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Vicky Schiff On Launching Avrio Real Estate Credit During Market Dislocation


Vicky Schiff, a commercial real estate finance veteran who co-founded Mosaic Real Estate Investors, recently launched a new venture targeting upper middle market transactions with a heavy focus on sustainability.

Schiff, who departed Mosaic in 2021, formed Avrio Real Estate Credit late last year as a new lender providing loans ranging from $25 million to $150 million in a variety of debt structures. She partnered on the platform with Dream Unlimited Corp., a Toronto-based developer which has a dedicated environmental, social and corporate governance (ESG) team that will enable Avrio to assist borrowers with raising their ESG scores, by taking actions such as improving sustainable features within their properties. 

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Denver-based Avrio, which also has offices in New York, Toronto and Los Angeles, offers short-term and first-mortgage loans along with B notes, mezzanine debt and preferred equity investments. The national platform, which Schiff runs out of Avrio’s LA office, targets transactions in all property sectors with a particular focus on multifamily with goals of expanding the inventory of affordable housing units. 

On one of her recent visits to Avrio’s New York office, Schiff spoke with Commercial Observer about her CRE roots as the daughter of a Las Vegas casino developer, her decision to team up with Dream to launch Avrio, opportunities for the new firm in a higher interest rate environment, and the platform’s goals for financing more sustainable development projects. 

The interview has been edited for length and clarity.

Commercial Observer: You grew up in Las Vegas and your dad was a casino developer. How did that exposure to commercial real estate at a young age influence your decision to jump into the profession?

Vicky Schiff: I have these pictures of myself where I was on a job site when I was 3. My dad built Circus Circus and he took pictures of me every few weeks on the job site wearing a hard hat. In one photo I’m sitting on a tractor, next I’m looking down a vault in the ground. My dad moved to Vegas in 1949 when there were very few people there. When I was a child in the 1970s, he took me everywhere with him, so if he had a meeting with his banker, I’d sit in the corner really bored, and very annoyed that I was even there in the first place, but I learned so much and he encouraged me to be my own boss, to control my own destiny and to think creatively. He always told me I was great at math. No words ever came out of his mouth like, “You’re a female so you can’t do something.” He was totally neutral about that, so in my mind I never had any hurdles around being successful as an entrepreneur, because he was an entrepreneur and I grew up with an entrepreneurial mindset. There’s ups and downs to it for sure t, but it gave me a really good view into moving forward no matter what and being creative and trying to get some level of control over my own destiny — although success involves so many other people.

You mentioned that you never felt any barriers to tackle commercial real estate as a woman because of your father, but clearly there aren’t as many women in the industry as there should be. Since you entered the profession, has there been any push from your end to increase the number of women in commercial real estate finance

I’m very close with about three dozen women that are very senior leaders in the industry, and we talk a lot and spend time together and compare notes and try to work together. For example, Greta Guggenheim [former CEO of TPG Real Estate Finance Trust] is on the board of our company now. There’s a lot of value in those connections.

In addition to that, I have about a half a dozen mentees that are women and minorities. I meet with them once a month and we go through what their goals are and what they are doing about moving forward, what’s getting in their way, what their obstacles are and what their plan is for the next 30 days. So, I’m trying to help them think through being structured around the way they’re thinking about their career.

You co-founded Mosaic Real Estate Investors in 2015 and decided to launch this latest venture, Avrio Real Estate Credit, late last year. What was the catalyst for this move?

I’ve been working with Dream for about a decade, and I had a great conversation with them about the opportunity in debt, given the market. We started talking last summer, and since we know each other so well we decided this would be a good thing to do together. The Founder of Dream proposed that we start a company and partner. I love real estate and I love credit. I have lived through cycles, having been through as many as I have, including when my dad was developing in the 1970s. Think interest rates are high now? He was paying18 percent on some of his industrial projects. There’s a wave that happens every cycle and it always happens for a different reason, but it’s interesting to be in the middle of that and trying to make decisions about what to do. This is one of those times, and we just thought that it would be great to work together and build something again.

You’ve said before that Avrio is very focused on the “upper middle market.” Describe what this entails and why is now a good time to focus on this segment. 

The upper middle market is the $25 million to $150 million loan size. I think that given Dream’s overall experience in their asset classes — they’re in 17 markets across the U.S. as owners and operators — that that size can lend itself to both first mortgages on midsize to larger projects, and it could also lend itself to preferred equity and mezzanine debt on projects that need to be recapitalized. We think there’s a pretty wide swath between dollar one and first mortgages and we’re about 70 percent loan-to-value in our structure. The question is “what’s the value?” … which everyone is trying to figure out right now (laughs). We think first mortgages, mezzanine, preferred equity and A and B note structures are opportune, and our team has a lot of experience doing that. So that’s what I would consider the middle market as it’s not only the size, but it’s also where in the capital stack we plan to play. And then asset class-wise, we’re relatively neutral. But I would say our expertise falls within industrial and housing related projects.

What market are you most focused on today?

It depends on the asset. I think the more important question is not what markets are you focused on, but where is there demand? Sometimes it just comes down to the specific location. For example, we’ll look at student housing, but it has to be in locations that perhaps are hard to entitle or are growing as universities versus shrinking. We would look at multifamily in certain markets and not industrial in those same markets or vice versa. So, it just depends on the demand drivers.
In a place like New York, people are very New York centric and experienced here, and I don’t know that we’re going to compete with a lot of the players that are here in New York, but I have done some transactions in New York. We have a dynamic checklist of what we look for in an asset and are disciplined, and once we see something we like on the surface, we dig in and look at all the attributes. It may not be Boise, Idaho, but it may be Los Angeles or certain markets in Texas. We’re looking at 50+ markets across the country. We’re already in places like Oklahoma as owners and other growing markets. Maybe some of those markets might make sense to us.

You did a lot of construction lending at Mosaic. What opportunities are you seeing in that space these days, especially in this interest rate environment? 

I would say more than 50 percent of the requests we get every day are for construction deals. There’s definitely less construction lenders out there and the proceeds that they’re willing to lend, particularly on the bank side, have shrunk, even down to the 40 to 60 percent mark. We’re going to be pretty judicious if we do a construction loan on where our basis or last dollar is and the supply in the market.

I think there’s plenty of opportunity in this market, particularly with restructuring existing owners’ capital stacks at higher interest rates so we don’t necessarily have to do a lot of construction, but we’ll pick and choose. I love construction lending in a lot of ways, but it did go through issues with labor costs and supply chain. I talk to borrowers every day that have built in the last two years and they’re anywhere from 5 to 20 percent over budget, so as a lender you don’t really want to get caught up in that. I think that’s been muted a bit with the drop of some lumber and some other costs, but labor is still a big problem, and I don’t know if that’s going to go away anytime soon. I think there’s an opportunity there, and you can certainly lend to lower proceeds and charge higher interest rates so that the spreads are higher, but the index is a lot higher.

How was the regional bank crisis affected Avrio’s business early on in your launch?

I think what we’re seeing as far as on-the-ground feedback from borrowers is that they either can’t get loans from retail banks, or the loan-to-values have dropped significantly so borrowers are more conservative. We were working on a transaction where they had a bank loan that was for 45 percent of cost, which is quite low. I’ve also talked to people at regional banks that set up A-note programs, and from one week to the next just stop lending completely. I think the regulators are in these banks looking at what they’re actually doing, particularly at the smaller to mid-sized banks.

A big part of your platform is providing financing for sustainable development projects. What is your vision for this side of Avrio’s business?

Our motto is “Measuring What Matters for Tomorrow”. What we think is important is not forcing people to do things that are not going to add to the bottom line of the project, but rather measuring things that people are already doing and helping them tap into resources to help them do it better. For example, we just signed a partnership with a company called BlueSkyre and they utilize a measurement system, so what we’re going to do is we’re going to overlay a measurement tool for everything that we do on the lending side. For example, if you’re building something new, or you’re creating a major renovation project, you’re going to use more efficient lighting, low-flow water appliances and other technologies that create a more efficient and more energy-efficient and green building.

We also may look at projects that are in the “workforce” housing category, and we would measure the average rents against the median household income within that market. We have a proprietary list that in working with borrowers as part of our servicing, and we create a report that gets distributed to our stakeholders, and also share that with borrowers. The borrowers may come to us and say, “Is there a better way to do X, Y, or Z and do you have the resources for that?” It might be a material supplier, it might be a technology, it may be a way to measure affordability, it may be a way to run a building more efficiently — efficiently with employees and using technology. We’ve created and will continue to create a database of best practices that we can share with them, whether it’s materials or technology or just ways of doing things and they’ll get the benefit of that.

We’re trying to create a virtuous cycle where everybody wins in the long run and those changes create economic benefits to the owners of those buildings, meaning energy costs are lower and tenants are stickier since they want to be in a building that provides energy efficiency. I know that ESG has been a bad word in some areas, but I just came back from Canada, and they are all in. We talk to the pension funds there and they’re absolutely all in on this, but there has to be a connection between the economic outcomes. You can’t do things that lose money. Nobody’s going to sign up for that.

What are your near-term or long-term goals for the platform

We want to put a stake in the ground around a couple of things that we do that are unique particularly around measuring ESG, being a good steward of capital in the market and being a trusted counterparty. I Iove real estate because people live, work and play in real estate. In my last firm, we were the lender on a project in Park City [Utah] where the developer told us, “If it wasn’t for you this wouldn’t be here,” and at that project I’m seeing people coming in and out with their kids off the ski mountain having dinner and lunch and just having family time. So, my first and foremost goal is to utilize real estate to impact people’s lives in a positive way. Obviously we want to be one of the most successful private financiers in the country. We’re not playing small. We’re in this to do really well for everybody.

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