The Norris Group Real Estate Podcast

Inside DBL Capital: Building Value Through Fund Strategy with Andrew Falde | Part 1 #925

• The Norris Group, Craig Evans

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In this episode, Joey Romero sits down with Andrew Falde, Senior Vice President of Capital Markets at DBL Capital, to unpack the inner workings of the DBL Capital Fund. Andrew discusses the fund's purpose, strategic approach, and regulatory compliance. He also shares insights on today’s capital raising environment, current and future market trends, and how DBL handles investor liquidity and waterfall distribution. Whether you're a passive investor or fund manager, this episode offers valuable takeaways on navigating capital markets with clarity and confidence. 



Andrew Falde is the Senior Vice President of Capital Markets, whose extensive background spans Wall Street, private equity funds, and institutional investment groups. With over $300 million in real estate transactions under his belt, Andrew brings a deep understanding of deal structuring, capital raising, and long-term value creation. In this episode, he shares valuable insights into navigating today’s capital markets, building scalable investment strategies, and aligning finance with real estate growth.


In this episode:

  • Joey Romero introduces Andrew Falde, Senior Vice President of Capital Markets at DBL Capital.
  • DBL Capital Fund Overview: The purpose and mission behind the DBL Capital Fund.
  • Fund Strategy & Compliance: Discussion on the fund’s investment strategy and how it aligns with SEC regulations.
  • Insights into the current real estate and capital markets, along with future expectations.
  • Capital Raising Challenges: Andrew shares the biggest obstacles when raising capital in today’s environment.
  • Investor Liquidity & Distributions: Explanation of liquidity options and how waterfall distributions are structured for investors.




The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.


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Narrator:

Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we'll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you're a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here's your host, Craig Evans.

Joey Romero:

Welcome everybody to The Norris Group Real Estate Podcast. Today's guest is Andrew Falde, the SVP of Capital Markets for DBL Capital. With the background spanning Wall Street private funds and institutional real estate groups,he's brokered over $300 million in real estate transactions and spent his career structuring deals, raising capital and building systems that create long term value. Andrew brings a unique blend of strategic thinking and hands on experience to every conversation, and today, you're going to hear exactly how he approaches the game. Let's welcome Andrew. Thank you, Andrew for joining us. It's good to have you on today.

Andrew Falde:

Glad to be here. Thanks, Joey.

Joey Romero:

All right. So we thought we just, you know, we get a lot of questions about DBL Capital. We send out Craig's corner every week, and we're getting some some good responses and some good engagements. But, you know, I think people still have this idea that it's something, that maybe it's not really. So we thought we'd have you on today to just kind of go over what DBL Capital is. Why the Fund was created, and you know what the plans are and what the future is for DBL Capital. So let me, let's just get right into it. Usually, we do a whole lot of hey, let's learn about our guests. And it was kind of funny last week we got a little, a little feedback like, hey, a little less on the guests, and more of like, why they're on the show, you know.

Andrew Falde:

Let's do it first, right? Yeah,

Joey Romero:

Yes, absolutely. So can you, tell us why the fund was actually even launched?

Andrew Falde:

Yeah. So, I guess there's two ways to talk about the why, the big why behind the fund. So one is like, what is the fund doing? And then, why is it the way it is? So what the fund is doing is affordable home construction in parts of America. You know, we specifically targeted Florida right now, but it's really about targeting those places where affordability is becoming a crisis, where home ownership is becoming very difficult to achieve, where a lot of demand is for more expensive homes, and has been that way for many years, and even historically and really going into those target markets and making housing affordable to own and rent primarily for ownership, but also rentals will be in there. You say, well, you could do that as one off deals or syndications and all that. So you say, though that's the purpose behind the fund. So why a fund? Why not syndications? Why not just say you can be the investor and the sister company, Douglas Brook Homes can be the builder. So like so, why is there a whole fund structure around it? And that's for accessibility. So accessibility and efficiency. So efficiency creates more value, more profit, more opportunity, faster builds, faster use of capital. So the old way that worked, worked very well, but it was limited to who could be in it. The old way, which built well over $100 million of affordable homes throughout the target markets, was that an individual investor had to buy fund or sign the debt for so either fund out of cash or get the loans for 10 homes at a time, in order for there to be enough efficiency for the builder, for the manager, and that's Craig, to produce enough value for that investor. Otherwise, if you come in and you say, 'Hey, build me one house that I can flip'. You know, I want to, I want to build a house and I want to sell it for a profit, or to deal with one at a time. You're paying retail. You have to pay full price, just like the end user, what is the value you're creating there? So you have to buy in bulk, and so that limits how many people can do that. 10 homes, you know, if it's you could be 3 million, $4 million in total value. So you either have to sign that much debt or contribute that much cash, or a combination of the two. Then, besides that, it was all right, well, you decided you wanted to do those 10 homes, and now, so now the process just starts the day you sign the contract. So that mean, okay, well you want to do it? Great. Now we'll start looking for land. Now we'll start the entire process. And so you had this build up period of lag, or, as you'll see in a future video from Craig, called the dead zone, where the capital is working or you're working, but there's nothing being earned. We're still in the waiting game. Well at this point now, with a fund, somebody can tap into and they can contribute a much smaller amount. They get the wholesale access to the fund. And there's already a pipeline of homes under construction, near completion, lots in contract, homes in permitting, and you join immediately as a fractional owner of the entire pipeline, rather than saying, hey, I wanna, I need to put up 10 times as much capital or debt and just start at the beginning. So that's the reason for the fund being formed, to pass along those economics to investors at a much lower risk and at a much faster cycling of capital.

Joey Romero:

So, can you describe the fun to me like I was in third grade?

Andrew Falde:

I love that. Just describing like a third grade, which I have a lot of experience with, because I have three kids under 12 and under right now, and one of them just ended third grade, and one is in third grade a few years ago. So I have a lot of experience saying, Well, what does that mean? How does that work? What are you doing? They look at me writing code, or what are you doing, you know, like, okay, so yes, I'm familiar with that concept. I think it's valuable for all of us, you know, to really like what's going on here. So the fund as to a third graders that you're saying, right? Exactly? This is fun. I would take that third grader and walk them into any old neighborhood and then point at houses and say, 'See that house, or you see the house you live in, say, that would be a lot of work to build that right? Like, if it didn't exist, it was just land there. There'd be a lot of time, a lot of people. There's probably 50 or 100 different people that will work on that house. You have the people in charge of buying the land, person decorating it, designing it, and then you have to pay for it, and then you have to go borrow the money for it.' You say, like, all of this has to happen in order to make a house exist. Well, the fund is a way to help people not have to go through figure out all of that. They can just put their money into a fund, which is a group of investors, a group of people putting their money together, and that pays for all of these houses to be built, and then that will give the opportunity for the person, and in that it can be done more affordably, because it's done as a professional organization. And then people can buy and live in these homes, because there's more of these homes that are at prices they can afford for their family. So I think that would be the simplest way to put it.

Joey Romero:

Is it just like, you just talked about building houses, what else is the fund going to do? Is there more that there's gonna do?

Andrew Falde:

Yeah, so building is the core strategy, because, as the fund is co-owned the master organization, DBL Unlimited, it also owns the home builder, manages the fund and the mortgage company, so there's the most profit margin in producing a new home. So that's why it's the core strategy, and will always be a big driver to it. And then the other will be distressed or discounted acquisitions. So not paying retail, not going to MLS, not just taking the first thing off at a standard cap rate, but really going in and finding where can value be added. And the one way we can force value to be added is through construction, building something. Because you can just say this product is needed, this it can be put here and then make it happen. All the others are opportunistic, either based on market conditions or individual projects that are distressed or in trouble.

Joey Romero:

Okay, so we just went from third grade to now we're going to go to over my head. Is the fund SEC regulated? And what does that mean for investors?

Andrew Falde:

Yes. So it's regulated. SEC regulated, and that's important to know, like a lot of it will say, Oh, we're regulated. Everyone's regulated. This podcast is regulated by the FTC. Like, in some way, everyone has regulations they're under. But the strictest ones that you can find for any type of investment opportunity is SEC, Securities and Exchange Commission to have oversight. So this is a Reg D fund, so it's private placement, it's for accredited investors, and that's very important, because small syndication, small opportunities, don't have as much oversight. And the reason for that is there would be too much to monitor, too much to control. And the government hasn't said this outright, but the way I interpret it, and all the rules as far as you could go out and put a deal together with 15 family and friends, you know, 10 million, $20 million deal, and just fly right on under the radar, because they say, Well, if as long as you don't hurt a lot of people, and you don't hurt people more than once, like we can't oversee every little deal that's happening, but when you go and put yourself out to the public and advertise to be allowed to take on the general public's capital, you can hurt a lot of people. And so because we have exposure, and because we're saying we're going out and we're offering this to many people publicly, that has the strict oversight of the SEC, especially

Joey Romero:

And so even though there's, you know, there's the way that it's structured here with the fund. explicit risk, and you know, when there's always disclaimers, it does offer some protection for the investors, right?

Andrew Falde:

Yep, just every time I have a meeting with Craig, and we're going through numbers and things like that, in a 20 minute conversation, he'll stop me five times and say, be careful. We can't say that. Be careful. We can't say that, you know, just to make sure we can't over promise. We can't overstate. We have to be conservative. Ultimately, we just have to let the performance speak for itself. And we can't, you know, over promise or overstate what's possible.

Joey Romero:

So where does DBL capital invest now, and how is that going to change in the future?

Andrew Falde:

So right now, it's affordable, the lowest price point that we can build that's attractive to small families or individuals in the Southwest Florida market, that's one where affordability is it not is non existent. Most people are stuck renting right now as interest rates have gone up, then their price point has come down even more than it had. As is, prices have gone up since 2020. Accelerated very rapidly. It's gone out of their range. Prices are down a little bit right now because of interest rates, because of just a market cycle, but we're still above where we had been three years ago, three, four years ago. So we are in a rising market with a little dip right now, a little bit higher interest rates, some would say a lot higher, but really just kind of more torn historic norms really.

Joey Romero:

It's we're supposed to be.

Andrew Falde:

Yeah, exactly. It's hard to complain, you know? It's just you complain if you didn't get it before or you can't get it again.

Joey Romero:

What you think about is a whole, it's almost a whole generation of of people who are going into home ownership that have never seen the sevens. But you know, you talk to anybody over 50, they're going to be like, What are you talking about? Like, oh, that's, that's right. We're supposed to be.

Andrew Falde:

Yeah. I've heard of people saying, Oh, my first mortgage was 18%.

Joey Romero:

Yeah.

Andrew Falde:

Like, well, I guess that's why your home was$80,000 too.

Joey Romero:

Yes.

Andrew Falde:

Yeah.

Joey Romero:

How is DBL Capital gonna identify the new markets and when will that happen?

Andrew Falde:

Okay, yeah, so it's wherever the profit margin can be found without depending on appreciation and where there can be a solid infrastructure put in. So like anyone with construction experience can go to another market. But do you have a team in place? Do you have the disposition broker in place? Do you have the acquisition broker in place, the one who finds the land professionally knows all the problems there and avoids those problems, whether it's, you know, environmental issues or height issues and needing more fill these types of things. So wherever you have to have expertise. Now, Craig's built in many different markets, different states, so he does know these things. But this is the market we know. This is the market that's been very attractive for growth for over 20 years, and has been through big spikes and those corrections as well. But those, that's volatility. It's just like any tech stock or any type of fast growth asset, you know, think Bitcoin, think anything where it didn't exist before and there's something new happen, you're going to get volatility. So there's volatility in this market, but that volatility continues to be like be overcome by demand. So the demand keeps coming in, demand keeps coming in, and at that affordable price. And if you just take an aerial view over all these sub markets and sub markets that we're in. There's so much green space still left. There's so many empty lots streets that you just look down on and see, you know, only 30, 40% of the street has houses on it, and this is the affordable area to live. It's very nice, good weather, close to a lot of employment, close to major airport, university, all these things that you need, that there's really just a lot of opportunity here left. I think the first move outside of this market will be acquisitions rather than construction, and then moving into maybe Central Florida, this is my take. I mean, Craig and I have talked a little bit about it, but my take is the central Florida market just, it's astounding. As you drive through, you just see trees, trees, trees, Orange Grove, Orange Grove. Just nothing, nothing, nothing. And then you see a Lennar community being built, like, just a brand new one under construction, land being cleared, like, Oh, okay. So there are the migration to the center of the state is happening, and that brings direct access to Disney World, if you're into that. It gives you direct access to either coast. So you have a lot of opportunity there, in either direction. It gets you a little bit higher and people like that, because it's for any kind of flooding concerns, also the weather, if you're Central, kind of a little bit mid Central, a little bit north, the weather is a little bit cooler. It's five or 10 degrees cooler a lot of times in that area. So it's very attractive. And a lot of people are saying, hey, you know what? I'm from Indiana. Hey, I'm from Ohio. I'm from Illinois. Well, we didn't have a beach anywhere near us. I just don't want to be cold anymore. I don't need to be 15 minutes from the beach. I'm more than happy to be an hour and a half from the beach and an hour closer to Orlando and all these different things, and still in a place that's not over built and just feels everything's new. So there's just tons. Just look up any aerial map on Google Maps, Google aerial images, all that, and you're just going to see this wide open territories being built. One's called Babcock Ranch is being developed. A whole new city is being built. And when it was first started, they're like, who's wants to live out there? Well, that's proven. There's a lot of people, a lot of people are saying, more than happy to not live. I've lived before my whole life. I don't like the beach. And I'm like, I get it. I don't need I don't need to be anywhere near, I don't have need a boat. There's rivers, if I really cared, there is so much opportunity there.

Joey Romero:

Part of your job, correct me, if I'm wrong, is being really involved with capital raise. What is, what is the hardest part of the initial capital raise? Because, once these things get into the 10s and 20 million range, it's like people can't wait to throw money in there, right? But what's, so what's the hardest part of getting this off the ground?

Andrew Falde:

Yeah, it's kind of, I don't know if you ever seen the the illustration, like the physical illustration where the small domino hits the bigger domino hits the bigger domino until you can, like, theoretically, you could knock over, like the Statue of Liberty, you know, starting with a little Domino and that's the same thing with capital, where the in any kind of investment at an early stage, you have the angel investors, the round a investors, and then it finally goes to mainstream, where people just start doing, like, direct deposits on a monthly basis, you know, like add to the account. And so we're at that because the fund, this fund is new, and there will be more funds. There will always be a fund release that says, hey, this fund is just for land acquisition and development prior to the housing fund building on so there'll be a new fund for that. It'll be new. So the reality is, you have to look at the fund manager, you have to look at the team and say, Are they new to this? Well, that's not even close. You have multi decade experience. You have the exact same team and infrastructure and construction license, all that has been going on for well over $100 million in just the last five or 10 years. And so that is not new. So it's just the, okay, instead of take, like we talked at the beginning, instead of taking one investor or one small group and doing 10 houses here, then another person or group do another 10 houses here. We're saying, Hey, you can not take multi seven figure risk capital or debt, and you can do that with six figures of capital and debt have the same economics, maybe better, depending on how you slice the debt component, because you're not signing for the debt anymore. So the economics are still just as attractive, and the speed of returns is faster. So the long and short of it is usually it's that after you see that first year of like delivered statements, and then that's when those who have been on the sidelines start to kick in more. Feel a little bit less like the angel, a little bit less like, you know, the early adopter is like, 'all right, here's our one year quarterly statements. Here's our annual distribution was done. Here are the houses that were completed'. So that's that first year, and we're about eight months into that, I think, right? Maybe, maybe 10 months, because we have part of last year and this year going on. So I think when we're completed with that year, it's going to become a little bit more of a less of an uphill battle.

Joey Romero:

Liquidity is important for a fund. What's the targeted liquidity for the fund and where is it out right now ?

Andrew Falde:

The target, I believe, is 30% so there's liquidity, and then there's also not having aggregate leverage, not over 70% but our aggregate leverage level is more conservative and our liquidity level is more conservative than you normally see in a fund, just because we want to be positioned for long term, generational operating not just one opportunity, not just say, Hey, we're just going into this. What's the point of having the cash on the side? What's the point of having that excess margin in there to work with if it's just one syndicate or just one opportunity. You know, we just need a little breathing room in there. So we're more positioned for, hey, we're gonna have dry powder. So if land prices are down like they are, we can jump in and grab a bunch of watts at half price. But people who say, I have to sell now, you know, it was 40 last year, but it's 25 right now, fine, I'll sell it or less. So that's what that is really for safety and opportunity for the fund to do what it needs to do.

Joey Romero:

Can you tell our listeners, what does Waterfall Distribution mean? And then what the actual Waterfall Distribution of DBL capital is?

Andrew Falde:

Got it. Yeah, so waterfall means that it's not just at the end of the year, we just slice everything up and send it out. There's actually because you don't know what the return will be. If the return is going to be eight or it's going to be 28 we just don't know. And that's market conditions operating, you know, all these different things, how much capital came in, when it came in, and all these different factors. So what we do is we have the investors, the cash, the capital paid first. So that's called the pref, or preference, preference paid payment. So the pref is the 8% amount that goes to the investor, and then from there, and it's all spelled out in the docs in exact form, in exactly what order and what has to be paid in what order. But the most important thing is the capital investor is paid first, then a asset management fee, then the splits start. So after the asset management fee is paid, which is after the pref, then we had the 80/20 split, 80 to the investor, 20 to the manager. And that takes it all the way up until 12% return has been calculated and distributed. And then above 12% is 50/50. So the 12% is called the target return, which can be misleading. It sounds like, oh, you try to make 12% and that's the end of the story. And I don't even get all of that. I have to split some of it. So the reality is that's the target before we get excited, that's the target to say we're trying to get up and through that and then based on market conditions and efficiencies and speed of construction, all these other factors, when the cash was in, when the capital came in, all those other factors. Now we're playing the real game, which is we're splitting 50/50 above that. So that's where we're really trying to get, is north of 12% and take that 5050, split above that.

Joey Romero:

Okay everyone that's going to do it for this week's episode, please be sure to tune in next week for part two.

Narrator:

For more information on hard money loans, trust deed investing and upcoming events with the Norris group. Check out the norrisgroup.com for more information on passive investing through the DBL capital Real Estate Investment Fund, please visit DBL capital.com

Joey Romero:

The Norris Group originates and services loans in California and Florida under California DRE license 01219911. Florida mortgage lender license 1577 and NMLS license 1623669. For more information on hard money lending go to thenorrisgroup.com and click the hard money tab.