Remissary’s Adi Chugh Talks CRE Fintech Resilience and His New Platform
Fearing no foreign challenges, Adi Chugh started his brokerage Maverick Capital Partners in 2011 with no direct real estate experience and no New York deal track record.
Seven years later, his firm is in line to register over $5.5 billion in capital markets volume in 2018, he said. In September, Chugh, 37, launched Remissary, an online capital matchmaking platform that uses Maverick’s momentum and mirrors its “sniper shot” approach to arranging financing.
Chugh—“the only bald Indian in the commercial real estate financing space,” as he joked—moved from his home country to attend a small liberal arts school called Dickinson College in Carlisle, Pa., where he earned a degree in international business and economics.
After college, he got his finance start in investment banking with an internship at Barclays before moving on and making stops at Wachovia and Merrill Lynch prior to starting Maverick.
At Maverick, Chugh recognized the inefficiency in the flow of information between borrowers and lenders and sought to bridge the gap, he said. Just several weeks after launch, Chugh said Remissary—the name meaning an emissary for real estate financing—has sourced hundreds of millions of dollars worth of potential deal flow.
Commercial Observer spoke with Chugh about how his platform might revolutionize the role of the intermediary and also survive and thrive through potential downturns.
Commercial Observer: Why did you start Remissary?
Adi Chugh: It’s hard for a borrower to always know what they want, as they typically have access to imperfect information from brokers; that’s where the relationship side of it enters. But, what about delivering to borrowers the most optimal pricing, the best structure and the highest proceeds? People have proceed and price sensitivity; that’s just the DNA of the business.
Tech grows at a wild speed overnight; it’s quick. I saw how quickly the real estate vertical was being infiltrated by tech; everyone was trying to penetrate it. I thought that financing is the cornerstone of the damn business and propels the whole thing. Something’s got to give. The last recession gave birth to a lot of new capital sources and the biggest challenge is finding the right capital for the right deal and in the most efficient manner. People have always gotten their financing but real estate is not being financed in the most optimal way, hence Remissary.
Take me inside the incubator, when you were developing the service up until launch.
I put the idea together about two and half years ago and sketched it out. I was on a 14-hour plane ride from New York back home to India; it was on my mind for a long time. The everyday rigmarole of deals prevented me from sitting without the phone distracting me. I got on the plane and took probably 60 percent of that ride to formulate the plan and draw the site by hand. I needed to explain this to a tech person who is not going to understand what mezzanine financing or a first mortgage is; they need visuals.
We eventually found a solid tech team in New York, a gentleman from MIT and his partner. We worked on the platform wholeheartedly for the last two years. We’ve been editing it and changing the interface and its steps over the last six months. There was a period in between where I was worried about the timing of the launch; it’s very critical, like playing roulette. If you don’t have your money on the felt when the number falls, it’s worth nothing.
What’s the general sentiment on the service from industry players?
It’s amazing. A lot of the people who I spoke with about the idea in the past would dismiss it in a matter of seconds—“you’ll never replace me.” Nobody ever thought they’d be able to buy diapers online or that somebody could pack all the ingredients of a meal and deliver it to you so you can cook them. People are realizing this is a value-add service that’s free to lenders and borrowers, until they get a deal executed. Lenders have a free source of custom-made origination. We understand lenders and we target specific lenders based on their profiles. What we’ve done is we’re creating a national highway for capital distribution. Lenders like it because it can help them fundraise.
How does Remissary interface with Maverick?
The Remissary team is complemented by the Maverick team. I haven’t taken any investors in the company, although I’ve had a few offers, because we believe we can build this thing out for a little while longer. Remissary is a separate operation from Maverick. Remissary is chapter two, where Maverick was chapter one, which will eventually be phased out.
How does a lender enroll in this service?
Everybody knows the big lenders, but they might not know the right person or the lender’s mandate. People aren’t always aware of which lenders are available. What we’re telling lenders is, “create your profile; it’s free.” If you go to the homepage, it says “Start Lending.” So, you can click that and 90 seconds later, you’re out of there. You tell me what you like to lend on, what asset classes you like, where in the capital stack you like to lend, what size you like, the terms of your capital and also what states and markets you like. With that, we determine, for borrowers, the best capital source.
Which types of lenders have signed on or showed interest?
When I conceived the idea, I was of the opinion that this thing was going to attract small lenders, like community banks, credit unions and small bridge lenders. In the last year my mindset has changed entirely. The same guys who didn’t like my idea a year ago are coming to me and wanting to be a part of it.
If I go on my platform, I can immediately see 250 lenders. It’s like a Match.com for real estate. It also shows trends in real estate investing. Just looking at the list, I have people all the way from TPG, Blackstone, Brookfield, Apollo, Mack [Real Estate Credit Strategies] and Bank of America to Emerald Creek and Madison Realty Capital. Within the first week, I also had three lenders from Israel, which shocked me.
Give me a sense of your deal flow and current pool of borrowers.
It’s scattered. We have a $7 million industrial loan in upstate New York. We have a $100 million hotel loan from the West Coast that trickled in. We have a multifamily refinance in New York. The reality is we’re in the early days. I’m not really that focused on the borrowing pool right now. When you open a restaurant, you make sure you have enough food to serve the guests. So, I’m trying to build the critical mass of lenders because they will be the feeder of this platform.
What types of financing does the service offer? Are you limited right now?
We’re not limited at all. We can finance from zero to 100 percent of the capital stack. We’re offering first mortgage, mezzanine financing, preferred equity, limited partner equity and general partner (GP) equity. Different parts of the capital stack have different values for different people. GP equity is the most difficult to raise because people don’t know where it is. Family office capital is one of the hardest to access. We are now giving those family offices access to deal flow they’ve never had and also getting access are regional borrowers in certain geographies where it’s hard to get capital.
How does Remissary differ from its competition?
I think the proof is in the pudding. Your history is a reflection of your future. I think coming from a Wall Street finance background and then coming from a real estate finance business and understanding what it takes to put a deal together is crucial. My favorite example: putting a real estate finance deal together is like putting 1,000 pieces of a puzzle together. I have a lot of respect for the other groups who have built platforms; it’s motivating and inspirational. One of the competitors approached me a year and a half back to join Remissary as CEO because one of their investors was a client of mine. I turned it down because our philosophies are very different. Our platform is like this: if you want a bespoke, customized suit from Barney’s, you come here, if you want a Men’s Wearhouse suit, you go to others.
How well do you think this service would operate in a downturn?
It’s almost like you’re inside my mind. I have a slide in my business presentation that reads, “Remissary works in good times and it’ll work in bad times.” It works in a tough financial market because people need choice and availability of capital. If the market goes sideways, a borrower would need multiple and alternative sources of capital. When the market is tough, people will come here because there will be an ocean of lenders. We’re not going to throw a borrower in an ocean; from the ocean, we’ll find the perfect glass of water that floats their boat. At the end of the day, it’s all about data.
I don’t get paid to talk. If I did, I’d be a billionaire. I don’t want business if I can’t deliver. The damage is you could lose your reputation in the market, and I’m not here for that. No one remembers you for 100 deals you did right, they remember you for the one deal on which you couldn’t deliver.