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The Millionacres Hour: Interview with Jilliene Helman of Realty Mogul

In this conversation from December 22, 2020, Deidre Woollard and Jason Hall interview Jilliene Helman of Realty Mogul on real estate crowdfunding, market trends, and more.

Transcript

Deidre Woollard: Hello, Fools! It's just past two o'clock on the east coast. I want to welcome everyone to the Millionacres hour where we get to talk about my favorite subject, real estate. Today we have Jason Hall, your usual host of the rap here with us for this hour, and we're going to interview Jilliene Helman of RealtyMogul. I've been following her career for a while. She is a leader in real estate crowdfunding, and she is the Chief Executive Officer of RealtyMogul. She's been involved with investments of property values over 2 billion, including over 15,000 apartment units. She is really a pioneer in real estate crowdfunding. Welcome, Jilliene.

Jilliene Helman: Thanks for having me on today.

Deidre Woollard: Excellent. Jason, do you want to kick us off on the first question?

Jason Hall: Yeah. Jilliene, welcome. I'm really excited to have you on. I have to say I've followed this space for a few years and done some deep-dive reviews of a lot of the platforms and RealtyMogul consistently comes to the top of the list for me is one of my favorite platform. Just a couple of things, just one of the highest-scoring that I've reviewed. In particular, this mix of high-quality standalone offerings that accredited investors have access to. But also REIT, you have a couple of really high-quality REIT that non-accreted investors can get too. That's important for us at The Motley Fool, is increasing investor access. What I would like to give you an opportunity to do is just share a little bit about RealtyMogul and what you think sets RealtyMogul apart from your competitors in a really crowded space.

Jilliene Helman: Yeah, absolutely. First and foremost thanks for having me to both of you and also Jason for the introduction and the reviews on our business. I love how you lead with mission for Motley Fool, which is all about getting investors access to different investments obviously in Motley Fool, but at RealtyMogul we're exclusively working on commercial real estate transactions, and that's been our mission from the beginning, give individual investors access to high-quality commercial real estate transactions, and do it in a way that's very accessible and very easy. We have a digital delivery through our crowdfunding platform. As you mentioned, we have the ability for accredited investors to invest on a deal-by-deal basis, and we also have the ability for non-accredited investors to invest in a one of our two real estate investment trust. One of those REITs is really focused on income generation, the other REIT is really focused on growth. I think that there's some amazing players out there. Our competitive set is an amazing competitive set. I have nothing negative to say about them. I think that we've all built this industry on our backs over the last eight years. I think the main difference probably between our businesses and some of our competitive set is we tend to focus more on straight down the fairway deals, and that's a good thing for investors in a bad thing for investors. I'll just share it openly and transparently. A lot of transactions that our competitors will do, we will have passed on. There's a deal that went up on another platform just yesterday and there was an e-mail circulating our company around, we passed on this two-and-a-half weeks ago, and do we stand by the decision to pass there despite it being really well funded through a competitor, and we did because we didn't believe in the fundamentals that happened to be in an office transaction, in a market that we don't want to go long at all first so that's why we declined it. It wasn't sponsorship or anything of that nature, but we tend to be more conservative. One of my favorite people to read in this industry is Howard Marks at Oaktree, and he talks about, if you want to be in the top five percent of fund managers or investors, you have to be willing to be in the bottom five percent, because you have to do things that are so different than your competitive set. We're unwilling to do that. We tend to stick pretty right down the fairway. Seventy percent of our business has been multi-family. We've made office investments, retail investments. We do know hospitality, which helped a lot during the pandemic. Obviously, no one could have imagine what was going to happen in hospitality, but we've really tried to stick pretty much down the fairway with this thesis that you can get really great risk-adjusted returns in real estate without taking a lot of undue risk. We've tried to minimize risk on our transactions. We're really proud of the track record, but what it means is we don't do as many transactions. There's other platforms that are doing more deals than we are. We've made a decision that we're okay with that. We're in this for the long haul. That's a big differentiator between us and other platforms. But I think the industry as a whole is really doing a great service to individual investors in particular.

Jason Hall: Just a follow-up question on that. Then Deidre has got a number of really good questions we're going to go through here. But one of the things that I found reviewing these platforms, and I've looked at probably two dozen different platforms, and there's 50 more out there that we can look at and 100 pass that we would never even consider looking at. But one of the first things I learned is to follow the money. What I mean by that is for every platform out there, there's a little bit of a different way to monetize it, whether you're charging the sponsors for a placement to list it on your website or whether you're taking a percentage of the investor's contribution as a pass-through. Whether you're charging the investors directly, asset management fees, some mix of that, then you have all of the different promote structures and that sort. There's all these various ways to make money. One of the things that I've found and I just would like to hear your thoughts on it before we get more in this some of the nuts and bolts of the market right now is, because this gets to your point about passing on deals is my experience is that a lot of the platforms that have a lot of deal flow, if you follow the way they make money, they tend to prioritize deal flow because that's where they get their money, is on the deal flow and not necessarily in a share of the returns on the deal. I'm curious, like your thoughts on the tension between monetizing the platform and also prioritizing the due diligence to make sure that you're offering high-quality investments and being willing to walk away from a deal that you could make money on because you don't think it's right for your investors.

Jilliene Helman: Look, at the end of the day, it comes down to culture for us, and we talk a lot about culture. Our number 1 cultural value is sleep well at night. Our number 2 cultural value is protect the investor. Our number 3 cultural value is own it. So live by our decisions, sleep well at night, and protect the investor. I think we're in the crowdfunding industry and that we are a profitable business. So we don't have to go look for, whereas our next dollar coming from. There was a number of companies, unfortunately, during COVID that had to do mass layoffs, that was not us. It's been really important to us to be financially disciplined. Once we got the platform up and builds, obviously we had a huge investment in technology, we had huge investments in marketing, but since we solidified ourselves. I think one of the top three players in this industry, it's not a winner take all business, so we're not willing to spend capital and we're not going to have a healthy return on that capital, and that's the same way we think about real estate investing, we don't want to do deals that we don't think makes sense, and so our culture I think keeps us really in check for not doing deals that we shouldn't be doing. I sit on investment committee, our CIO sits on investment committee, our head of asset Management's sits on investment committee and we have a lot of debates around deals and the reality is: we thought we were going to go into a recession much earlier, we've been playing defense since 2015 and the reality is we were totally wrong. We could have made tons more money if we were more aggressive in the last five years but we just we didn't feel comfortable there. None of us can predict it obviously what happened with the pandemic, but for us it comes down to culture, and I think you're right around incentives, we have made it a priority to have a piece of the deal on the back-end from our sponsor partners. We're very much investment in the back-end of these transactions. I think it also leads into us being very long-term focused. We could have charged very expensive upfront fees, and that would make us not very back-end focus, we're very back-end focused. I look at this business and I'm thinking about what does it look like 10 years out? What does it look like 20 years out? What does it look like we've deployed and do another $10 billion of real estate transactions? How much wealth can we generate for our investors? It's a longevity mindset and I really think that it's culture. I came from a very conservative Japanese bank. I worked for Bank of Tokyo-Mitsubishi, which is the Bank of America in Japan and the US subsidiaries. I went through the awake crisis with that bank and we had almost no losses in the commercial real estate book. It was a very conservative training, and so I'm for sure an entrepreneur. I love running companies, I love managing teams, but at the end of the day, my roots are conservative banker and you can't shake your roots.

Deidre Woollard: Excellent. You mentioned earlier, 70 percent multifamily deals. How has multifamily served you during this crisis, and what are you seeing in multifamily right now?

Jilliene Helman: Yeah, look, incredibly grateful to be concentrated in multifamily. Hospitality is really suffering right now, senior living is really suffering right now, student housing is suffering right now, retail was suffering pre-crisis but continues to suffer. Our office transactions have actually fared very well and we can talk a bit about office maybe later in the conversation, but really grateful to have our concentration in multifamily. We've invested in over 15,000 apartment units. The reality is that unprecedented federal stimulus has done a lot of good for the multifamily markets. You've had government intervention which has distorted the markets and really helped us to avoid a crisis, which puts us in a very different position today than we were in 2008. The increased unemployment benefits, the direct stimulus to citizens, and now most recently, the announcement for $25 billion for States to allocate back-rent, to keep people in their homes when the CDC eviction moratorium ends in January 2021. That was the latest news out of Congress just 24-hours ago. I think that it's really held on multifamily. Although transaction volume is down year-over-year, which is largely due to the great pause in Q2. I think our firm and most other firms in the market in Q2 said we're going to push the breaks and we're going to watch and see what happens and make sure that if we're going to be investing in transactions that make sense to be investing in those transactions. But although transaction volume is down, pricing is holding. We are very active in the markets across the country, and there were two deals that we did, it was a two-property portfolio in Dallas and I think those are going to be only two multifamily deals that truly have a COVID discount. They were able to negotiate a COVID discount because there was so much uncertainty. This was in March of 2020, but I don't know that we're going to see other COVID discounts, especially in multifamily. I think you'll still see them in hospitality, if you want to call them in retail, I think there's still some stuff coming in office, but in multifamily it's holding up incredibly well. The big question is what markets? Different markets are behaving differently, and I view the 2008 recession as a truly national recession. I view the COVID recession as a micro-market recession or a very local recession you're seeing different markets have unemployment rates play out very differently. Different markets have rent growth or rent degradation play out very differently, so the local markets are very different. But as a whole, multifamily is holding up the best of any asset class and you are seeing more and more capital rush in because folks are looking for that safe haven that I think you can find in multifamily compared to the other asset classes.

Deidre Woollard: I'd be interested to see, just a follow-up to that your expectations going forward for multifamily, say over the next 5-10 years. Looking on the home buying side, obviously there's massive unmet demand. The question is: How much of that demand is going to be able to be met by home builders? There's certainly no inventory of existing properties. So I'm curious to your thoughts in terms of how that could potentially put out for multifamily since that's right in the core of your business.

Jilliene Helman: Yeah, absolutely. I think we still have a depth of supply of particularly affordable multifamily in the US. It's challenging to build affordable multifamily, the numbers just don't work, the math doesn't work. You can build class A multifamily and those economics work, but I think that the recession is very different than the '08 recession and that we don't have a supply and demand imbalance. We had too much supply in '08 on both the single family side and on the apartment side. We don't have enough supply today. So I think that that plays out. That being said, there's a lot of developments. I think folks thought that the construction starts were going to diminish pretty substantially when COVID started and the reality that most, not all, but a lot of them have gotten back on track. So I think you're still going to see a lot of deliveries in 2022. I think you're still going to see a lot of deliveries in 2023 but I think that you're going to see household creation startup again. In recessions, it can track, people get roommates, people who back in with their parents, whatever it may be. I think that we will go back into a time of positive economic growth, which is typically good for household creation. I think multifamily is going to do very well over the next 5-10 years. I tell our team, I don't want to make any investment in a multifamily transaction that we're not comfortable owning for 10 years. That doesn't mean that's the business plan, but it means that we have to have that level of comfort. What I think is going to happen in multifamily is returns are going to come down. I think that COVID has made people realize that on a risk-adjusted basis, it is so much less risky comparatively than some of the other asset classes that returns are going to come down and real estate and particularly multifamily investing it's no longer an alternative investment class. You have tremendous amounts of capital being deployed, a lot of institutional capital, a lot of retail capital. I think multifamily is going to do well, but the one potential concern I have around our ability to continue to acquire and invest in multifamily. If cap rates continue to come down because of the cap rate compression, because there's so much demand from investors for multi-family, and interest rates move up. What's going to happen there is returns are going to come down and eventually, interest rates will come back up. I don't think that it's going to be anytime soon, but eventually, they will, but that's going to compress the returns for multi-family. When we first started this business in 2012, we wouldn't really touch a multi-family deal unless we were underwriting 17,18, 19 percent return on a value at multi-family deal, then it was at 15. For the last couple of years, it's been a 15 and now it's a 14. I think those numbers are going to keep coming down. That being said, I don't personally know where I can deploy capital at the same risk-adjusted return level and earn even a 12, let alone a 14 or a 15, which is where we're underwriting most of the existing multi-family today. Development's a different story and a different risk.

Jason Hall: Deidre?

Deidre Woollard: You mentioned Dallas earlier. Are there any markets that you are staying away from? I know rents have fallen in San Francisco and New York to some extent. Are you worried about those places or do you feel like they're going to come back strong?

Jilliene Helman: My belief, and this is more philosophy than data, is that as humans, we have relatively short memories. I hate to bring up 9/11, but you look at 9/11 and everyone said no one's ever going back to the city. No one is going to live in New York. No one is going to go to work in these skyscrapers, and low and behold, a couple of months later, life felt relatively back to normal for those folks. Obviously, never back to normal for those who lost people in that tragedy, but I think that you will see life return back to normal. It's a matter of how quickly. We do not like New York City at all. Nobody likes New York City right now. As much as I dislike it from COVID, I probably dislike it more because of the political arena, and rent control, and how challenging it is right now to invest in the housing stock there, but I have to tell you, I think that by 2023, New York is going to be back. There's probably going to be some really fantastic buying opportunities in New York late 2022. So I could see us getting very aggressive in wanting to invest in New York in late 2022. It's not today and it's not next year. San Francisco is a similar story. I think that rents have come down in San Francisco. I think that with all the companies that are determining that they're going to have remote work forever, not the Googles of the world, but the Twitters and the Facebooks and some of these other major companies that were a huge part of the market, the residential and the office market in San Francisco, that market is going to get hammered, but by 2023, it will probably be back. I don't like Orange County. I don't like New York. I don't like Las Vegas. On the flip side, there's a lot of markets that I think are going to be recovering much faster. I expect Phoenix will recover really fast. I expect Jacksonville, Indianapolis, Dallas, those are going to recover really quickly or didn't really take a huge deep. We track a number of markets where there actually has been rent growth, and that goes back to it being a micro-market recession versus a national recession.

Jason Hall: To me, that sounds like your core focus remains even though there could be some opportunities in terms of maybe buying properties at a lower cost, in the interim, you are still prioritizing the predictability of rents and understanding when the market has recovered in terms of generating cash flows before you get aggressive on any deals in those markets, before you see some signs of what they're going to look like. Is that how you're thinking about it?

Jilliene Helman: Yes and no, because there's always new ones in real estate, and one of the things I love about real estate compared to the public markets, and maybe this is going to sound craft, but it's not intended to, so a caveat, myself, is you can trade on insider information legally in real estate. You can't do that legally in the public markets, but in real estate, it's a private market and that's what it's all about. If we are looking to buy an asset, I would do a deal in any market in the country today at the right price. It's all about basis, it's all about business plan, it's all about the people and knowing that you can execute on that business plan. So there is a world where we would buy a deal in New York today, but I wouldn't say that I'm going to go buy aggressively in New York today. There's that nuance and that caveat on when we expect those markets to come back. I will share with you the last year's deals that we've done in the midst of COVID. We did two deals in Dallas, we just closed a deal in Phoenix. We just closed a deal in Columbus. We're working on two deals in DC, and the DC market's gotten hit relatively. It's a major city, but there are two deals there that we think are really interesting. We're looking in every market. It just matters where we think that we can buy something that makes sense, and if you're buying in a market like New York or San Francisco, we have to underwrite pretty significant negative rent growth until, at least, 2023. So most deals are not going to work, but that's not to say that you can't find a deal that is going to work even with those, I would say, realistic, not conservative, underwriting assumptions.

Jason Hall: Makes sense. One thing I want to mention real quick too to all of our live participants, just a reminder for Slido, we're hoping we have a few minutes near the end to do some Q&A with Jillian. Just a reminder for everybody how to do that, go to Slido in your web browser, sli.do and the event code MF live, all one word, MFlive, and if time permits, hopefully, we can do a little bit of Q&A with your questions as well. Deidre?

Deidre Woollard: Wondering about these markets, and if you have the same ideas about office in these markets that you do about multi-family, and where you are looking for opportunities and offers right now.

Jilliene Helman: Office for me right now is all about cash flows. If you have long-term leases lined up with companies that have the financial-ware, we'll maintain those. I'll give you an example of an office deal that we did, which people may have said, you were crazy to do this in the middle of a pandemic, but we closed a deal, an office transaction in Las Vegas, Nevada shortly after COVID hit. On the surface, I would also call you crazy. [laughs] I would say that's never a deal that we're going to do, and Las Vegas is not a market that we're focused on. I think I mentioned that one is a non-darling earlier in the conversation. So why did we do that deal? Well, it's a credit tenant. The tenant is NV Energy, which is a subsidiary of Berkshire Hathaway. There was an extended lease on that transaction and it effectively was a covered leasing play, where the tenant had no option to get out of that lease. I think we have nine years to backfill if the tenant were to leave that lease, and so am I willing to bet long that Las Vegas is back in action in nine years? A hundred percent. I'll take that bet all day long. It all comes down to tenancy and office, and that's tied to location, obviously. We're very weary of underwriting any rent growth in office and the appreciation in office. I mean, I think it could take a very long time for appreciation to come back in office. I do think people will go back to offices in some way, shape, or form. Again, I think we have short memories. I was talking to a gentleman that I know in China and he was saying everyone's back in the office. Everyone is back in the office. It's sort as if COVID never happened and things are continuing. I'm not saying that the US is going to behave the exact same way. There's obviously nuance to culture and otherwise, but we're really looking at credit tenancy. We're looking at also opportunities. There's an office here we're looking which is at a conversion of multifamily. They're saying office is no longer the best, highest and best use for this asset, we want to do a pretty significant renovation and convert that to multi-family. That's kind of interesting to us. But it all comes down a tenancy. We're not we're not doing any spec office. In fact, the deal that I mentioned earlier that we turned down was a spec office deal and we just said it's not the right time. We don't think to be investing in spec office if we can invest in something and generate a really great cash yield. Because there is a difference between the cap rate that we're acquiring the office and where interest rates are today. We'll take that cash flow play. That's what the Las Vegas deal was, and the energy, it was a cash flow play. We didn't underwrite any of the upside, any of the appreciation, which if it happen, it's great, and if it doesn't happen, we've got high-quality tenancy. I think New York office is very scary, LA Office is very scary, San Francisco office is very scary, Dallas is probably one exception, Austin maybe. I mean, you've just got so many companies that have announced they're moving into Texas. With Oracle, and CBRE, and Tesla. Those are markets where I'd look more closely and I'd be willing to take more risk. I think office comes back, I just think it takes a while.

Jason Hall: It's tough to know, right? For every Jack Dorsey, they're saying, we want to try to make remote as possible for everybody as we can. You have somebody like Reed Hastings that says, I want every single employee back in the office. It's just so hard to project. I think that's the big point right there is, we don't know exactly what the future is going to look like, but I do tend to agree with you it's probably going to look more like it did in the past than it looks right now. It's going to be somewhere in the middle.

Jilliene Helman: I think it's going to be flexible office. We think a lot about talent. I mean, the single greatest asset to my business is our people. We're only as good as the collection of people at the company. I don't think that you're going to be able, as a CEO or the head of a company, to be able to recruit the highest-quality talent by mandating the people are in an office five days a week. I just don't think people want that lifestyle. Whether it's irrespective of age, like we've all now experienced over a year. It will probably 18 months by the time that folks are back in offices. Life feels different. I think for a lot of people, it feels a little bit better. It's more time with your kids, the ability to eat healthier, the ability to exercise, picking up an hour, even if you're commute was 20 minutes, that's still an hour by the time you park your car and do all the things to go into an office. I think that the war for talent is going to be one, by having remote flexibility. I think that that's going to really challenge office, that being said, I think companies will still have a physical presence. I think about RealtyMogul, we're going to have a physical presence again because we have clients who want to come in, and want to meet us, and want to know that there's a fancy building somewhere where we're talking about investing their capital. But there's no way I'm going to mandate that 100 percent of my team is in the office 100 percent of the time because I won't be able to retain and recruit the best talent. I think it will be somewhere in the middle. But who knows? All speculation at this point.

Jason Hall: Deidre.

Deidre Woollard: I wanted to ask you about real estate crowd funding in general. This year, we saw the SEC changed some of the rules. Do you think that we're going to see more investor access? Do you think that we're going to see some of the loosening of regulations around accreditation in the coming years?

Jilliene Helman: I certainly hope so, because as much as we try and create great products for non-accredited investors, there's so much more access for accredited investors not only in real estate, but in other asset classes. Just to allude again on what you were talking about, the SCC came out and said that certain professional certifications would now allow an investor to be deemed an accredited investor even if they don't have the network or liquidity requirements. They started with Series 7, Series 63, Series 82, professional financial licenses. I was shocked at that point in time that they didn't also include the CPA and the JD. Open it up to all attorneys, open it up to all CPAs. But if you read the nuance in the legislation, they made it very clear that that would be added in the future, I think. Again, Julian speculating. I know it's not called the Julian Speculation Hour, but I'll make it a Julian Speculation Hour. I think that they left the door open for that in a very clear way that wouldn't require a lot of back and forth. We're really excited about that. I think ideally, they will open it up to people who will have an MBA. Ideally, they will open it up to JDs and CPAs. I do expect that to happen, but it takes time. I mean, this is one of the first changes to the accreditation definitions in decades upon decades. I think this is their way of testing the waters and making sure that everything is okay with the rollout of a broader scope of individuals who can qualify as it credits in the future.

Jason Hall: With that in mind, as it's becoming more open, why should retail investors consider crowd funded real estate versus just buying a publicly traded REIT.

Jilliene Helman: Look, I think that there's a lot of arbitrage in the private markets. As I mentioned earlier, in the private markets, you can legally trade on insider information. I'm a big believer in the middle market real estate space. That's really defined in my book, is deals under $50 million. If you look at the over 100 transactions, we funded at RealtyMogul, majority, if not all of those, are under $50 million and there's less competition there. There's more opportunity to use insider information. There's more opportunity to win deals because of relationships. There's less outwardly broker transaction. There's more opportunity to be really creative about the execution. Most publicly traded REITs are not trafficking in that space. They're buying the bigger deals. They've got billions and billions of dollars to put out, so they have to work on bigger transactions. Similar to a lot of private equity firms won't right a check less than $20 million. It leaves this middle-market world really open. If you look at the data, the middle market real estate transactions tend to outperform the larger transactions. There's exceptions on both sides of that fence, certainly. But I think that that's one of the main reasons, it's a way for investors to get into middle-market real estate. It's also a way for investors, I think to get really educated. If you buy shares in public REIT, you're probably not going to read the 10-Ks and the 10-Qs. I do, because I'm just nerdy like that. [laughs] I learn a lot and I enjoy it. I run two REIT, so I should be educated. We found so many investors say to us, I invested $25,000 in three or four deals with you, and I have learned so much. Because we do reporting on a granular property-level basis. Here's what's going on at the property, here's what the rent bumps are, here's what the vacancy is, here's what the return on cost is. There's there's hundreds of people who have used investing with us as their real estate education to then go on and buy their own deals, which is fantastic. We're big believers in having exposure to real estate. I also think that it's a lot more fun to be able to see the specific assets that you're investing in rather than investing in a blind pool, which a lot of these public REITs are, unless you actually go read the disclaimers in the financials. We are very transparent in both of our REITs in addition to the individual assets, what are the specific properties you are buying. What are the addresses? If you want to go, step foot on those properties. We'll have investors send us photographs of properties that we own and say, ''Hey, I was driving by and I took a bunch of photographs, and here's me in front of it, and I'm an owner. It's definitely coolness factor about it. But I also think there's a real legitimate financial reason which is middle-market tends to outperform the expensive, more competitive staff, and remains to be seen if it continues to. But we like the middle market space a lot as a result of that.

Jason Hall: I want to give you a little hats up here. It's not just that you guys provide that information, but you make it readable and easily consumable for regular Joes and Josephines out there. I want to give you some props for that. I think you guys, and Cordray, and Streitwise, the little shop just down the street from you, guys. I think the three of you do the best at getting the information to people in a way that's easily consumable.

Jilliene Helman: Thanks, appreciate it.

Deidre Woollard: So on the other side, I was wondering, are you seeing more sponsors being interested in crowd funding? I think that's one of the things that's been interesting, is that sponsors, where it used to be a little more hesitant. Are you seeing more developers coming to you with deals than you used to?

Jilliene Helman: Absolutely. In the early days, we were having to sell ourselves, and say this is who we are and this is what we do. It's the typical adoption curve for technology. In the early days, you had a bunch of early adopters, and you think you're on to something, and it's amazing, and then you go through this low where you're not so big that everyone knows you, but you're not so small that you don't have any business. We're on the other end of that curve now. I credit us and I also credit our competitive shadow have done a great job of educating sponsors. It is very mainstream now to finance your transaction through crowd funding. We have sponsors now pitching us as opposed to us pitching them and selling to them. They're coming to us and saying, hey, we want to build a long-term relationship with RealtyMogul and we know the benefits of this. Because the skill set of raising capital is a totally different skill set than acquiring an operating real estate. Our philosophy has always been they're different skill sets and we would rather that we have sponsors that are great at acquiring assets and managing assets than raising capital. Because that raising capital skillset doesn't help us in the financial performance of the transaction. I would say that there's much more widespread adoption today. We frankly have more business than we know what to do with. That just means that we declined a lot of transactions. We're very focused on sponsor experience. There's sponsors that want to access that we declined because of experience. Then there's a lot of sponsors that are incredibly experienced. I mean, we have sponsors that have done two, three billion dollars in transaction volume, and they are now turning to crowd funding, which I think is indicative of it really becoming a mainstream industry today.

Jason Hall: That actually brings up talking about prioritizing experience and the sponsors that you work with. One of the questions I wanted to ask is, in the crowdfunding space as a whole, there's a combination of really smart tech people, and really smart real estate people, and a little bit of some that are kind of a mix, but I'm just really curious to hear in terms of how you think about your talent base and prioritizing great real estate people versus great tech people to get the platform and the technology as good as possible.

Jilliene Helman: To answer with one word, were a fintech company, which means we're both, but financial services leads. Because you can't build this business, if you in my opinion, and if you don't have financial services first, because people are investing real money and real investments. So no matter how sleek your technology is, no matter how cool your distributions are, it doesn't matter if you're investing in transactions that don't perform. They are in the early days of this business, back to 2012, 2013, there were a bunch of CEOs that popped up that we're very much technologists and technology people. Most of those companies did not make it because they weren't focused on long-term thinking around the investable assets. We have both, we have an amazing technology team. It's not to knock them at all. They are fantastic. Our VP of Engineering has been with me nearly five-years and he's just done a great job in building out the tech on our platform and his team. But at the end of the day, we're a financial services company first. It goes back to our value set. Our values of sleep well at night and investor protection. Those things really lead us to being a business where we care so much about each and every single one of our investments, that best top priority.

Jason Hall: I think that's a very good answer. I'm happy with. [laughs] Diedre, go ahead.

Deidre Woollard: Putting me on the spot there, Jason. [laughs] Earlier, you mentioned that you're not doing the hospitality at all. It seems like there's going to be some distressed assets in 2021. There might be some opportunities there. Is that an area that you're considering at all depending on what happens or is it probably going to be a hard note for you?

Jilliene Helman: It's such a hard one. We stopped investing in hospitality in 2015 because it's really, from my perspective and operating business, not a real estate business. We had to go in the core of our heart of hearts and say, are we a platform that invest in operating companies today aka hospitality, or are we applaud form that really wants to stay tried and true real estate? There's one hospitality idea, there are others too, but one that's truly hospitality, one is hospitality to multi-family conversions, and we're multifamily be both. So that's an easy one for us and we're looking at a couple of those. But the other is transitioning existing hospitality in the long stay hospitality. Instead of doing one night, someone comes and rents or room, the minimum is 30 days or 60 days or 90 days. That feels more like hospitality, it's just a little bit less of a hospitality business. That's something that we've been toying with and we've been having conversations with a very great, deeply sophisticated sponsors. So we may be able to get our arms around that, but probably not, to be totally honest. I mean, it's still an operating business. One of the great lessons from COVID is it was an operating business. I don't know that investors who think that they are investing in real estate and are thinking about their real estate allocation should have an allocation of hospitality. Now, if they're thinking about their overall investment allocation and they want to have some allocation to operating businesses in addition to real estate, I'm not opposed to it. It's kind of a full fledged portfolio. But in general, unless I was running the hotel. I don't know that I'm going to be investing in hospitality.

Jason Hall: You ever really want to run a hotel, Jilliene? Let's be honest.

Jilliene Helman: You never know. [laughs] Never say never. But I finance it myself because I don't think that I'd want investors coming into that operating business either. I think that a lot of the boutiques hotels have done fantastic during COVID. If you have some kind of shtick, you have some kind of niche, those hotels I think are really interesting and really fun. But I don't see us going along hospitality right now. Although I do think it'll come back. I know you didn't ask me that question, but I do think it will come back and I do think business travel will come back and someone asked me recently, business people are never going to travel. Are you ever going to travel the way that you want to travel? The reality is, salespeople are going to get on the plane. Salespeople are going to get on a plane, and they're going to get face-to-face with people, and they're going to do a deal. As soon as that starts up again, you're going to have to get on a plane and go face-to-face again doing business. I think that a lot of that business travel we will come back, which really fueled a lot of the hospitality business.

Jason Hall: I have a thesis I want to bounce off of you and say your professional opinion on. We've talked about this transition of work to home, and hybrid, and whatever work and living looks like, say two or three years from now. My thesis is that the convention business is either going to fully recover or be even bigger. I think there's a case for it be even bigger if hybrid and work-from-home becomes a bigger part of the way people works because companies are going to prioritize finding ways to get their people together more. I think some of the real estate companies that I'm really interested in are really big in the convention space. I think there's some opportunities there. I'm just curious as to your thoughts on that.

Jilliene Helman: I think it's a good thesis. People are social creatures. We like to be together, we like to congregate. I think you're right. I think more companies are going to be remote. NMHC is like the biggest conference of the year for our business. It's coming up in January, although we will be remote and I could see if I don't have all my employees and the office, historically, we'd send five people. Now, we send 10 people, and do a big event, and get in front of people, and make it a social outing. I totally agree. I think you're spot on. I think next year is going to be hard. I think that a lot of people are going to get the vaccine by the end of next year and people are going to be comfortable. But I think it'll really start to come back in 2022 and '23. I think the next two years in the events business is still going to be pretty tough.

Jason Hall: I agree. I think there's the expectations are probably starting to get ahead of the reality at this point.

Jilliene Helman: Yeah.

Jason Hall: Deidre?

Deidre Woollard: I want to make sure we take a look at some of the questions we've got.

Jason Hall: Good idea.

Deidre Woollard: One of them is, "Is liquidity a concern with private crowd funded REITs, and is there a minimum holding period for your REITs?"

Jilliene Helman: Yeah. The REITs act a little bit differently than the individual assets. On the REIT perspective, we don't have any concerns around liquidity. We entered the pandemic, very, very liquid. We have minimum liquidity requirements that we feel really comfortable with. I would say that the liquidity question is as good as the management team. You really want to look to the management team to make sure that they are making the right decisions around REITs. In our REITs, we have a one-year lockup, so if you invest, you can't get out for the first year, and then thereafter, we have a penalty for the first three years. If you get out in the second year, it's a two-percent penalty. If you get out in the third year, it's a one-percent penalty. The reality is, we really don't want people investing for the short-term in our REITs. If you're thinking about, "How do I get out? What's the exit?" It's probably not the right vehicle for you, which is strange for me to convince you not to invest with us, but I just try and be open and honest with any investors so they can find the right vehicle. We really want long-term investors. We don't want dinner table money. We want folks who really believe in real estate for the long-term. We are looking to make a five to 10-year investment, and use it as a diversification mechanism for themselves.

Jason Hall: Something I just dropped in the chat here in Zoom, I encourage folks to look at, is the review that we did of the RealtyMogul platform. It does have some information about the structure of the REITs and the ability to win the liquidity options and that sort of thing. Also has some more information that's important too for the stand-alone deals because each deal is different. Right, Jilliene?

Jilliene Helman: Yeah.

Jason Hall: In terms of how long the plan is, what your minimum investment might be, return profiles, all of those things.

Jilliene Helman: Yeah. On our individual deals, the whole period range from two years to 10 years. There's a lot of variety depending on what you're looking for and what you think is the right investment opportunity. I would say though in general, in real estate, hold for the long-term. I don't love day traders in real estate. There are some big opportunities in the REIT world through COVID. Don't get me wrong. Some people made a lot of money, but I invest in real estate the same way I investment in the public stock market, which is invest in companies that you want to own long-term and invest in properties that you want to own long-term. Your likelihood of getting hurt, I think, is a lot less when you invest with that philosophy and that theory.

Jason Hall: I want to ask your comments on this. I'm going to read the question here first. "Always learning Fools. Asking how to invest in the Mogul REITs." I can just hit the top, they are not available on any exchange, you're directly giving your money to RealtyMogul through their platform. You can go to RealtyMogul's website and create an account. To do that, the minimum investment, Jilliene, still $5,000 for your REITs.

Jilliene Helman: Correct.

Jason Hall: Can you please lower it? Thank you. I'd appreciate that. [laughs] You never hear that. But here's what I wanted to say and I wanted your thoughts on it. The reason those limits are the amounts are the way they are and the reason there's liquidity restrictions is, again, this isn't a secondary market. You are giving the money to RealtyMogul. RealtyMogul is taking that money and then allocating it. They are investing it in debt, they're investing it in properties. If you want to sell it, you're going back to RealtyMogul and say, "Hey, I want my money back." To Jilliene's point, talk about that tension again between your goal of finding good long-term opportunities and giving investors access to that liquidity.

Jilliene Helman: I think it starts with just total and utter transparency upfront. I'm sure you've had, or maybe not, because you guys are good at that thing, but I'm sure there are other CEOs who would come on here and say, "Invest with us and there will be liquidity when you need it." That's not the message I'm saying.

Jason Hall: Right. [laughs]

Jilliene Helman: It's very much, like these are long-term investments. You're totally right, Jason. There's a mismatch between what we're investing in, and if people want liquidity in a year, we don't want to ever be in a position where we have to go sell an asset. We keep liquid capital in the REITs as a matter of policy. I think an ample amount of liquid capital on the REITs is a matter of policy. But the reality is, we're long term thinkers. It's important to us to be culturally aligned with our investor base. That being said, there's things that happen. We've had people who have come to us and said, "Hey, I realized this is a long-term investment. I lost my job because of COVID, so I want to be redeemed because of that." We try and do as best that we can by investors, and manage that. That's why we maintain minimum liquidity standards in the REITs at all times. But that's not the norm. We're really trying to educate investors to say, "If you want to invest with us, plan to do it for the long-term." It takes a long time to build value in real estate. If you don't want to do it, it meant a lot of risks. You can build value in real estate very quickly if you want to take a lot of risk. You do a big redevelopment, you do construction project, you do spec industrial. There's ways to move very quickly and create a lot of wealth in 1-2 years. But that's not our strategy in the REITs. Our strategy in the REITs is to be steady, to think long-term, and to have income growth and appreciation growth on a year-over-year basis, but not to take undue risk. In that vehicle, we're really looking for investors who want to invest for the long-term.

Deidre Woollard: One question we're getting a lot is, "Does RealtyMogul invest anywhere outside the US?"

Jilliene Helman: We do not. We're just domestic today. We've looked at a couple of things in Puerto Rico, which you could call out of the US or not. But the biggest concern I have is local regulations and local laws. I've heard horror stories in certain countries around title, and not really having title in your assets. I think there could be the world in the future where we do. I think that if we did that, we'll start in Canada. I'm a Canadian citizen, so that would make the most logical sense. But if we were going to do it, we do with partners that are tried and true on the ground there because I think that, actually going back to an earlier question that Jason asked, "How are we different than our peer set?" One of the big differences is we step foot on every single property. One of the peer sets in our business doesn't believe they have to step foot on every property because they're trusting in their partners. They work with some phenomenal partners, so don't get me wrong. I'm not knocking those partners, but I just don't believe that we can do full due diligence on a transaction without stepping foot and without someone being on the ground, even during COVID. During COVID, I've said to my team, you don't have to travel, but if you don't want to go, I'm going to go personally. We did a deal in Columbus, Ohio. I popped in a plane and I went out there. We're doing another deal in Lake Orion, I popped in a plane and went out there. The two Dallas deals I had seen. We feel strongly the need to step foot on the assets. So if we were going to build something internationally, it would have to be in partnership with someone who we trusted to step foot on every asset, and trusted their analysis of those markets and those assets themselves.

Jason Hall: Husky86 is asking a good question that I think is important. One of the things when we look at businesses of all types, as we like to see skin in the game, whether it's having a personal stake in the business itself, and particularly in crowdfunded real estate, having exposure to the actual properties that are going through your platform. I'm curious to hear just your thoughts on that. The stakes that you take in the deals that are offered, the stand-alone, your financial stake in the REITs. Your thoughts on how you think about skin in the game at a deal level?

Jilliene Helman: Yeah, absolutely. On the REIT front, the parent companies are investor in both REITs. But I think more importantly than that, frankly, is a lot of our compensation on the individual deals is back-ended. We're compensated. We take a piece of the operator or a piece of the sponsors promote. We're going to get a significant piece of our compensation on the back-end if the deal performs. If it doesn't perform, we're not going to be compensated. There's inherent conflict between building a business and investing every single dollar in our mission, or putting those dollars back in each individual asset. What we've said is, how do we set up the financial incentives so that we're incentivized on the back-end to do right by investors, and to be aligned with investors, but make the choice to deploy every single dollar into the mission of the business. That's really what we've done. We've said, "We'll take a piece of the back-end so that we're fully aligned, but we're going to choose to spend the majority of our dollars investing back in the company, hiring additional teammates, augmenting the technology to meet our mission, which is to provide more high-quality real estate transactions to investors. That's how we've thought about it. On the REITs, we have a co-invest. On the individual assets, we're compensated on the back-end for that alignment.

Jason Hall: Just to quickly explain to folks following at home that might not understand all the lingo, promote is a structure so that once a deal reaches a certain level of profitability, it describes how additional profits are split between different parties. What Jilliene is essentially saying is that their financial returns are structured so that the better the deal does, there's more incentive for RealtyMogul over the term of that deal. The way a lot of other platforms are restructured, is it's about volume. A lot of these platforms are set up so that, a deal could lose money, but the platform could make money because they get a transaction fee just by selling that deal. I think that's a really important distinction. Deidre, go ahead.

Deidre Woollard: I've got a question. When someone invest 5,000 in the REIT, is it invested in multiple properties, or is it invested in one project?

Jilliene Helman: Yeah, so in the REIT's, it's invested in multiple projects. The first REIT, which is really focused on income, that REIT has $216 million of property value in the REIT today, so you're diversified across about a $200 million portfolio, and then the second REIT is more focused on value-add and growth. It's limited to multi-family and the total asset value of that REIT is about a $150 million. The first REIT's $215 million, the second REIT is about a 150 million. If you go to our website, we're fully transparent about all of the assets in those REIT's. You can actually see at a granular basis, the address of every single one of those properties. You can pull it up on Google Maps. We have details about what it is, who the tenants are, if it's multi-family, what the rents are. We try and go into pretty granular detail so investors really feel like they're buying specific assets. You're not just buying a ticker on a stock exchange, for example, the way that it usually feels when you buy a REIT, but you can really know exactly what you own.

Jason Hall: One additional good piece of information I want to share with the REIT, since they're available to non-accredited investors, and this is across the industry, not just for RealtyMogul, but anyone that's offering investments to non-accredited investors is required to file with the SEC. Just like you can if you buy shares of Google, you can go to the SEC, and you can look at the documents that are filed, and you file semiannual and annual reports, is that correct? [OVERLAPPING]

Jilliene Helman: Correct. We actually choose to file a quarterly too. We'll do a quarterly investor letter that details each individual asset. We file that publicly. Even if you weren't an owner of the REIT, you can find those filed publicly, and they are linked on our website as well.

Jason Hall: Also, if there's any sort of material information, you file the AK's with that information as well. The point is for those of you that are familiar with your 10Qs and 10Ks on the stocks that you buy, there are equivalent documents for RealtyMogul REITs, and I encourage you to read them, because the biggest thing that's opened my eyes about this industry, is so many of your competitors, frankly, they say one thing in their promotional materials, but then when you actually get into what they do, which is what is in their SEC filings, it is stunning. You start to see these related party transactions, and the fee structures for some of the things that are built-in that they completely disclose, which means they're above board, but because nobody reads those SEC documents, people have no idea what they're investing in. The key is that could teach you a lot about the management that you can trust and that you can't in this space, and if you're going to invest in any REIT, whether it's publicly traded or one of these private REIT's, you have to trust the people that are running it because they're deciding the properties that you're going to own. I just wanted to really stress that point, and you guys do great, you really do. I think you do a great job with that.

Jilliene Helman: Yeah. They're both public companies. So both our REITs are public companies, which means that they're fully audited, and our REITs are also managed by a registered investment advisor. We're held at an even higher level of standard being managed by a Registered Investment Advisor, and we appreciate the oversight. Again, it just goes back to culture. Another one of our cultural values is details matter. Right? Cross your t's and dot your i's. Real estate's a detailed business. There is a great video about the value of a dollar in real estate, and if you can grow rents by one dollar, the five cap, it's a meaningful change, in the value of the real estate. We have a lot of pride, I think, in the details and in managing the REITs, and again, we're thinking very long term. We're looking for investors that want to invest with us for the long-term, and a lot of that is just making sure that we do everything by the book, which is really, really important to the company culturally.

Jason Hall: Deidre?

Deidre Woollard: We've got a couple of questions about rates of return and where people can look at returns before they invest.

Jilliene Helman: Yeah, absolutely. If you are looking at investing in the REITs, you can go to our website and see very easily the distribution history of both of those REITs. We've been paying distributions on the first REIT since 2016. We have never missed a monthly distribution since 2016. The first distribution was September 2016. You can find the statistics about that directly on our website, and then in the second REIT, similar story. We pay quarterly distributions in the second REIT and monthly distributions in the first REIT. It's a little bit different in how they're structured, but in the second REIT, the first distribution we ever paid was in March of 2018, and we paid a distribution every quarter since then. I have to say it, past performance is not indicative of future performance, so no guarantees, but we work really, really hard to invest in quality assets that we believe in and that we think make sense. On the REITs, you can find it on our website, and then for the individual assets, if you're an accredited investor, once you get access to the accredited investor platform, you will see a tab called past investments, and we're fully transparent on every single investment we have ever done. What the returns of those investments are, and we have both a debt platform, and an equity platform. You can look on every single equity deal. You can look at every single debt transaction. We've had over a 150 transactions go full cycle since we started the business 8 years ago, to 150 deals that we originated, and that has paid back. A lot of that in the early days was our lending platform, but we've had now over 40 transactions in our equity platform go full cycle, and you can dig into each individual transaction. Where was it located? What was the name of the transaction? How long did we hold it? What was the actual return? So that's on the past investments tab, after you become an accredited investor on the platform.

Jason Hall: Go ahead, Deidre.

Deidre Woollard: No, I was just going to say that, that's fantastic. I think being able to view that and dive into the past deals is incredibly valuable.

Jason Hall: Yeah, most of the companies out there don't do it. For various reasons, they have private placement agreements with the sponsors that they can't publicly disclose everything, but I think in general you have to be willing to show your warts as well as your muscles. [laughs] If you're not willing to show both, it's definitely a disservice to people that want to invest with you. Let's see here. Do you see any other good questions here? We got about 2 and a half minutes left. One thing I just wanted to ask you about, and maybe you can just make some closing comments here is, one of the things that I think is important, you're a woman in a very male-dominated industry, but I was just curious as to your overall thoughts about the importance of diversity and helping build out a better, stronger real estate business. Just curious as to your thoughts on that.

Jilliene Helman: Look, I think that a diverse team that operates with empathy and respect is going to outperform individuals all day long. I'm proud of being a woman in the industry. We're proud of building out a diverse team, and I selfishly love diversity because I learn so much. Like one of the things that's so important to me in life is this love of learning. I lived abroad in Spain, I lived abroad in Tokyo, I lived abroad in Beijing, and I learned so much through those experiences of learning different cultures, and meeting different types of people, and so I try and really encourage it across our team, and that being said, as a female in the industry, I have been given the opportunity to work harder, more than some of my male peers, and I'm so grateful for that. There is a funny joke that wasn't so funny at the time, but we've now invested and raised north of $600 million across the RealtyMogul platform and in the RealtyMogul company, and the first million dollars that I raised, I had to do a 100 coffee meetings, and I don't drink coffee.

Jason Hall: [laughs]

Jilliene Helman: I have no idea if that had anything to do with my gender. I really don't, but if it did, amazing. [inaudible] talk to me because I got to own the pitch and I got to meet 100 really smart people who were telling us where we should take the business and how we should think about it, and helping to craft the mission that has become real TubeMogul as of eight years ago. I try and work really hard and enjoy it. You got to enjoy what you do every day and I'm super grateful that I have a job that allows me to do that.

Jason Hall: That's great. That's really great. Diedre.

Deidre Woollard: Fantastic. I think that's a perfect place to end the interview and I just wanted to say thank you so much for coming on. This has been a great discussion.