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How USDA Rural Development Loans Work with Jordan Blanchard - TLP177 · The Land Development Podcast with Ryan Glick

• 0:00
  SPEAKER_00: It's not a matter of will something go wrong.
• 0:02
  SPEAKER_00: Something always goes wrong, especially when you have giant complicated construction projects.
• 0:07
  SPEAKER_00: That might be cost overruns.
• 0:09
  SPEAKER_00: It might be slower revenue growth.
• 0:11
  SPEAKER_00: It might almost always higher expense growth.
• 0:14
  SPEAKER_00: And if you raise a static amount of money and you think that's going to be sufficient to get you through the hard times, it's not right.
• 0:21
  SPEAKER_00: Whoever your investors are, make sure that you have some way to access additional capital.
• 0:41
  SPEAKER_01: Hey, what's going on, everybody?
• 0:42
  SPEAKER_01: Welcome back to the Land Development Podcast.
• 0:44
  SPEAKER_01: I am your host, Ryan Glick.
• 0:46
  SPEAKER_01: We have an interview episode for you today, and joining me is Jordan Blanchard.
• 0:51
  SPEAKER_01: Jordan's the co-founder and executive manager at Excalibur Rural Capital.
• 0:55
  SPEAKER_01: Jordan, thanks for joining me.
• 0:57
  SPEAKER_01: Thank you, Ryan.
• 0:58
  SPEAKER_01: Pleasure to be here.
• 0:59
  SPEAKER_01: For sure.
• 1:00
  SPEAKER_01: And uh let's jump right into your background.
• 1:02
  SPEAKER_01: I like to establish the background of my guests on the show to start with, just to give people an idea of how you got into the space that you're in now.
• 1:10
  SPEAKER_01: So could you walk us through how you got into the government-backed lending space?
• 1:17
  SPEAKER_00: Absolutely.
• 1:18
  SPEAKER_00: So I'm roughly a 40-year commercial lending veteran.
• 1:23
  SPEAKER_00: Say 35 of those years were have been spent on government guaranteed lending.
• 1:28
  SPEAKER_00: The first 25 or so were the SBA 504 and SBA 7A programs.
• 1:34
  SPEAKER_00: And for those that don't know, those are just the sections in the original Act, so 504 and 7A.
• 1:40
  SPEAKER_00: Those are two government guaranteed programs that are typically specific to businesses that want to occupy at least 51% of the real estate that they purchase.
• 1:51
  SPEAKER_00: They can also be used for non-real estate items such as equipment or working capital or buying a business.
• 1:57
  SPEAKER_00: So 25 years in that industry.
• 2:00
  SPEAKER_00: In 2016, uh the bank that I worked for asked if I wanted to start a USDA lending department because I had expertise in government guaranteed lending.
• 2:09
  SPEAKER_00: I said, sure.
• 2:10
  SPEAKER_00: I really didn't know much about it.
• 2:11
  SPEAKER_00: And then as I got into the program, or I should say programs because they're plural, I realized how powerful these programs could be, especially for developers that want to build and rent or even build for their own purposes.
• 2:27
  SPEAKER_00: So uh last 10 years have been dedicated just to USDA government guaranteed programs.
• 2:33
  SPEAKER_01: Nice.
• 2:33
  SPEAKER_01: And, you know, when when you stay in a segment of that industry for so long, there must be a reason for it.
• 2:40
  SPEAKER_01: Um what what was it about this particular area of the industry that kept you there versus going and getting into other areas of lending?
• 2:49
  SPEAKER_00: It's a great question.
• 2:50
  SPEAKER_00: I I would sum it up by saying I'm a deal junkie and I want to figure out how to get to yes versus constantly saying no.
• 2:58
  SPEAKER_00: And the government guaranteed programs allow more flexibility and allow us to say yes more frequently.
• 3:04
  SPEAKER_01: Well, I do want to get into those programs.
• 3:06
  SPEAKER_01: I want to get into more details about that.
• 3:08
  SPEAKER_01: Before we do it, just want to uh get a little background on your company.
• 3:11
  SPEAKER_01: So for those who are not familiar with Excalibur Rural Capital, could you describe what the company does?
• 3:17
  SPEAKER_00: Absolutely.
• 3:18
  SPEAKER_00: So uh to be a government guaranteed lender in the USDA lending space, you either have to be a bank, a credit union, or a non-bank lender.
• 3:27
  SPEAKER_00: And if you're a non-bank lender, the hurdle to be approved to be a lender is quite high.
• 3:32
  SPEAKER_00: So if you're a bank or credit union, you're just automatically approved.
• 3:36
  SPEAKER_00: You just have to tell the USDA, we want to start making USDA loans.
• 3:40
  SPEAKER_00: When you're a non-bank lender, you have to submit a full due diligence package and you have to get a third-party rating similar to done in Bradstreet.
• 3:49
  SPEAKER_00: So we started that process uh at the beginning of 2021 and obtained our lending license by roughly September of 2021.
• 4:01
  SPEAKER_00: We made our first USDA loan in October of 2021.
• 4:04
  SPEAKER_00: And since that time, we've been the highest volume lender in the country over those four or five years since then.
• 4:14
  SPEAKER_00: But essentially what we do is we agree to make a loan and then we apply to the USDA and ask them to guarantee a percentage of the loan.
• 4:24
  SPEAKER_00: It's not 100%.
• 4:25
  SPEAKER_00: They put up no money.
• 4:27
  SPEAKER_00: 100% of the capital comes from us.
• 4:30
  SPEAKER_00: And we obviously service the loan and we're responsible for any delinquencies or any workouts.
• 4:35
  SPEAKER_00: And where are you located out of?
• 4:37
  SPEAKER_00: Where's the company based out of?
• 4:38
  SPEAKER_00: Irvington, North Carolina, or excuse me, New York, which is about 30 miles up the Hudson from Manhattan.
• 4:45
  SPEAKER_00: Okay, gotcha.
• 4:46
  SPEAKER_01: And well, let's I want to get into understanding the type of financing we're talking about here and the types of projects that actually work and fit into it.
• 4:54
  SPEAKER_01: We haven't talked about this on the show before.
• 4:56
  SPEAKER_01: We haven't really dug into this type of financing.
• 5:00
  SPEAKER_01: And so I think where where I'd like to have you describe for those listening in and for me too, because I, you know, I'm going to be educated here as well, is you know, what is this USDA financing?
• 5:12
  SPEAKER_01: Like where does it come into play?
• 5:13
  SPEAKER_01: And can you describe it a little bit for us?
• 5:17
  SPEAKER_00: Sure.
• 5:17
  SPEAKER_00: So most people hear USDA financing and they immediately think of financing for farms or uh ranches.
• 5:25
  SPEAKER_00: That is not what these programs do, and I'll explain the programs in just a minute.
• 5:30
  SPEAKER_00: But the USDA has a specific agency called rural development.
• 5:35
  SPEAKER_00: And as the term implies, they want to see projects being developed in rural locations.
• 5:41
  SPEAKER_00: A rural location is defined as a town or city of 50,000 or less, not contiguous with a more populated area.
• 5:49
  SPEAKER_00: That's the general description.
• 5:51
  SPEAKER_00: USDA has a map.
• 5:53
  SPEAKER_00: You have to check the map.
• 5:54
  SPEAKER_00: The map is the final word.
• 5:57
  SPEAKER_00: So even if you think you're in a town that's too large or too small, check the map and you may be surprised one way or the other.
• 6:05
  SPEAKER_00: But the way I describe it is these projects are for economic development in real locations.
• 6:12
  SPEAKER_00: What does that mean?
• 6:13
  SPEAKER_00: Someone's going to build something that's going to create jobs and that's going to add to the tax base, and it's separate and distinct from farms and ranches.
• 6:22
  SPEAKER_01: Do you think that people who are looking to do projects that this program alone, because there is the requirement around the size of the community where this is going to be built or where the project is going to be done, do people and developers essentially, I guess, wrap their business around doing these types of projects so they can get this type of financing?
• 6:43
  SPEAKER_01: Or do you see more so that this financing is used when a project just happens to come up where it fits into one of these communities?
• 6:51
  SPEAKER_01: I'm not sure if I worded that very well, but I'm trying to figure out it's like a chicken or the egg type of thing.
• 6:56
  SPEAKER_00: Yeah.
• 6:56
  SPEAKER_00: Yeah, no, it it would be unusual for somebody to start with the USDA loan first and say, okay, I'm going to build or locate my project specific to that program.
• 7:06
  SPEAKER_00: It does happen in renewable energy, and I'll explain that in just a little bit.
• 7:10
  SPEAKER_00: But in general, no.
• 7:11
  SPEAKER_00: So I would say that developers and borrowers go through the life cycle of trying to obtain financing.
• 7:17
  SPEAKER_00: I want to build X, and I'm going to first communicate with the local and regional banks.
• 7:23
  SPEAKER_00: And the local and regional banks will often say no for a variety of reasons.
• 7:29
  SPEAKER_00: And then they start looking and they find that if a project qualifies as being rural, that there is this credit enhancement program that the USDA spets set up specifically for rural locations.
• 7:42
  SPEAKER_00: So that is much more the life cycle of a financing request rather than starting with the USDA loan in mind.
• 7:49
  SPEAKER_01: Okay.
• 7:50
  SPEAKER_01: And you mentioned the renewable energy.
• 7:52
  SPEAKER_01: What was it about renewable, new renewable energy then?
• 7:55
  SPEAKER_00: So before the current administration, we used to do a lot of financing for solar and wind assets as well as biogas transactions.
• 8:03
  SPEAKER_00: And for a solar, the advantages of the USDA are significant enough that solar developers would say, you know, if we have a choice to locate in a rural area, let's do it because we can get key advantages from the USDA.
• 8:18
  SPEAKER_00: The biggest would be a longer term.
• 8:21
  SPEAKER_00: So with USDA products, we can offer a 25-year term.
• 8:25
  SPEAKER_00: If they go to a bank, it might only be a 15-year term, and that materially impacts their return on investment.
• 8:31
  SPEAKER_00: However, the current administration has ruled out solar and wind, and we're no longer allowed to finance those.
• 8:38
  SPEAKER_01: I'm not sure what the stats are.
• 8:39
  SPEAKER_01: I was going to try to look really quick, but do you know what the stats are for residents moving away from some of the rural communities into the bigger metros and everything?
• 8:49
  SPEAKER_01: Do you see this particular type of financing being something that's trying to help keep some of these rural communities active and alive to allow people to invest in those communities?
• 9:01
  SPEAKER_01: Is that really the big driver versus everybody feeling like the only opportunity that they have, especially for the development community, is going to be around the bigger, more populated metros and everything?
• 9:12
  SPEAKER_00: Yeah, the way I would describe it is it's not so much to retain uh residents in rural locations, although that does happen.
• 9:19
  SPEAKER_00: It's more so economic incentive meets financing, funding, financing and funding.
• 9:27
  SPEAKER_00: And what I what I mean by that is uh, especially since COVID, we see people migrating from urban to rural, but only in specific locations.
• 9:39
  SPEAKER_00: One of our biggest states is Utah.
• 9:41
  SPEAKER_00: So there's a lot of people that are migrating to Utah because they they like the quality of life.
• 9:46
  SPEAKER_00: Or it could be Tennessee or maybe North Carolina.
• 9:50
  SPEAKER_00: There are other rural locations, possibly in call it Ohio or Nebraska, you know, Kansas, but we don't see a lot of growth going to those areas.
• 10:01
  SPEAKER_00: And therefore, that's not really where our financing is going.
• 10:06
  SPEAKER_00: But our lending will generally help a growing community scale that growth up and add to it, either by financing tourism, hospitality, manufacturing, retail, uh, industrial, logistics, things like that.
• 10:22
  SPEAKER_00: So it's more a draw than a retention.
• 10:24
  SPEAKER_01: Do you see yourself partnering more with the communities themselves or the actual developers?
• 10:30
  SPEAKER_00: It's much more the developers, but we certainly will partner with communities.
• 10:34
  SPEAKER_00: And one way we do that is through uh the what's called tax increment financing or PUDs in Utah, where we will make a loan and then the local municipality will sponsor, they're not on the hook, but they'll sponsor a bond offering that runs with the tax, the tax basis of the project, and it will help finance horizontal or ancillary development like parking garages and the like.
• 10:59
  SPEAKER_00: So that's the most likely way that we'll partner with the local community.
• 11:05
  SPEAKER_01: Hey, real quick, if you're getting something out of the show, head over to landdevpodcast.com and set up a free account.
• 11:12
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• 11:22
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• 11:30
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• 11:36
  SPEAKER_01: All right, let's get back to the show.
• 11:39
  SPEAKER_01: Well, let's uh walk through a scenario here.
• 11:41
  SPEAKER_01: So you you had mentioned you got to check the map and make sure that the area where you're looking to do your project fits into a project that would qualify.
• 11:50
  SPEAKER_01: Let's say that you've qualified a project and it it does qualify for this type of financing for your group.
• 11:55
  SPEAKER_01: What's what's the next step in the process to see if this deal is worth you guys going in on?
• 12:00
  SPEAKER_00: Sure.
• 12:01
  SPEAKER_00: So what we'll ask from the customer or the potential borrower is just a short synopsis.
• 12:08
  SPEAKER_00: You know, the mindset of I have to develop a 20 or 30 page business plan isn't accurate.
• 12:14
  SPEAKER_00: Most lenders don't want to read such an in-depth business plan at the at the initial stage.
• 12:19
  SPEAKER_00: At the underwriting stage, we do, but not at the initial stage.
• 12:22
  SPEAKER_00: So, what are the elements that make up a good pre-screen memo?
• 12:26
  SPEAKER_00: One is the sources and uses.
• 12:27
  SPEAKER_00: We want to identify what is the project cost and how much equity or other sources of capital are you bringing to the table so we know how much of a loan that has to fill the gaps.
• 12:39
  SPEAKER_00: That's the first one.
• 12:40
  SPEAKER_00: Two is the vision.
• 12:41
  SPEAKER_00: Three is the management capacity and capability.
• 12:45
  SPEAKER_00: Are you experienced in this industry?
• 12:47
  SPEAKER_00: Have you done this type of project before?
• 12:49
  SPEAKER_00: Because that's definitely what we want to see.
• 12:51
  SPEAKER_00: And then some uh brief uh uh outlook on projections and cash flow.
• 12:58
  SPEAKER_00: Everything can be done in a two to three page memo.
• 13:02
  SPEAKER_00: And once we get that information with high level of reliability, we can tell the client if we think that they're gonna get financing.
• 13:09
  SPEAKER_01: Well, you mentioned uh, you know, other financing that could be included in this project that they maybe already have raised or other sources.
• 13:18
  SPEAKER_01: Is there a common capital stack that you see as far as the different types of funding that come into a project that is operating or is used in parallel to a USDA loan?
• 13:30
  SPEAKER_00: Absolutely.
• 13:31
  SPEAKER_00: So there's a number of them.
• 13:33
  SPEAKER_00: And I'll kind of start from the least used to the most used.
• 13:37
  SPEAKER_00: So uh new market tax credits could be a source of capital or historic tax credits if it's a designated historic property.
• 13:45
  SPEAKER_00: I say the next one up then would be uh the uh TIFF bonds, which again, that's gonna require a larger project, but it can finance um big portion of the infrastructure for that specific project.
• 13:58
  SPEAKER_00: And then the one that's most common is pairing a USDA loan with commercial pace.
• 14:03
  SPEAKER_00: And if you'd like me to explain what commercial pace is, I can I can do that for you in the audience.
• 14:08
  SPEAKER_00: Yeah, I'm not familiar with it, so I'd be interested.
• 14:11
  SPEAKER_00: Sure.
• 14:12
  SPEAKER_00: So uh pace stands for property assessed clean energy.
• 14:15
  SPEAKER_00: And the word commercial just designates that there are programs that are specific for commercial and programs that might be residential.
• 14:24
  SPEAKER_00: So uh 38 states allow commercial pace.
• 14:28
  SPEAKER_00: And basically what it is is it's a self-tax assessment.
• 14:32
  SPEAKER_00: So if I want to build a$50 million logistics warehouse to lease to FedEx, I'll use the maximum USDA loan of, say,$25 million.
• 14:42
  SPEAKER_00: And now I have another$25 million that I have to figure out how to finance.
• 14:47
  SPEAKER_00: I might have$10 million in equity or 20% down.
• 14:51
  SPEAKER_00: In that case, there'd be a$15 million gap, and I can go to the local municipality and say, uh, Mr.
• 14:59
  SPEAKER_00: or Mrs.
• 14:59
  SPEAKER_00: Municipality, I have a lender willing to give me an advance for a recurring ongoing future tax assessment.
• 15:09
  SPEAKER_00: So I get$15 million from an affiliate of Excalibur Capital, and then uh that affiliate goes to the county and says, I have funded a self-tax assessment, and we need you to collect the taxes on an ongoing basis, typically over 25 years, to pay it off.
• 15:31
  SPEAKER_00: So that's the best way I can describe it.
• 15:33
  SPEAKER_00: It's a self-tax assessment on a 2B constructed building.
• 15:37
  SPEAKER_00: So ideally, a client is going to utilize or design in uh special energy improvements.
• 15:45
  SPEAKER_00: It's not really anything more than one would already do in the normal course of business because everybody wants to reduce their energy cost and get a good return on investment.
• 15:55
  SPEAKER_00: But now we've provided$25 million in senior lien, first mortgage, first lien financing, and then another$15 million, which is actually senior to the senior lien because it's part of the tax base for a total financing capital stack of$40 million or 80% in my example.
• 16:15
  SPEAKER_00: Gotcha.
• 16:15
  SPEAKER_01: You know, coming into this, I didn't do a ton of research on the topic.
• 16:19
  SPEAKER_01: And I that's generally how I do this because I don't want to, I don't want to think I know the answer to things.
• 16:24
  SPEAKER_01: And so I want to be curious on the topic.
• 16:26
  SPEAKER_01: And, you know, you mentioned at the beginning that one of the biggest misconceptions about USDA financing was that people think it's for ranches and farm, you know, for agriculture and everything.
• 16:36
  SPEAKER_01: I had that belief as well.
• 16:38
  SPEAKER_01: That was that's what comes to my mind.
• 16:39
  SPEAKER_01: Are there other misconceptions besides that that people have about USDA financing that is just not true?
• 16:46
  SPEAKER_00: Yes.
• 16:46
  SPEAKER_00: Uh so one is that the rate will be uh lower than uh conventional bank lending because it's partially guaranteed by the government.
• 16:55
  SPEAKER_00: It's not the case.
• 16:56
  SPEAKER_00: There's two reasons.
• 16:57
  SPEAKER_00: One is we are generally making a riskier loan than the bank.
• 17:01
  SPEAKER_00: And again, like I said earlier, it's 100% our capital.
• 17:03
  SPEAKER_00: The USDA is not putting up any capital.
• 17:06
  SPEAKER_00: But two, the USDA does have add-on fees that they, whatever the guaranteed program is, there's there's going to be guarantee fees that are charged annually.
• 17:15
  SPEAKER_00: And so the combination of those two makes it a little bit higher rate than a conventional loan.
• 17:22
  SPEAKER_00: Uh, the second misconception is that any business plan should be able to qualify because the government is guaranteeing a percentage.
• 17:30
  SPEAKER_00: That's 100% not true.
• 17:31
  SPEAKER_00: Again, our capital, number one, and number two, the agency, every agency is very diligent in tracking and monitoring lenders who utilize their programs.
• 17:43
  SPEAKER_00: And if our delinquency rate was to click up beyond what our peers would be, we're subject to suspension.
• 17:50
  SPEAKER_00: So these are generally very large transactions.
• 17:54
  SPEAKER_00: And so it's no different than really any other commercial underwriting and due diligence.
• 18:00
  SPEAKER_00: There are some credit enhancements that we can talk about, but the qualifying is not going to be any easier than it would be if you just went to the local bank.
• 18:08
  SPEAKER_01: What are some common projects that you see in this area?
• 18:12
  SPEAKER_01: What are types of things that are being developed in these rural communities that are using this type of financing?
• 18:17
  SPEAKER_00: It's all over the board, but I'd say the most common is hospitality.
• 18:20
  SPEAKER_00: So I'd say 40% of the USDA portfolio, not just our portfolio, but the portfolio overall is probably hospitality.
• 18:29
  SPEAKER_00: And why is that?
• 18:31
  SPEAKER_00: Well, it gets back to those benefits that I talked about, and just to kind of go over them a little bit.
• 18:36
  SPEAKER_00: One is USDA allows us to do much larger projects.
• 18:40
  SPEAKER_00: Once you get to be about$5 or$10 million in loan amount, then the local banks generally will fall off, as will some regional banks.
• 18:48
  SPEAKER_00: So if you have$30,$40 million in financing, then you know conventional banks become less of an option.
• 18:55
  SPEAKER_00: Two, we can accommodate a higher loan to value ratio.
• 18:58
  SPEAKER_00: So it's common for us to go all the way up to 80%.
• 19:01
  SPEAKER_00: Conventional lenders would probably be 70% or less.
• 19:04
  SPEAKER_00: Three, we can offer longer terms.
• 19:06
  SPEAKER_00: So a conventional loan might just be for construction, and then it's on you to go find a permanent takeout.
• 19:12
  SPEAKER_00: What happens if you can't?
• 19:14
  SPEAKER_00: Or it might be a mini-perm, you know, 15 or 20 due in five.
• 19:18
  SPEAKER_00: And at the end of five years, you have to figure out what you're going to do.
• 19:21
  SPEAKER_00: In our case, the construction loan and the permanent loan all run together.
• 19:27
  SPEAKER_00: That eliminates the risk of refinancing, and we allow for much longer term.
• 19:31
  SPEAKER_00: So it might be two years of interest only to build something, followed by 25 years of fully amortizing.
• 19:37
  SPEAKER_00: So folks that are in rural locations also need help in getting financing because many conventional lenders don't want to lend in rural areas.
• 19:46
  SPEAKER_00: So those are all the benefits.
• 19:48
  SPEAKER_00: Hospitality is a big one because developers want to develop in growing communities.
• 19:54
  SPEAKER_00: They're not going to go to stagnating or communities in decline because that wouldn't be a good business plan.
• 20:00
  SPEAKER_00: If you're a growing committee, community, then you need hospitality to house guests and people that want to uh explore the area for future development or relocation, not to mention the construction workers.
• 20:14
  SPEAKER_00: So that's a big reason.
• 20:16
  SPEAKER_00: From there, it could really be any business purpose.
• 20:20
  SPEAKER_00: There's only 10 or 12 purposes that are not allowed by the USDA.
• 20:26
  SPEAKER_00: But you see behind me that the picture of uh mixed use, retail in the bottom and apartments on top.
• 20:32
  SPEAKER_00: That would be eligible as long as it's mostly commercial, 51%.
• 20:36
  SPEAKER_00: But again, it could be logistics hubs, manufacturing, uh, warehousing.
• 20:41
  SPEAKER_00: Uh, we did a sand terminal that is taking sand from South Dakota, export it to the Permian Basin by retail.
• 20:48
  SPEAKER_00: We did a metals recycler in in um in Texas that's actually importing uh rare earth metals uh before they're refined from Mexico, refining them and then adding to the rare earth, rare rare earth metal stockpile.
• 21:03
  SPEAKER_00: But it's we probably have 20 or 30 different industries that we've lent to at this stage.
• 21:10
  SPEAKER_01: So do you think uh so thinking through a developer who may be listening in right now and the projects that they have queued up or projects they're thinking about doing, you know, when you're thinking through the capital stack that that they're probably considering for their projects, maybe they have uh, you know, a fund that they use to raise to fund part of their projects, but they also maybe go and do traditional, you know, loans in some cases.
• 21:33
  SPEAKER_01: Do you think that the USDA financing should be something that's a it's just always a consideration to at least check and make sure and see if that's an option for developers doing projects?
• 21:44
  SPEAKER_00: Uh not always.
• 21:45
  SPEAKER_00: So I'll give you what I think are the best use cases.
• 21:48
  SPEAKER_00: So um where a USDA loan makes sense is for somebody that is either having a difficult time accessing accessing financing because it's in a rural location.
• 22:00
  SPEAKER_00: And it's a large project, andor they want to put less money down.
• 22:06
  SPEAKER_00: That's the classic scenario.
• 22:08
  SPEAKER_00: Where it doesn't make sense is if somebody has plenty of equity and they can qualify for a conventional loan, they should go do that because conventional loan terms are going to be better in general.
• 22:21
  SPEAKER_00: And the time frame to get a U to get a conventional loan is going to be shorter.
• 22:26
  SPEAKER_00: The other thing, especially for developers that build on spec or build to suit, the USDA funds are not for that.
• 22:33
  SPEAKER_00: USDA is going to finance projects that lead to long-term employment for the applicant.
• 22:39
  SPEAKER_00: So we're not able to finance somebody that just wants to build and flip it.
• 22:43
  SPEAKER_00: It has to be a developer that he's either going to own and lease, or the developer is the small business themselves.
• 22:53
  SPEAKER_01: Okay, gotcha.
• 22:54
  SPEAKER_01: So they're not uh so it's not to develop and sell, it's to develop and uh, like you just said, it's so for the example of the building behind you there, they're they're managing the tenants um both below and above for the residential side and the commercial side.
• 23:10
  SPEAKER_01: On top of that, they're not only managing that, but I would assume before they're going to get to the point where they are maybe approved, maybe they have to even pre-lease some of the space before they're going to be able to move forward with the project.
• 23:26
  SPEAKER_01: Because otherwise, I mean, in that case, I would consider it to be pretty speculative if you don't have anything pre, you know, pre-leased.
• 23:32
  SPEAKER_00: Well, we as the lender would love to have a project partially at least uh pre-leased, but in general, that doesn't happen because of the time frame prior to completion.
• 23:43
  SPEAKER_00: So we have to fund our loan, and then two years later it'll be completed and then ready to start leasing.
• 23:48
  SPEAKER_00: So we realize it's not realistic to have actual leases signed uh at the time we fund.
• 23:56
  SPEAKER_00: What we are asking for is a couple of things.
• 23:58
  SPEAKER_00: So one would be the, you know, if they have a letter of of interest from one or more tenants, that's ideal.
• 24:06
  SPEAKER_00: Or two, it's possible, again, for the example that's behind me, is that the appraisal indicates there's a specific demand and what the lease up time frame would be.
• 24:15
  SPEAKER_00: Let me also add the developer doesn't have to manage the project themselves.
• 24:19
  SPEAKER_00: They can hire a third-party management firm to manage the leasing process and the tenants.
• 24:25
  SPEAKER_01: Okay, gotcha.
• 24:26
  SPEAKER_01: That that does make sense.
• 24:27
  SPEAKER_01: And then the LOIs make sense as well to kind of prove that there's there's interest there and you're not going to have a problem leasing the space and everything.
• 24:35
  SPEAKER_01: Do you have a project over the years that you've been involved in that maybe you've uh lended on that has been your favorite or one that really stands out in your mind that you could talk a little bit about?
• 24:47
  SPEAKER_00: You know, I'd say the Sand Terminal Project.
• 24:49
  SPEAKER_00: And it's a it's a funky project to call my favorite, but it just a lot of things came together.
• 24:57
  SPEAKER_00: So again, they have to transport sand from South Dakota to the Permian Basin.
• 25:02
  SPEAKER_00: The oil industry is hot and doesn't seem to be letting up.
• 25:06
  SPEAKER_00: And what we ended up financing were uh what we call a sand terminal, which is just big storage tanks that are in a railroad yard.
• 25:14
  SPEAKER_00: So it comes into there and then gets reloaded and then sent down.
• 25:18
  SPEAKER_00: Um it was about a$19 million loan.
• 25:21
  SPEAKER_00: So that project would have been too special purpose, the collateral, and too large for the local banks to accommodate.
• 25:28
  SPEAKER_00: And so we were able to come in and finance it.
• 25:31
  SPEAKER_00: And, you know, that that's an example of not only creating local jobs, but help fueling the American economy.
• 25:38
  SPEAKER_00: So that that's one.
• 25:40
  SPEAKER_00: I have a bunch, but that's the one that sticks out in my head the most.
• 25:43
  SPEAKER_00: Yeah.
• 25:44
  SPEAKER_01: No, it is interesting.
• 25:45
  SPEAKER_01: And it's uh it's not one that at least me coming into this, that's not a project that I'd necessarily think of as, you know, as one that you'd be involved in.
• 25:53
  SPEAKER_01: So that's that is really interesting.
• 25:55
  SPEAKER_01: Well, let's go ahead and shift into the last segment, which is the lightning round.
• 25:59
  SPEAKER_01: So I've got five questions for you to close out here, all just related to your experience and everything like that.
• 26:03
  SPEAKER_01: Uh, first one, what's the best piece of career advice that you've ever received?
• 26:08
  SPEAKER_00: Uh, persistence.
• 26:10
  SPEAKER_00: So when you're in your 20s and you want to accelerate your career quickly, that's the time to be patient and just keep going to work every day.
• 26:21
  SPEAKER_00: I didn't realize when I started at Wells Fargo that many years ago as a branch business banking officer that one day I will would have co-founded uh the largest uh USDA lender in the country.
• 26:33
  SPEAKER_00: But it's really about just staying persistent and allowing the equivalent of compound interest to benefit your career the same as it would benefit an investment.
• 26:43
  SPEAKER_01: Yeah, I want to dig into that just a little bit because what does what does your ability or willingness to be open to new opportunities say about you getting to this point too?
• 26:53
  SPEAKER_01: Because you, I mean, there's plenty of people that stay at Wells Fargo for their entire careers, right?
• 26:58
  SPEAKER_01: But you were at least open to a new opportunity and everything.
• 27:01
  SPEAKER_01: What did that do for your your career?
• 27:03
  SPEAKER_01: Obviously it got you to this point, but what did it do over kind of the length of things?
• 27:07
  SPEAKER_00: Well, first of all, I always considered myself to be Jordan Inc.
• 27:12
  SPEAKER_00: So I worked for a company, I worked for a bank, but I always treated myself as my own small business and I would invest in my skills and training and education.
• 27:22
  SPEAKER_00: But I thought like an owner.
• 27:23
  SPEAKER_00: I tried to provide value to my employer the same as if I was the owner of that business.
• 27:31
  SPEAKER_00: And I think that benefited me greatly.
• 27:33
  SPEAKER_00: Yeah, I like that.
• 27:34
  SPEAKER_01: All right, second one.
• 27:35
  SPEAKER_01: What's one mistake that you see borrowers make over and over again?
• 27:40
  SPEAKER_00: Uh not having access to liquidity after closing, because it's not a matter of uh will something go wrong.
• 27:50
  SPEAKER_00: Something always goes wrong, especially when you have giant complicated construction projects.
• 27:55
  SPEAKER_00: That might be cost overruns, it might be slower revenue growth, it might almost always higher expense growth.
• 28:03
  SPEAKER_00: And if you raise a static amount of money and you think that's going to be sufficient for to get you through the hard times, it's not right.
• 28:10
  SPEAKER_00: So, you know, whoever your investors are, make sure that you have some way to access additional capital.
• 28:17
  SPEAKER_00: All right.
• 28:17
  SPEAKER_00: Third one, what's one habit that's made the biggest difference in your career?
• 28:22
  SPEAKER_00: I'd say waking up early and spending time on my own personal growth before I sit down and I let the reactivity of the world affect me.
• 28:33
  SPEAKER_00: So um that is typically meditation.
• 28:37
  SPEAKER_00: It's typically journaling and some sort of movement practice.
• 28:41
  SPEAKER_01: All right, fourth one.
• 28:43
  SPEAKER_01: What's one lesson you wish you had learned earlier in your career?
• 28:47
  SPEAKER_00: Uh it's 100% getting up early.
• 28:49
  SPEAKER_00: I mean, that that has just been such a a life-changing uh event for me.
• 28:54
  SPEAKER_00: So um beyond that, I would say to be less reactive.
• 28:58
  SPEAKER_00: You know, when you're younger, you think everything's a disaster.
• 29:02
  SPEAKER_00: And when you get older, you have some perspective.
• 29:03
  SPEAKER_00: You've been through it a lot.
• 29:05
  SPEAKER_00: A little bit of patience will generally get you through whatever the difficult situation is.
• 29:11
  SPEAKER_01: All right, last one.
• 29:12
  SPEAKER_01: What's one thing you're looking forward to over the next few years?
• 29:16
  SPEAKER_00: Great question, because the time frame is right for me.
• 29:18
  SPEAKER_00: I'm going to be 60 this year.
• 29:20
  SPEAKER_00: And, you know, I've had to think a lot about do I want to be the key principal at Excalibur Real Capital for the next 25 years?
• 29:28
  SPEAKER_00: And the answer is probably not.
• 29:30
  SPEAKER_00: So I'm really working hard to design an executive nomad lifestyle.
• 29:36
  SPEAKER_00: I love this business.
• 29:37
  SPEAKER_00: I I love going to work every day.
• 29:39
  SPEAKER_00: I just want the opportunity to travel and maybe work on more of my schedule than be reactive to everybody else's schedule.
• 29:47
  SPEAKER_00: So I'd say definitely that is what I'm looking forward to the most.
• 29:52
  SPEAKER_01: Well, Jordan, what's the best way for people listening in to connect with you and to also learn more about uh Excalibur Rural Capital?
• 29:59
  SPEAKER_00: Our LinkedIn page has a lot of resources.
• 30:02
  SPEAKER_00: It it has a lot of tombstones on fundings that we have done.
• 30:06
  SPEAKER_00: Uh just search Excalibur Rural Capital.
• 30:08
  SPEAKER_00: I also have my own LinkedIn page.
• 30:11
  SPEAKER_00: And then I'll I'll provide if somebody uh messages me within LinkedIn, I'll see it and I'll get back to them.
• 30:16
  SPEAKER_00: But people are are welcome to reach out directly via email.
• 30:20
  SPEAKER_00: It's Jordan J-O-R-D-A-N-B at XRCUSDA.com.
• 30:29
  SPEAKER_01: Perfect.
• 30:29
  SPEAKER_01: So those of you listening in, if you look down in the description for this episode, you'll see a link there to the show notes page.
• 30:35
  SPEAKER_01: And on the show notes page will be the links that were just mentioned there.
• 30:38
  SPEAKER_01: Uh Jordan, really appreciate you hopping on here and talking about this topic that we haven't really dug into before.
• 30:42
  SPEAKER_01: So a lot of stuff here.
• 30:43
  SPEAKER_01: I know there's a lot more we probably could get into, right?
• 30:46
  SPEAKER_01: We just we touched on some of it, but it's a it's a big topic.
• 30:49
  SPEAKER_01: So I really appreciate you taking the time to join us.
• 30:51
  SPEAKER_01: Enjoy being a guest, Ryan.
• 30:53
  SPEAKER_01: All right, guys, that's all for this episode.
• 30:55
  SPEAKER_01: If you're not already subscribed, please click that button.
• 30:58
  SPEAKER_01: We'd love to have you back for the next one.
• 31:00
  SPEAKER_01: Otherwise, we will talk to you all next week.