UC Funds’ Dan Palmier on Thriving Through a Crisis
Closed deals are few and far between, and even rarer when an alternative lender is providing the debt. UC Funds has been finding opportunity in today’s turbulent market, with recent activity including a $30 million ground-up construction loan for an L.A. apartment project and a $25 million land loan refi in Orlando, Fla. The firm also recently converted two hotels in Stamford, Conn., to temporary residences for frontline workers and is donating 10 percent of its profits to COVID-19 relief.
CO caught up with Dan Palmier, the founder and CEO of UC Funds, earlier this month to hear why he’s expecting his busiest year ever.
Commercial Observer: How have you been dealing with the COVID-19 pandemic? We see UC Funds continuing to close deals while many alternative lenders have pressed pause.
Dan Palmier: It’s been a really, really interesting time and a time unlike anything we’ve ever experienced. We’ve been drawing from our experience during previous crises including the great recession, 9/11, Hurricane Katrina and through other adversity. We have a very experienced senior leadership team that’s also very entrepreneurial and — what’s really different compared with 2008 — we’re a private company and our investors are also very entrepreneurial. Cycles are what they are; there are ups and downs. We’ve been very fortunate and blessed to form relationships with groups that have a lot of capital and we handpicked for a downturn. So we have capital that understands opportunity, while I think 90 percent of the market is sitting on its hands, looking sideways and watching the news. We see tremendous opportunity in the market right now and you’ll see a lot more announcements of deals that we’re closing. We’ve got our biggest pipeline ever and — I don’t want to jinx it, but — this should be our best year ever. We’re very excited.
To what do you attribute your ability to keep lending today?
It’s really down to a confluence of things. We have capital that has a lot of confidence in the management team. We have a great track record and we all come from credit backgrounds; we’re asset managers, we’re workout specialists and we’ve got a lot of expertise in structuring around risk. So this is a market in which we’re very nimble. There was so much capital in the market before that it created lower yields and it was hard to do business. We did a lot of business however because our competitive advantages would allow us to out-maneuver the competition; we’re nimble, we’re quick, we’re creative and we’re reliable. Our typical time between term sheet and closing is 35 days; I don’t know if there’s anybody faster. We’re also owners and buyers; we understand what our competition is doing, how long deals take and we’re lightning quick in comparison.
We’ve never seen adversity like this, across the globe. In 2008 we all learned that if you don’t have a cohesive team you’re not going to be able to survive. Our idea and our mission is not to survive but to thrive, and the ‘U’ in UC Funds stands for Ubuntu, a South African proverb that means that nothing gets done without someone else. Whether that’s someone on your team or your brother, your sister or your friend; it means you are you because of other people. Our core value system is about taking care of the customer, taking care of each other and being a family. There’s muscle memory from 2008 and having that experience is important. We made it through 2008 with very little capital. This time round we are going to thrive, and there’s no doubt about it. We’re disconnected physically for now, and I don’t like to stay home, but through technology I see more of my people every single day than I ever did previously. We meet on Zoom every single day and I start off meetings saiying “Guys, failure is not an option.”
Which opportunities are keeping you busiest right now?
The GSEs have a mandate to change borrowers’ deals — whether they’re funded or in their pipeline — by putting in mandatory interest reserves, cutting leverage and not allowing landlords with that government paper to evict those tenants. We have borrowers who have Fannie and Freddie debt and also delinquencies. They’re not allowed to evict tenants so they need flexible capital. Then, construction lenders have really dialed back so we’re doing a lot of construction lending — ground-up, acquisition and construction that includes C-PACE (Commercial Property Assessed Clean Energy). We’ve done hundreds of millions of that product this year alone, and our pipeline is full of it. We also did a land loan in orlando.
Are you seeing any interesting loan sale opportunities yet?
We’re still very early on in the fallout of the pandemic. There’s going to be a lot more market distress and opportunity, so we will definitely buy loans. Most groups are still in shock. There’s no crystal ball, everyone’s feeling their own woes and there’s paralysis. We’re having fun. I feel bad for people that are suffering and I don’t make light of that at all, but you also have to create. For our customers we’re rescuing deals from lenders that are not performing and for our employees we have them focused on producing and creating instead of feeling bad for themselves.
Is there a lesson you learned during the global financial crisis that’s proved useful in this crisis?
A lot of things, but nothing replaces hard work, precision, discipline and focus. If you focus on what you can control, how you can create value for your organization as well as yourself and keep yourself healthy then you have a fighting shot. A great attitude and enthusiasm are also very important things in being efficient with our energy. If you have anxiety and are afraid you can waste energy. The key for the management team and myself is to try to lead and reassure and continue to win on a day-to-day basis.
Tell us about the conversion of your Stamford, Connecticut hotels to temporary residences for frontline workers.
We had to make a decision because the music stopped and our competitors started to close their doors. We made a decision to go on offense and we started to work the phones and visit with the mayor and let it be known we were going to be committed to keeping our doors open. Lo and behold, we have the CDC, the U.S. Army, Department of Health, nurses [staying there] and the two hotels are 90 percent occupied for the next 60 days.