Yair discusses unique challenges and opportunities working with foreign investors, why he’s doubling down on multifamily, and his perspective on technology in commercial real estate.
Listen to the audio here:
See below for a full AI-generated transcript. Please excuse grammar errors.
Evan Chesir: [00:00:00] Yair, thanks for joining.
Yair Tilson: My pleasure. Thanks for having me
Evan Chesir: Welcome to the SeeCares podcast recording. Glad you could all join us. Yair Tilson is the founder and CEO of Kay Finance, which is a capital advisory firm specializing in structured finance for US commercial real estate nationwide. The firm was founded in 2013, and you guys have really been making some noises over the last certainly few years, even two, three years.
Yair Tilson: That's that's what we like to do. Try to make some noise.
Evan Chesir: Yair has been a close partner of ours, at SeeCares, as we look to kind of accelerate the commercial real estate financing industry. Yair is also the director of Gryfon real estate partners, where your tests, your responsibilities include origination, structuring and underwriting.
And I figured, you know, given your 10 plus years of [00:01:00] experience, I wanted to talk to you a little bit about how you started Kay Finance, what you do, what you focus on as kind of a boutique banking firm, and broker.
Yair Tilson: Absolutely.
Yeah. Thanks so much for having me on Evan. And, you know, SeeCares guys. you guys are awesome and it's been great to see that relationship grow and flourish over the last number of years. You said a lot of it in the intro there, so I don't want to bore the viewers, but as you were mentioning, you know, I think, I think what's unique about Kay as a part of our background, you know, might be myself originally from New York and then through personal reasons and all sorts of other, um, reasons.
I found myself living in Israel, - there we are, two New Yorkers on a call sitting in Israel. There you go, so look at that! So, on that note, we ended up, opening up a subsequent office. In Israel. Then from there we really saw a particular niche, um, to, to your point, Evan and everything you said in the intro.
You know, we [00:02:00] do specialize in structured finance where essentially, um, structuring loans and equity solutions for clients of ours across the country, as well as internationally who have a focus in scaling their portfolios in, in the US. Kind of going back to my initial point, which was, I think something that's been really exciting and a lot of fun that's been happening at Kay and something I'm really, really excited about.
"US commercial real estate, like many others out there, is becoming a significant worldwide commodity, and international groups have a unique focus and desire to break in"
And the prospect of the future that it may hold is the idea that, you know, we do live in a very global world. Asterisk to the pandemic and things like that that have certainly been disruptive, but, you know, by no means, you know, I'm in a position to eliminate these things. I think, you know, the idea of globalization and the idea of the world being interconnected.
And, and as you see in the news now, how you're seeing things like, you know, Concord 2.0 coming back, you know, planes that will get you from New York. To, uh, to, you know, to Berlin in three [00:03:00] hours and things of that nature, because, you know, ultimately that is where things will continue to go.
And, you know, US commercial real estate, just like anything, is becoming a significant worldwide commodity. And although it's not necessarily traded in the same way, a traditional commodity. It certainly is viewed like that in, in, in many markets. And, I think what's been fun and really, really interesting and insightful for Kay here has been that our kind of little window in insight into that world and how a lot of different... what we call international groups, but essentially groups that are sitting outside of the United States who have a focus and to break in, and that interest is just tremendous. And, it's essentially ever-growing right. So, so we are looking to continue to sort of, um, Leverage, you know, in many ways that positioning and our fact and our know-how of having an office for many years, um, sort of in two places.
And now, you know, [00:04:00] we're excited to announce that we're going to be opening up an office in Johannesburg over the next, we hope to get it done in early Q1 of this year. So, um, you know, that's just kind of another step in that direction for us to bring visibility for companies who have a focus in scaling us commercial real estate portfolios, but are stationed in some location outside of the US, for them to get that sort of, uh, you know, glove service, um, in, in, in ability that is the same New York developer walking into our New York office gets.
Evan Chesir: Congratulations. First of all, on the Johannesburg office, I didn't know about that.
Yair Tilson: Thank you so much
Evan Chesir: In terms of ramifications for the commercial real estate industry, even across different asset classes and so forth, what kind of ramifications do you see from this increase in globalization and investors coming from, from abroad?
Yair Tilson: In general. in general, I think, you know, especially again, asterix pandemic, it's just because we're still in this kind of weird flux. I know myself, [00:05:00] I'm everyday still dealing with it. And as far as how I'm traveling, I'm someone who's probably more experienced traveler than most.
And even the challenges I have to, to sort of navigate these very confusing times, which certainly does have an impact on, uh, you know, on, on, on everything we're talking about. But I think it's all temporary, right? So assuming that it'll all temporary. you know, with, with the mass introduction of technology over the last, you know, 20 years and it's, and it's called now, they call it FinTech, but it's sort of influence in the financial markets and the ability and equities and the ability for people to invest cross border and no longer do you have to be a mega institution that has endless resources to do it.
Now you can literally be a guy who learned something on YouTube in a language that you don't fully understand with subtitles using an app, and then start investing.
This has continued to affect pricing and I think it will continue to, but it's, it's a factor like anything else that is a factor in pricing. Um, you know, [00:06:00] are we seeing extreme cap rate compression because of institutional capital flows? I think it's a factor, you know, I don't think it's the, you know, a primary factor.
Yeah, certainly, you know. Sure. Well, whenever you have, you know, a larger flow of capital, you know, overly focused in, in one day in one place, you're going to see that effect pricing. I will tell you that, you know, internationals definitely have a different way of viewing, um, assets and, and making decisions on, on sort of what they want to buy and their risk tolerance for certain things.
Then let's say a local guy, um, who who's lived and breathed the neighborhood, may feel it's let's say less risky. Um, so you see them really navigating into very specific asset types. And I'm talking in large generalizations right now, but, but, but yes.
Evan Chesir: Do you sense hesitant, hesitancy at all on behalf of, you know, local operators [00:07:00] or US-based investors or lenders and working with people abroad?
Are there advantages?
Yair Tilson: Oh, absolutely. You know, I, I think, you know, I was just so funny. I was talking about this specific topic just yesterday with some, some of my employees internally, but I think what, what. What is what is really, um, refreshing. Um, in most cases when working with some of these groups is that there is a willingness and an eagerness, to learn and try things out.
So there's an idea of, this is where I want to do. This is what we're best and most efficient in. Now you know, Kay being, let's say an experienced group and what they're efficient, I'll tell us how to sort of build that roadmap and, and bill and, and, and we're very comfortable obviously in that position.
And we encourage clients to, to kind of give us that level of, um, of trust if you will. Um, you know, but that being said, Um, you know, that eagerness and willingness to learn and be creative and understand, um, as [00:08:00] opposed to often what we will find is a little bit more of a resistance, especially on, let's say newer relationships who were sort of trying to encourage to see if we can work with them and bring value.
Um, you know, you, you often find a sense of, you know, I kind of know everybody who's anybody. What, what additional value can one bring, but which of course it's silly because, you know, there's an endless supply of value that any one person can bring. So, you know, I think, that mentality and mindset is refreshing and, and very different when working with internationals.
Um, obviously some of the more challenges is because of the lack of know-how, in some cases, again, generally making large generalizations, there is a lot more handling for good or for bad. There might be in some cases, other questions that are asked, you know, so it could, it could take things can certainly take longer.
Um, when it goes about just doing our job, as far as bringing a really, um, quality product, it's, it's certainly more challenging, right? Certain banks don't necessarily want to [00:09:00] work with foreign nationals, things of that nature. But, uh, again, that's what we're specializing in and are very proud of what we've been able to accomplish.
So could you give
Evan Chesir: an example of a way that a foreign investor would be more open to the kind of learning and handholding you're describing, as opposed to a more traditional kind of US-based investor trying to build
Yair Tilson: their portfolio.
Yeah. I mean, I, I I think what had helps there is it just more.
Um, the water hadn't been contaminated, right? So there's a lot of times you're meeting people with fresh eyes. They're not, there's not there hadn't been a birdie or many birdies who've who over the years have whispered different things and expectations. So they are, their, their allowance for, for kind of free-thinking and hearing you out and then not making sense without major resistance is just, it's just the natural way of things, you know? Um, whereas you know, the local, uh, um, the local profile, um, now [00:10:00] again, you know, what's so fun about the United States and what I love, you know, while it's the market that I'm married to, is, is it size, right?
And we, and I've been saying generalizations throughout this conversation, but, but talk about a large place. Um, every market there is is a little bit different, has a little bit of story. I think that talking about the difference for our nationals, you know, I find that foreign nationals. Often, because a lot of America looks the same, they think it is the same. And I think that's, you know, unless you really understand it and been in it and drive it and know it and talk to people you can't fully appreciate that nuance. And that nuance goes way further than nuance goes from town to town, city to city. So that's certainly a gap of knowledge that we try to tighten for our clients.
Evan Chesir: When dealing with a lot [00:11:00] of clients abroad in addition to those in the US, is there any advice you would give to them looking or looking to poach the good lenders or the most fitting lenders I should say for their situation? Are they at a disadvantage?
How can they overcome this challenge?
Yair Tilson: Yeah. Well, first thing is you got to get a good mortgage broker. That's what you got us now. I'm just kidding. the, uh, uh, no, I mean, the reality is, uh, it's a very good question and it's something it's sort of like day one conversations, no week one conversations when started building a new relationship and starting to build sort of a roadmap to success.
And one of the things we always, um, talk about is we have to be very specific about our story, as well as be very aware of what we're trying to accomplish. You know, the one thing foreign nationals don't have the advantage of is, is confusing stories because the minute you are a foreign [00:12:00] national, your story is confusing.
Even if it's not right, just a minute, just spell your existence. It's a little bit more confusing. So you don't want everything after. Has to be told in a very specific way. So, you know, just this talking briefly on it, but for example, right, what is your exact strategy? What we're trying to accomplish here, what kind of capital are you going to be bringing?
How has that capital then to be being brought into the country? What are your experience in the country outside of the country? You know, what is your local team? And who's going to be working with you. What is your lawyers? You know, having all of that, no matter by the way. And that doesn't mean you're an institutional buyer, you just have to be organized, right? It doesn't, you don't have to have a staff lawyer. Do you have one strategic, local, right. There's a lot of ways, um, to, to go about that. Um, and here at Kay, we have been to, you know, that's, again, part of what we, part of all that we do, but. That's certainly, if I had to give one tip for today, that's sort of where, you know, think about, think about that.
Think about how you're, how you're going about things, um, where where's your star goal is where your end goal is and, and, and start to [00:13:00] really build the roadmap. Otherwise, if you just kinda jump in which there is a level of that, but it just jumped in with your eyes closed. It's gonna, it's gonna be a lot, a lot of obstacles in the way.
Evan Chesir: Very interesting. In terms of, you know, for the lenders, in terms of structuring loans, uh, would you structure it first of all, are you seeing any trends now in terms of how they structure a loan, either for foreign investors internally, anything you want to highlight?
Yair Tilson: Um, I mean, I would say if we're talking now in the beginning of this week, uh, you know, second week of January, Um, we're definitely, you know, a lot of what was last year is feeling like it's a little bit of a different year.
Rates are starting to go up a little bit. Um, you know, there's a, there's a large consensus in the market amongst, um, the giants of them. Um, that, that is, uh, that rates can only, you know, we will see a gradual rate increase, but only to very specific ceiling. And then if that, at that point, if there is a, an adverse reaction, there'll be so some sort of [00:14:00] counter, you know to that, so I think it will be done in a very controlled manner, but you will absolutely see the impact and it's happening.
I mean, it's happening. Um, immediately, that 25 increased you're seeing we, we were, we were just very specific to a loan product. We quoted yesterday. Um, you know, we were doing HUD loans, which is, uh, a famously well-priced product, even in the high rates times. And we were recording all time, lows, closing, closing them last year at 2.6% rates in some best cases, two fi 2, 5, 5, um, and now on our newest.
And then we just got price yesterday. It was three and a quarter. Now, can I, can you still get priced under three on these deals? I think you can value for the right deal, but, but, but it's not now we're already seeing, so now that's still a very tight pricing. I think I would encourage any day, you know, that's still a good deal, but you know, that that product has a [00:15:00] lot of leeway, you know, to it because it's so it's, so it's priced so low already.
But the other products, you know, we'll, we'll start to suffer from it. Well that's ever, but what we'll start to, um, you know, change and with that, um, normally you would see that affect pricing. Um, and it will be really interesting to see if it happens, um, in this market. So,
Evan Chesir: Interesting to see what's going to happen.
Yair Tilson: Uh, very dynamic right now. Yeah. Um, and I'll tell you, what doesn't help is that the market is so erratic because of just, you know, because of this Corona and, and, you know, the market does not, I mean, although 2020 would say otherwise, you know, I wouldn't, I wouldn't say wall street loves COVID.
Um, and, uh, and so they hate most about it. Yeah, yeah, yeah. That's what I was going to say. But what they hate about is unpredictability of it. The only reason it was a success in 2020 is because that, cause it started becoming predictable. Right. We [00:16:00] started getting the vaccines. We said, we're going to be out.
So now, you know, this is the thing they really, it needs also. So there's a lot, there's a lot, a lot, a lot of things. Floating and going around now in the market and, uh, interesting time to be alive. Evan
Evan Chesir: What asset class are you focusing on now? Where would you put your money?
Yair Tilson: Put your money? Yeah. So over the years, um, you know, I guess that if that's a Yair question, you know, I, I just happened to, I guess stuff.
So I'm, I'm partially biased because it's where I've been. Overwhelmingly drenched in for the last, over a decade now, but, you know, multifamily to me is the most, just understood asset class. And I think that's why, you know, cap rates, you know, are following, um, you know, across the board. But, um, you know, I think what's fun about multi-family.
Um, and I use the word fun a lot in our conversations because I don't really understand, um, you know, we live in, we live in a very serious time, as well as our profession, specifically in structured finances, and I'm proud of it. It is a [00:17:00] very specific type of industry and it should be taken very seriously.
Um, but, um, you gotta, if you're not having fun doing things, then, then you know, life's just life. I think it's proven to everyone is a little too short these days. So, So I was saying, it's funny about multi-family is that you're able to actually, there's a fit for all sizes. So, you know, if you want to get started, you know, kind of dabble your feet in a real estate investment, you can buy in two to three units. You know, if you have the time, you know, Yeah, the cash, you can then graduate to a 50 unit, a hundred unit type portfolio growing.
Evan Chesir: So you're saying to go into multifamily...
Yair Tilson: I think. Yeah. I think that, I think the ease of entrance into that space, um, and the sort of the predictability. it's hard to match. Um, I think industrial has a huge runway ahead of it. Um, you know, we've been deeply involved in industrial the last five years or so last mile logistics, small bay warehousing, mission critical...
Evan Chesir: Because of COVID specifically over the last [00:18:00] three years?
Yair Tilson: So, so certain sectors of industrial because of COVID in the last few years has, has really, um, exploded, you know, like at, at a different kind of pace than outpacing its predictions. Um, that being said, I think the general.
Trend was moving towards some of these key industrial assets. Um, you know, being valuable, such as, um, you know, last mile, which is essentially like white box, um, small warehouse, you know, not small, like they could be 10,000, 200,000 or 200,000 square feet and larger, um, in which they, um, you know, our, our, the last sort of, uh, method in which the shipment happens.
Right. So, There. And then they're always in 10-mile radius of the, of where it's being delivered or whatever. So that, that idea I think, is only going to continue to expand. I think that's obvious, but you have to have, you know, to enter a market like that. You really have to have a lot of, yeah. You know, and that's where I think it differs a little bit from multi-family.
Uh, if you want to really do extremely well [00:19:00] multi-family you have to have a, you have to have a tremendous know-how, but if you want to sort of get in, um, and feel relatively comfortable and sort of in your, in your depths, I would say that, um, you know, multifamily is an easier entry than, than most other asset classes.
Yeah, of course.
A separate conversation about, uh, your predictions regarding industry. So we'll say that for the next episode. Sure. Awesome. Yeah. Thanks a lot for speaking with us and for being such a partner with seekers over the last few years and looking for the next conversation,
I really appreciate it Evan!