Transcript:

Now, coming up here on Stage Next, we have our Centimillionaire fireside chat, so
Richard, if you want to make your way to the stage, and also if we have John
Lettera, if you want to make your way up to the stage here too, this is going to
be how to build one billion in assets platform with John and Richard. Let's give
them a little round of applause as they make their way to the stage.
Great. Thank you, Charlie. One of the fun things you get to do running the family
office club is just interview people that I want to learn from and then we just
happen to do it in front of all of you and then try to keep it interesting for
other founders. I try to ask questions that I'm personally curious about. But we
have here today with us, John Lettera, I've probably met with him in person now 10
times. He's a co -founder and partner of Fairbridge Asset Management, which manages over $1 in the real estate platform. They're backed by multiple institutional investment groups, including Oak Tree Capital, which is backed by the billionaire Howard Marks. He has over 20 years of legal experience, has been working for over 25 years in real estate debt originations. He also served in the US Marine Corps and did four tours in Iraq as well. Let's give him a round of applause for that.

Do we have any other veterans in the room that want to stand up? We can give you
a round of applause as well. Any veterans?

Thank you. Thank you for being here, Ed. Ed's the founder at Gold's Gym, which you might have noticed across the street, and he came and gave a keynote at our last event. I think it was in Beverly Hills, so I appreciate you've been here at. So,
John, thank you for being here. What else did I miss in your bio and introduction?
I think you covered it all. All right. Great. Well, over 30 years, you've scaled to the size of the business you have now. A lot of people don't get to that size. They get stuck at $30 million, $50 million, under $100 million in assets. What is the edge that helped you get there that might be simple to explain, but maybe most people don't talk about. - That's a good question. First, I'll start by saying everything I say today comes from the perspective of real estate. So I don't know how many real estate professionals are in the room, but that's what I know it's all I do. So usually when I'm speaking, it's not from an investment advice perspective. It's from a real estate perspective. And I don't think and necessarily have an edge, what I have always tried to do in my career is just be authentic, be myself, and be fully transparent with my investors. For instance, as I was coming out here, we just got off a long conference call going through every single default in our portfolio. And when I say be yourself, I really mean, for instance, I don't have the Ivy League School background born and raised in New York as you could probably tell especially when I start speaking a little bit more and I like to be able to use that to my advantage for instance for those of you in real estate you know that real estate is 99 % bullshit everyone's trying to bullshit you and everyone's full of shit in real estate and just using that background using my background I'd like to think that I could really sniff that out very quickly. So if I had to come up with any sort of edge, I'd say I spent a lot of time concentrating on the downside. And I've always subscribed to the theory that only the paranoid survive. And I believe that as long as I concentrate on the downside, the upside usually just takes care of itself.
Interesting. Yeah. Larry Namer, we're doing a fireside chat with him this evening.
He's the founder of the E -Channel. He sold for a billion dollars. And in his book,
he said, "To survive in Los Angeles, you assume everybody is lying to you until
they prove to you they're not. So, I guess you're saying something pretty similar,
right? Yeah, absolutely. Interesting. Okay. So, I know you say you don't have an
edge, but I think everyone in the room is like, "He obviously has an edge. He's
managing a billion dollars and very successful." So, what do others not see about
you behind the scenes that maybe has a superpower of yours? I know you say you
don't have an edge, but you obviously are doing many, many things better than the average real estate platform out there. But what about you personally, do you think is a superpower besides being authentic, maybe not being afraid of having an opinion, etc?
Superpower. Well, I'd say knowing what you know, I know what I know. And I think you've heard me say this many times Now, I know real estate. That's what I invest in.

I subscribe to the Warren Buffett theory where diversification is just a hedge
against ignorance. All I am in is real estate. My family office is invested in real
estate. My fund is in real estate. I know real estate. I don't even know what I
don't know. So when people come to me with all these other types of investments, I think you have to be disciplined enough to walk away. Say no. And the same goes
through for even a real estate investment. You have to be extremely disciplined.
Everyone thinks they have the cutest baby. So don't fall in love with the asset.
I cannot say that enough. Fall in love with the deal, not the asset. And you have to be disciplined enough to walk away. If a deal is not going your way, we're lenders. So if I don't like the LTV, if I don't like the LTC, if I don't like my ratios, if I don't like the sponsor, I don't care how much I like that trophy asset, I walk away from the deal. There's always another deal to be had. Got it. It reminds me of, you know, John is nice enough because he is connected to Pace University. He got us a venue, a couple of different venues we've used in White Plains, the New York City at our last AI mastermind. And we're talking about using AI tools and how that could replace maybe in person due diligence. And John said every single time he wants to walk the property himself with the person who is wanting to acquire the property. And I don't care what AI tools you have, nothing replaces that. And I thought that was really, that kind of stood out during the day as something that you were 100 % confident on and you were not gonna change no matter what AI tools came up, right? - Yeah, and I'll reiterate again, again, How many people are in real estate in the room? It's probably a lot, right? So I'm all for technology, AI, we utilize it, we have all the algorithms, the software, I could do my BPO's, my comps, but we're a national fund. And maybe this is my military training, but I'll tell any sponsor, any borrower, when they call us up, I could be anywhere in the country within 24 hours. And when I tell my analysts the same thing, when they're like, we have something to do. And the Marines were anywhere in the world in 24 hours. I think we could be anywhere in the country within 24 hours. Because I truly believe that till this day, no matter how much technology we use, real estate is a full contact sport. Someone in my company is walking the property, meeting the sponsor, and I want to meet the sponsor at the property. You're not at the property, we're done. Deals off. So we still walk a property, meet the So I want to be on the roof in the utility rooms every part of it. That's real estate
Great. How about so do you simply outwork everyone in your mind? Is your is your
work ethic miles deep or do you think you're more thoughtful and strategic than
other people? Or is it a combination of both in your mind, or is it heavily slant
one way or the other? I Would say yeah, I Spend a lot of I'm making sure that
whatever task I am doing in a particular moment that I'm fully focused and
concentrating, I'm not one to multitask, I'm not answering emails and text messages as I'm walking a property. So I think it's more or less that, I'm not sitting here saying I outwork everybody, but I would say that I do focus more,
and I've noticed, than the average person. And maybe that's just a factor in my and
I'm getting up there now, I'm 54 years old, so I'm not that into the phone,
into the texting. I mean, obviously I use it, but if I have a task, I'm not
worried about who's emailing me at that moment. And I'm very good at just answering emails at specified periods in the day. I don't feel the need to have to answer people immediately. - Right, got it. How'd you first come across the first
institutional investor you closed? How'd you go from raising capital, from local
friends, local contacts, family offices, and then jumping to the institutional world.
How did that happen for you? I could talk about this all day, but I'll be very
quick. It definitely was an evolution and a journey. So very, very quickly,
I started off just doing bridge lending in the Bronx. That's where I was born. I
was raised in the Bronx. For 10 years, I would not do a deal outside of the
Bronx. It was what I knew, it was my comfort zone, I understood it, and I knew I
could make money. The minute you gave me something in Brooklyn, it was like another country. I wasn't going to Brooklyn, I wasn't going to Queens. In fact, till this day, just as a complete aside, I'm a born and raised New Yorker, 54 years old,
I've still yet to step foot onto Staten Island. Never been there.
And it's truly just an evolution. I started off doing just $100 ,000 deals with my
money and my family's money. And then eventually that grew to 200, 300, a million, and obviously as the business started to scale and the business started to grow, we would look at deals now around the tri -state area, and then the tri -state area turned into more of a national environment. And then I've never went out,
and I think it's an important point about how to scale a business. I truly never
went out looking for the institutional money. And I think if you run a business as
diligent and as successful as I have with my partners at the time, the institutions
truly do find you. And we started getting knocked on the doors for first leverage
credit lines that eventually turned into institutional investors coming in.
And then just to bring at Full Circle, that also brought a whole level, and I
don't know if this is one of your questions, but it also brings an entire level of
complexity. And that complexity was learned very difficult along the way. For
instance, many institutions started knocking on my door wanting to invest big money, which I was happily ready to take. However, at that point in my career, I didn't have an audit, I didn't have third party advisors, I didn't have the correct legal counsel, I didn't have fund administrators, and that was a whole process for me to learn. And over the years, I went and I spent the money to get an audit. I did
all my legal documents the correct way with the big law firms. I went and got the
largest fund administrator in the world and eventually scaled and scaled and scaled.

Okay. So would you say if someone here is in a room and they're at somewhere
between a hundred and 300 million of assets assets that maybe over invest in
institutionalizing if they want to welcome those institutional investors. Is that kind
of the AUM level to over invest in all those things you just talked about once
you're over 100 million for sure in your climbing? I don't think there's necessarily
a level. I think that if you truly want institutional money, you definitely need to
have an institutional platform. No institutional will invest with you without an
institutional platform. And you have to be able to pass this. So there's third -party
due diligence, people out there that do it, like there's mercers of the world and
fact rights, and you have to be able to pass their due diligence requirements. And
it took me many years to get the top ratings on each of these third -party due
diligence requirements. So spend the money. And believe me, I wasn't making a ton of
money in my fund where I could go out and spend $100 ,000 and start doing audited
financials on a quarterly basis. But I did it. I didn't have the money to go hire
some of the largest law firms, you know, our lawyers are good when prompted to do
all my re -documentation, but we did it. We now have offshore funds, Cayman funds,
auditors, Opus Fund Administration does our nav on a monthly basis. Like these are
all the institutional type things that you have to do if you truly want that
institutional capital. If you don't spend the money, spend the time and do it,
I am telling you, you're wasting your time, you will never raise a dime of
institutional capital. Great. Thank you. So we talk a lot about being ultra healthy,
not just aiming at being ultra wealthy. Do you see your health as simply a smart
investment or an advantage that gives you more energy in your business? Where do you
see that all fit in. - I got to chase these borrowers. I'm constantly running after
borrowers and who's not paying, I got to get them to pay. So I find, but there's
some, I'm being a bit funny, but there is a little bit of truth to that. I mean,
we've had several instances where there were some issues with certain borrowers, but
health has always been a large part of my life. Obviously I have a military
background, so it was instilled in me at a very young age. But I also if I don't
start my day off with some sort of a workout I just do not have that mental
clarity or that focus that I need to get through the day I I believe it goes hand
-in -hand. I truly do for sure Was there some point of increased momentum a choke
point you acquired or something that you did and then everything went straight up?
Afterwards it felt like like you just started going 70 miles per hour instead of 40
miles per hour between You know a million and a billion. Did you notice an event?
Yeah, the event had nothing to do Truly with an investment like I've never in my
30 years of being in this business changed my investment philosophy It has always
been the same and for those of you again in real estate I just stick to the the
basics of real estate investing good assets good jurisdictions good basis So that's
never changed. But what truly catapulted my fun to get into the billion dollar.
Realm is as I was saying the minute I institutionalized my platform. The money
started really coming in. Really started coming in and and what do I mean by that
again just to reiterate the minute that we got or started to get audited financials
and now I had one to two years of audited financials behind me. The moment that I
hired opus -funded administrators as our fund administrator. Now I have my NAV done,
my NAV on a monthly basis and newsletters. Once we had that institutional platform,
then the money really started coming and that catapulted us. Great. What's a million
-dollar insight that you could provide that you don't hear people say at investment
conferences? Maybe it's counterintuitive. It's something you haven't said yet today.
Just put big pressure on you. What's a million -dollar insight for everyone here?
That would say some of my best opportunities in my career have grown out of
problems. And usually for the most part, I've noticed that problems are a blessing
in disguise. And they can be an opportunity in disguise, especially in real estate.
And like I said, some of my best investment options,
some of my best investments that I've done arose out of problems along the way. And
I've always said to everyone in my company, "A problem is only a problem if it
can't be fixed." And usually every problem could be fixed. Right. We had a $5
billion real estate platform head on stage at our last investor summit. And he said
that 90 % of his problems are people problems, 90 % of his opportunities are people
opportunities. So As you have built up your team, any tips for those building
platforms on recruiting best talent or who you look for or what you look for in
their background? Do you hire a lot of past military folks because of your
background or any other tips or suggestions on that side? It just got to get out
there. For me, almost every single person that I've hired has sat on the other side
of the table. That's my biggest recruiting Technique is just seeing how other people
operate across the table negotiating techniques. How they underwrite how they look at
real estate deals I would say 90 % of the people we've hired are people that I've
seen doing business with And then for any investors here in the room that may hear
a real estate pitch from anyone during this event What advice would you have for
them on making wise real estate investments? We heard you need to visit the property
walk it in person, you know, with the person that you're lending the money to in
your case. Any other tips for investors here in the room that allocate to real
estate? I could tell you my two turnoffs like where I just walk away from a deal.
Number one is I'm not a fan of the whole sweat equity. Like, oh, I want 80 % loan
to cost. And I'll say, let me see your 20%. Well, I own the property for five
years and it's worked this much. So that's my 20%. You know, that's, that's not
equity. Make sure they're skin -in -the -game. Anyone who is truly does not have true
skin -in -the -game. I would not do a deal. I would not do an investment and I
would not do anything with that individual whatsoever. So to me skin -in -the -game is
very very important. The other thing I hear all the time which is another very very
large turnoff for us is where people consistently on a real estate transaction are
always offering me equity upside in the back. And for instance, if I come out and
I price a deal at, let's say, 11 % and two points, someone may come back and say,
well, how about you do 10 % but a 10 % equity kicker or some sort of warrant on
the back end. And it always bewildered me on why someone would be willing to give
up just 100 basis points, but yet offer me a back -end equity split.
Like, why are they willing to give up that back -end equity? Makes zero sense. I am
so much cheaper than equity could ever be. And that always raises a red flag for
me as well. I mean, debt should always be cheaper than equity. Right, right. So
from your perspective, you're like, why would you offer that if you really believe
in what you're doing? Because if you think you're going to do amazingly well, you
want to keep all the equity you can. From your Perspective is it smart or sharp or
something that you do do to ask for equity even if the person doesn't want to give
it up Is that something you guys do? No, we don't do it and maybe this is the
lawyer in me speaking But there's a lot of legalities on and conflicting legalities
on taking equity and debt even in the form of warrants It could be construed to
merge. There's a lot of legalities on why we don't get involved at all with equity
I mean we've been involved in early in my career on some equity actions where if
it goes into litigation, not only can it be merged, but there's you have to pick
and choose your remedy or that you're an equity owner, you're a debt owner. If
you're a debt and you're trying to wipe out all the equity, you don't want the
cost to merge it. I mean, I could just go on this derivative and shareholder
lawsuits that you could get involved in to tie up the foreclosure process. So we
just, I prefer, and I think I mentioned this to you and a lot of your investors
came back to me and you mentioned at the last one where I said I prefer to sleep
at night and not remain awake and by controlling the capital stack and being at the
top of the capital stack knowing I could wipe everybody else out that's where I
want to be right right I remember talking about like you know do you lose sleep at
night you're like no we're the reason that other people lose sleep at night right
so I like I like the way you said that so What about for people in the room who
are meeting with someone, they have their own real estate platform? Any quick tip on
like following up with a busy investor, getting their attention, breaking through the
clutter when they have 100 deals coming in per week? You obviously were able to do
it. Any tips for them that you haven't said yet? - I do, listen, the value added
in real estate is a good deal. If you have a good deal, you do not need to
follow up with any investor. And I could tell you now, I get hundreds of emails a
week on deal flow. And the minute I see a deal where I'm like, that's a good
deal, I'm chasing that person. They're no longer chasing me because I want that
deal. So if you're not getting a call back or you're not hearing back from someone,
I wouldn't necessarily look at the person you sent it to. I'd look at the deal
because, again, the value add in this business is deals. Everybody wants deal flow
and good deal flow. And it is So difficult to get right. I think that's pure gold
because what we always hear is oh, I've got lots of deals What I'm missing is the
capital I could do a billion dollars in deals this month if I had all the
investors But so does anybody who can access lupin it, right? It's like, you know
You want the one out of a thousand deal and that's exactly what you're saying is
that and a lot of people don't see deal Flow connected to their ability to raise
capital But if you have amazing deal flow, flow, which is why you're here on stage
to get access to more deal flow. If you have amazing deal flow, you're going to
raise more capital because other people don't have the same deal flow you have.
That's another way of saying what you just said. 100%. That's it. Awesome. Great.
I think that was a great note to end on that we didn't plan on asking you about,
but I think that people really need to hear that much more often. It hasn't come
up on stage much. That's awesome.
(applause) (upbeat music)