, seven, 8%, people aren't really scared for their jobs in general, at least in our investor basis. They have disposable income to invest and they're looking for something outside the public markets. And I think all three of us are a great position.

right, to benefit from that. And I think a lot of what we see is still driven by the newness of this sector. But I, you know, at the same time, when you have experienced hands, you have seen a little bit of a flight to quality, right? On our platform, at least. Charles, last word on this one. You know, I think it's hard to speak generally about, you know, probably any of our investor bases just by nature of their size, right? When you're talking about

thousands and thousands of people. It's not one profile of investor looking for one thing. You know, we really think about our investors in different buckets. And, you know, I think different investors are chasing different needs right now. There's probably never been more disparity between, you know, what one category of investor wants and what another category of investor wants. So

I would say same thing with Brian, our short-term node product. Definitely have seen very consistent interest in that. Basically, I want to earn a higher yield than a high yield savings account. But ultimately, what I prize most now is short fixed duration and flexibility to become more opportunistic in the future. I would say over the last few months, we've just seen kind of gradual demand uptick.

week over week across all our categories of investments. But there's a few that definitely stand out as the things that people are most interested in right now. So, you know, first is our debt fund, you know, short term bridge loans, one to two year durations diversified already. I think that that bet, you know, to what to what Brian spoke about just makes a lot of sense to a lot of people right now. Mortgage rates are high. I want to be a mortgage lender.

The next is distress. I think distress sells in any market, but obviously you have some real reasons for distress right now. Particularly, you have it more in categories like office, which we still have not delved into, but even in multifamily, particularly with the issues with regional banks.

There are just interesting kind of one-off opportunities that really resonate with investors of why I want to do this right now. I think the hardest thing for a lot of investors is, is the time now, is the time tomorrow, is the time in two months? And then the last one is really honestly the opposite of that. So we see a lot of interest in these deals that are really stabilized, right? So kind of core plus.

There's not a lot of business plan work to do. There's in-place cash flow. But the purchase price is high enough that even with higher debt costs, you can still generate cash flow. And I think those are looked at as, know, okay, if things do not change, if they do not improve, then I'll do fine on this. But there's upside in a very, you know, basically safe style of deal if there is a positive change in the macro environment.

You know, just to quickly hit something Brian said before, obviously our rates are not, you know, historically high by any means. It was a pace thing, not, not where they landed. But the other interesting thing about history here with rates is, you know, what the fed's trying to pull off now of gradually ticking rates down. That's never really how it goes. It usually they start to gradually take them down. Something happens in the world and then they drop them by a large amount.

So, you I think that there's, if you're looking at your sort of outcome curves, I think that there's enough that lean towards, right, things stay kind of the same, this will be okay. Things improve from an interest rate perspective, this can really be a double or a triple. And if something, you know, that's a lower likelihood outcome, all right, you know, there's things happening in the broader world that the Fed feels like they need to be more aggressive in policy.

then you really have a chance to be in kind of an outsized position. So, you know, it's in the buyer's eyes right now, very much so. Got it. Let's keep talking to the buyers. I want to turn up the heat a little bit, get some more competitive energy going here. Let's do the elevator test. So I'm getting on the elevator, this conference, first floor. You got 30 seconds to get to the 26th floor. Tell me the investor who wants to get in real estate but doesn't know how.

Well, why is your product the best option to get in real estate right now today? We can start with Brian. Quite simply, real estate debt outperforms pretty much anything else you can invest in on a risk adjusted basis. To be able to earn 12 % yields on something that repays in an average of 10 months is unheard of.

I think the reason to come to ground floor for that is we don't require that you get locked up in a fund or pay a fund manager to do it. We give you the technology and the user experience, say from our flywheel portfolio or other products that allow you to build your own portfolio and manage it yourself. And that's a real advantage in an environment where agility is at a premium and having liquidity open to you is...

is especially valuable. Thank you. Charles, your turn. You know, our platform is really geared around letting investors build a diversified portfolio that matches their goals. And we have a range of options. And I think right now, spreading your bets between things that have different return profiles, different durations, different geographies, you know, that really what because there's so many outcomes that are possible in the future of the market right now.

You don't want to be 100 % in stocks. You don't want to be 100 % in bonds. You want something where you're doing a mix of income-based short-term investing and things that have real appreciation potential if this is the bottom of the market or close to it. So I think what's unique in our platform is it really mirrors the stock and bond investing experience.

letting investors build something that is diversified across risk types and also really cater to what their view of the market is right now. Got it. Carter, Sos. I wouldn't pitch you that farmland is the best because I don't believe there is a best. I think the best portfolio is one that is well diversified according to investors risk tolerances. What we offer is something very unique.

in that regard, and that we appear to be not correlated to other assets. Similarly, historically, call it low double digit type of return profile with far less variability and volatility than most major asset classes. That's because we're compounding again through capital appreciation as well as income coming off of the farm. And so, these guys, we've built some great technology to make it a very easy and seamless process for the investor. So, we're believers in having...

exposure to a broad variety of asset classes. I think the recent legislation and regulation that came from that, as well as advances in technology, make that available, folks. And we're excited to be a part of that trend. Awesome. So let's say you all passed. I'm the investor. got to my floor. I believe you. Can't wait to go get on your platform tomorrow. One more question for you. How do you suggest that I diligence and research? I I'm committed now to writing a check, but I want to

sure what I'm getting into. I want to kick the tires. I want to understand who I'm in business with. How do I do that? When we start with Charles on that one. Yeah, look, the simplest place is to just sign up for the platform. So I'm guessing it's the same on ground floor and anchor trader. When you sign up, you start to get into a flow of educational materials, right? So those will be educational materials about

us, there'll be educational materials about real estate investing in general. And they're really geared towards a range of different pre-existing knowledge. The second piece is, you know, pick up a phone. We're all internet-based businesses, but obviously investing and in some cases investing large sums of money, you know, still want to know there's a human on the other end. So schedule a call, talk to someone on our team.

you know, understand our history, what we're about, what our process is. And then, you know, look, really read about the individual investments. And we try to show you the simple part and the complicated part on our platform. So for any given investment, we might have a few pages outlining the business plan, the financial structure, everything you might need to know at a high level to understand what the investment's about. But

You can also drill in deeper and you'll find a 40 page investment memo, you know, that a team of private equity professionals is preparing for everything that goes on our platform. We're not just posting things. We're, you know, treating these as we are the investor. We are aligned with you. And I think that's one of the things that, sets us apart. And, you know, there's lots on our platform and talking to our team that can help you get that sense of comfort.

How do I diligence all this stuff? Well, look, I think, you know, I think we are relatively unique on any platform that I know of and that we have eight years of audited financials and a hundred and seventy four page offering circular for each offering that we've qualified with the SEC. So you can go as deep as you want. We have something that approaches public company disclosure. We're 30 percent owned.

by our customers with over 7,000 shareholders. So if you want to go that deep, you can go to Edgar and you don't have to take it from me or our website or our people. You can go read everything yourself. It's all disclosed just as it is with a public company. And I don't think many platforms in our space have spent the time and money to meet that level of disclosure.

and not only disclosure, but regulatory oversight. So that's the strongest form that I can offer. I think it's the strongest form available in the market. But because not everybody wants to go read a bunch of detailed offering documents, we also report our performance every month on our blog. So you can show up to our blog and you can see our asset manager report. You can see exactly how many loans we repaid

in the month. can see exactly how many lost money, how many made money, what return they generated. And we even write case studies about shit that went wrong. So you can read till your heart's content. I also think our VP of Market Risk does a great job of doing a podcast on a weekly basis where he talks about the market and what's happening with ground floor. So I think

We have experimented with lot of ways over the years to win people's trust. It's a hard thing to do. We as a company have built our values around that. We try to live up to it. We've walked the talk. Our first regulatory qualification with this, it was 2015. So for those keeping score at home, that's eight annual audits now that we've done coming up on our ninth. And it's not always comfortable. It certainly isn't cheap.

But it's very valuable, I think, to people who are looking to know what's behind the curtain and what they can expect. Carter, last word on this one? Yeah. I would reiterate, you worked hard for this money. Do your homework. Don't listen to sales pitches. Whatever numbers somebody says on the phone, go verify it. Go dig in and understand what you're investing in. I'm often surprised by friends of mine who will go invest their very, you they work.

most of the hours of their day. And then they'll just say, yeah, I put like whatever significant portion of my money into Nvidia because I think AI is a thing or I like Tesla cars. And that always surprises me. The folks will use their money on such a whim when they work so hard to save it in the first place. So don't listen to sales pitches, like talk to people, call our platforms, speak to real human beings. But you worked hard for the money, do the same thing to protect it and guard it and help to compound it.

Let's double click on that. work hard and I have a day job that's not real estate investing. So I can either come to one of your platforms or go to other places and say, I like this one multifamily building in St. Louis that has a 22 % IRR projection or I can allocate to you as a fund manager or some kind of algorithm you've got as a diversified portfolio or some other REIT or fund manager. How should investors thinking about this issue of like stock picking versus

I wanna call it indexing, allocating, let's say to somebody who will make those decisions. Ryan, you wanna start us off there? Yeah, this one's near and dear to my heart. think, look, it's rational to allocate money to a index fund. Like we're talking about public market investing. It's rational to allocate money to an index fund where you don't have to worry about handicapping different issues.

over time dollar cost averaging into the index. And I think pretty much all of my finance professors in business school told me that was the best thing to go do on a time adjusted, know, cost adjusted long-term basis, but it's a free country and people have trade ideas. I think the biggest lie in alternative investing is that people aren't smart enough or these investments are too, are so risky that

you know, they shouldn't be allowed to participate directly in the investments. Of course they should be. If I said I wanted to invest in Nvidia or Tesla and a car, you're right. Like not every time does everybody do all the research that they maybe should, but it's a free country and they should have the same opportunity to invest and pick and choose. We believe that, that people should get to retain their agency just because they're showing up in alternatives. They shouldn't lose their agency. And so it's important to

provide technology and information to make that as efficient and as successful as possible. That's why low minimums make a lot of sense, right? Especially in the context of direct investing. I mean, the reason that fractionalized stock trading came up is, know, Amazon was $1,700 a share. And so if somebody's only investing a couple thousand dollars and want to be fully, you know, do we want investors to be exposed to concentration risk as the price of picking and choosing? No, we don't, right? We don't want that.

so we have, we've tried to facilitate both. we've said, look, you can come and pick and choose if you want, you can try to out underwrite the underwriters. That's awesome. Let us know how that goes. And sometimes people do it, you know, and you can see it. We, we plot all the portfolio returns on a X, Y, you know, access and we'll, we publish this on our blog regularly and you can see some people overperform. Good for them. They're awesome.

Most people though, I think are best served by diversifying really broadly and it's all about You know, we've the problem that we've tried to solve is allowing people to index without trapping them into a fund structure that then makes them subject to redemption because what happens in a fund is the fund decides what its NAV is You get to invest at that NAV then the fund gets to decide when you get your money back

You don't just get to sell whenever you want. You have to request to sell. Then you have to wait. And then you have to, and by the way, Blackstone and Starwood couldn't repay everybody for about 18, 24 months. If those, largest REITs in the world are behaving that way, imagine how smaller ones are. I would just say it's important to get the benefits of indexing and the benefits of diversification without being subject to all of these legacy

unnecessary sort of limiters. And that's what we've tried to do with our flywheel portfolio, right? If you show up, you're immediately exposed to about two or 300 loans. You know, you get, but unlike any other, any fund that I know of, we receive principal and interest back, you receive your pro rata shareback. And so I think there are going to be more innovations like the flywheel portfolio. These guys have done some good work too.

to try to break that, give people choice without giving them the false alternative that says, if you can't handle choice, you have to be locked up. And I think the world is not going to tolerate, the world of investing is not going to tolerate, it just can't be that that's the alternative, right? You have to submit to being locked up and paying a fund manager for the privilege. That's our opinion anyway. Charles, stock picking, portfolio, some kind of hybrid?

Look, I think it almost doesn't matter what my opinion is, right? At the end of the day, to Brian's point, we're driven by what our customers want. We try to present both options and, you know, ultimately it's on the investor to decide what works best for them with the data and the options available to them. So, you know, what we find is we have diversified options, we have portfolios, we have true funds.

And there is a category of investor that that's what they want because that's the simplest and that's the fastest and that's what they're looking for out of the experience. And then there's other investors and I would say this is the majority who like the tangibility of knowing what they're going into, having the chance to hit an asymmetric return, even if they're taking on some asymmetric risk as a result. And the best battle for that I do think is structural, right? Is keeping

minimums low, facilitating diversification in other ways, retaining that, build your own portfolio experience, still encouraging that, because I do think that is the best thing for most investors, but letting people have more choice about how they get there. Because at the end of the day, for investors who are looking for things that are not like the traditional things, those are the investors coming to our platform, is

I have allocations in traditional things. I'm looking for something new. And one of the things that we're all able to offer is a higher level of choice and flexibility compared to traditional institutional products. Cool. We're going to get Carter's view on stock picking versus portfolios, but I just ask everybody in the audience to keep putting in your questions. We've got a bunch of them and we're going to jump into those after Carter finishes this answer here. Yeah. It depends on what you're looking for.

It goes back to like, agree with Brian, of course folks should have agency, but that does not mean they should go invest in something because they like the photos or they like the headline IRR. And I just really want to make sure that I am loud about that cautionary statement of understand the downsides. think Charles just said it really well, which is there's asymmetric upside and lots of investments. There's also asymmetric risk in some of them. Dig in, call the platform you're working with, understand what those risks are, where things have gone wrong.

I think it's, I want to really reiterate that there's lots of options. That's great. Doing research is a really, really important part of that. If you do not have time to do that, then maybe it is best to pay a little bit extra to have somebody else manage a portfolio for you rather than making uneducated guesses, I guess the best way to put it. So it depends on you as an investor and your tolerances and ultimately how you want to approach investing and whether that is...

If you want to do stock picking, great, just do your work. And if you don't, that's fine too. It's going to cost you a little extra and it may have some liquidity restrictions, but those are perfectly reasonable answers also. Awesome. All right. I'm digging into the bag of questions here, which is continues to expand. And I'm going to, in the interest of time, I'm going to combine some of the questions as well as have super concise short answers. So tax comes up a lot here.

I'm gonna read a couple of questions and you can just answer them as a group. are there tax benefits to real estate specifically? And how do I get them if I'm in a syndicate or on your platform as opposed to how I'd be treated if I'm holding the property? I'm gonna grab another question and combine it with this, which is how do you adapt opportunity zone strategies? what Paolo is asking in response to fluctuating economic or real estate market conditions. So again, we're just gonna wrap the opportunity zone as an aspect of tax.

And I'll try to do a little dance here and wrap yet another question in which is, know, addition to tax, which is a financial expense that you want to minimize, there's a lot of headaches in alternative investing. So K-1s filing taxes in these states that you didn't know you had taxes in, any other hassle and schlep or expense factor. So talk about how as an investor on a platform, that's going to hit me. What are the opportunities and challenges there? Why don't we start with Charles?

So it's variable by product. If for debt focused investments, you're either going to get a single consolidated K1 or a 1099. And that consolidated K1 is going to handle, you're going to soak up the state and not have state reporting obligations. And then for the tax benefit side for equity, you're going to get a K1, but you're going to have the benefits of depreciation.

and other things that can offset the income that you're earning, right? So for many investors, that's obviously a huge draw of equity real estate investing is you can get cashflow, but in many cases, you can get it tax-free in a given tax year and not pay that tax bill until there's actually a sale and there's profit upon sale. There is, course, you have to deal, if you're not used to dealing with K1s, that is something new to introduce your accountant to.

We know it's a sensitive issue for investors. every year we improve our rate of delivering those kind of things on time. All of those expenses in terms of just the entity management, those are all baked into what we're showing to you. So it's not an unanticipated cost. We do it in a flat low cost way that's all baked into the returns that are ultimately.

Gotcha. Carter, tell me about the slip factor. How do we handle it? Making money can be a hassle. money means you may have to pay taxes also. These are the things that come along with investing at points. yeah, K1s are in our world, the good news is they're pretty simple.

farm, owning farmland, renting it to a farmer. Opportunity zones in particular, we have certainly done some offerings that include opportunity zone strategies. We would always raise a little bit of caution that there's a lot of money that chases opportunity zone because it's an opportunity zone first. It needs to be a good investment first usually. And if it's an opportunity zone, that's a great benefit as an addition there. And then specific to our asset class in terms of tax benefits, similarly,

You can capture depreciation in many ways. But also importantly, we are the property company. The investor is investing in the underlying land. The farmer partner and the tenant there, they are the operating company. We are not investing necessarily in operations there, or usually not. But that farmer does have some of their own unique tax benefits and government support programs to make sure that our tenant is effectively solvent. So there are some great...

benefits to working with farmers.

Brian? Yeah, we've typically looked at the efficiency of tax reporting as a key consideration on ground floor for the most part. And there's some exceptions. It's just a 1099 INT. Now, some of the structures that we're creating to enable people to invest in portfolios under the hood, we're using some of the same structures that REITs will use in order to get the tax advantages that come with some forms.

of re-investing for some investors, right? There's some situations in which dividends are taxed at a lower rate for some REITs, in some cases for some investors. But for the most part, I think people just don't wanna receive a huge stack of forms. And the first time they get it, it's a shock. It drives the cost of tax prep for sure. As a guy that did TurboTax, much to my wife's horror,

for the better part of two decades. Man, the data entry for that sucks. I was investing with one of the platforms in our space and I was blown away at the stack of paper I had to deal with. And so we've always just tried to simplify that as much as possible. But look, taxes are a fact of life when investing and we're all trying to simplify it as much as we can and integrate and provide consolidated reporting.

But I think a lot of people are just concerned about the rate you're paying on this stuff. that is worth looking at. But I do think it's a secondary consideration to making sure that you're managing risk properly and that you're comfortable with the administrative burden such as it is. If it's an advantage tax rate, and it's a small amount of money, but it's a huge administrative burden.

You're probably in a bad place on the triangle. know, speaking personally as a person who's done that. So we're coming up on time. We probably have time for one, maybe two questions. So we are going to have leftover questions, which we'll commit to answering in a written format. I'm going to do another combination of questions just to be efficient. Martin asked any plans to have collaboration among your platforms? Everybody's we're to touch on that. And I'm going to make it a little more specific, which is.

You you've all convinced me so much today. Now I'm thinking about allocating between farmland, multifam and debt. So I want to invest in all these platforms. How do I think about that asset allocation within real estate? And can you just include a little bit on the divergence between how these asset classes might perform relative to one another? Let's start with Charles on this one.

I think collaboration is a great idea. know that certainly we're talking to our competitors far more than we ever did before this cycle. I think to Brian's point, a lot of platforms that were small and more fledgling just went out of business. So I think the circle of platforms that are here today and a few that are not on the call.

really look like the group that is gonna be the strong group for the next 10 years. And we know that we're talking to a lot of the same group of investors and fulfilling different needs from them. So, I think there's more collaboration happening and I expect more to come. And look, in terms of the relative performance, pros, cons, mean, hopefully we did a great job of kind of spelling that out here.

I do think that there's some pretty fundamental different value propositions between the platforms, you know, in terms of risk and reward. And, you know, ultimately it depends on you, the investor, right? Like what are you looking for in terms of your allocation between those? But the nice thing here is I don't think we're really directly competitive in terms of what we're offering. And for investors who want to blend across, you know, a range of outcomes, which most investors do.

I think it makes sense to look across the board.

Carter? I would just second that. It's pretty straightforward. It really depends upon your risk tolerance in terms of how you want to allocate to the platforms. so yeah, we just again encourage you to spend time with each of us or each of our teams and dig in and learn more. We'd be excited to share with you then. Ryan, asset allocation. Look, what's different about alternative investing when you, you know, I started off talking about Charles Schwab and

and are having been inspired by how he built that discount brokerage and what happened in the industry. What's different in our industry is we're bringing deal flow, either as vertically integrated originators, right, in our case, or as investment professionals who are looking at deal flow and bringing that in. That really isn't the case in public stock and market investing.

For the most part, that's secondary trading. And at most, you might be selecting a mutual fund or something along the way. But all of those platforms all kind of have the same product. What's different here is that we all have very different products that are highly complementary. And there will almost certainly be an advantage to be gained by bringing these things together over time and letting them cohere.

on an integrated platform, whether by partnership or consolidation in our industry or something. What I think, you know, what you can't do is expect one platform to go start de novo, like for ground floor to go off and start originating ourselves in some of the things that you guys do, you know, farmland or commercial, I think would be pretty tough to sort of

become good at that. And there are some platforms that have had some trouble, right? Because they started off being very broadly diversified across many different asset classes within real estate and without. And I think buyer beware when one platform tries to build it all themselves, because the truth is building an origination pipeline and a deal flow pipeline and managing that asset, managing that is very challenging work.

And it's work that gets better over time, God willing, because we learn lessons and we form credit policy. And there's a lot of nuance to that in this business. I am personally on behalf of our investors really looking forward to consolidating and partnering in the industry. We're now at a size and scale, certainly the three of us on this call and some others as well, as you said, Charles, are at a size and scale where that becomes interesting. We have track record, we have product, we have

We have the maturity that's needed to start to collaborating in that way. And I think that's what the next 10 years is about. And I think the market's really gonna be looking for that. Cool, let's sneak in one more question. Last comment here. Let's look ahead. There's a lot of scenarios ahead. There's some unknowns, geopolitics, everything we started the conversation with. What's one prediction, one expectation you have for what's gonna come in the future?

and one principle or method that you think investors should keep in mind to navigate it. And let's keep these answers to 30 seconds or less. We will start with Carter. We will continue to need to eat. As a people, we will all continue to need the products that come off the farms. so, again, I work in a very, very boring, not sexy world. And that to me is really interesting and intriguing and exciting.

to lot of investors it is as well. were after, we were seeking boring compounding here and it doesn't get more boring in the thesis than that. Ryan? I'm laughing because I was going to say, well, my most safe prediction is that people will always need a place to live. You're about, people are going to eat. I believe people are always going to need a place to live. And there are interesting questions about whether there will be more renting versus more homeownership and what does that mean? And

What shape does needing somewhere to live look like over time? I think those are very interesting questions. think we are also about boring compounding. You're not gonna go see a meme stock like behavior on our platform for the most part. And we like it that way. So we try to stay pretty predictable and in that lane. Charles, last thought.

Look, for my money, think 2025 and 2026 are years to be opportunistic in real estate. I think if you look at graphs of historical real estate performance, know, there are these bottoms and then they move back up and, you know, we're very clearly 10, 20, 30, 40 % down from where we were two to three years ago. And, you know, I think that opportunity will only last so long because that's the nature of cycles.

and you can't pick it perfect to the day. But the fact that there are these headwinds means that other buyers are going to be worried. And that's usually the best time to try to make some bets just on low valuations. Obviously, you got to be smart about the business plan and the market and all of those other things. But big picture.

You know, you don't want to look back and say, I thought the bottom wasn't here yet, so I waited and the bottom was missed. And that's what happens for most investors. So, you know, I think that things are set up to prices could go down more. They could come up faster than we thought. But we know from a historical perspective, they're in a pretty attractive place. So, you know, look, don't you don't need to go all in. You got to figure out what works for you. But

You gotta have an opportunistic hat on, I think, if you're going to make the most money you can over the next few years in real estate. Perfect place to close. Let's just say thank you to everybody who joined us today. Appreciate your time and your attention. Thank you to the panelists. We had a great conversation and we look forward to seeing you on the next one. Have a great day. See you guys.

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