Jim was extremely detailed and knowledgeable in what is a very specific arena with respect to financial instruments. Above and beyond would be an understatement when it came to service delivery.
Marc Lewis: Partner and Acquisitions Director, HM Equity Management
The capital markets arena ebbs and flows. For various reasons, often reflecting wider macroeconomics, sometimes fixed rate debt is the order of the day, sometime bank debt or insurance company debt, but right now the flavor of the day, specifically when it comes to ‘value add’ commercial real estate deals, is relatively high leveraged LIBOR floater bridge structures. With deal specific negotiable terms and fees, that’s really where the action is. And because the floating rate debt is specifically related to LIBOR, I would never have been aware of forthcoming changes to LIBOR in 2021, most likely in its complete retirement and replacement as a benchmark rate, without Derivative Logic’s detailed assistance and guidance. Although we have non-recourse loans, there are carve outs and significant implications to us as the GP in terms of both the promote and the returns to the LPs, that would, by definition, be considerably affected by such a change in this commonly used benchmark, the future details of which we do not know as we go into a new deal as of now. With such sizable loans, we would never have known about this, we would have just signed the loan docs, resulting in us having no leverage with our lenders once the details of the LIBOR replacement are released. The legal language in the loan docs is vital. Jim is a market leader in the understanding of the implications of those changes.
This is what I would call above and beyond. First of all, Derivative Logic is very hands-on, literally. Very hands on. All the way to the top, which was great. Their pricing was keener than anyone else we could find. They gave us a lot of crucial advice as we came to negotiate the details of the loan doc clauses, and the various pitfalls in the legal language if, as expected, those changes occur during the lifetime of our notes.
I’m annoyingly pro-active, I really am. I will work any amount of hours in a day to get done what need to be done. Myself and my business partner sit on approximately $250m in asset value, with significant amount of LP equity under management. The old adage, “if you need something done ask a busy man” is absolutely true. If something needs doing I get it done. I’m really appreciative of people who can keep up with me. Derivative Logic is ahead of the game, on point, always there when I needed them. Everything was to hand in advance. Put it this way, with fifty different threads needing to come together for a close I don’t need to be chasing people down for things that can delay closing when I’ve got a million dollars personally in cash at stake. Being up to date with all the various things that are required in terms of pricing, invoices, access to markets, etc. etc., it’s absolutely vital. While this financial instrument is probably a small piece of the overall jigsaw, not having it ready rapidly makes it a very big piece of the jigsaw. Keeping it small and insignificant is highly significant, if that makes sense.
Put it this way, the fact that I’ve never had to think about compliance means they’ve been doing their job 100% effectively. I can’t say it with anymore clarity than that. It really is that simple. If I don’t have to think about it because it’s done, if I can trust that it’s being done, that’s a big ask on my part as a micromanager. I will pore through hundreds of pages of legal docs. But if I’ve got somebody I know and trust, who’s doing it as it relates to their specific financial discipline, the skills of which I do not have, trust that I don’t have to and I can concentrate on the 49 other things that do need doing, it really is a big deal.
There’s such a lot of money at stake, I can’t afford for it to go wrong for either myself and my partner personally or our LPs. Missing tiny things can have exponential effects to your overall business plan. It’s absolutely crucial having faith that everything’s in place, everything’s done and accomplished.
I have total faith in Derivative Logic from what I’ve seen so far, and with not just over one deal. They’ve been part of the two biggest deals we’ve done, $100 million alone between them.
They’ve done exactly what they said on the tin and then some.