Alexis Assadi on Real Estate Lending and Due Diligence
Alexis Assadi is a financier who concentrates on funding real estate ventures and small businesses. He is the Chief Executive Officer of Pacific Income Capital Corporation, the general partner of Pacific Income Limited Partnership. In addition, he is a director of Assadi Capital Corporation and various other privately-held companies in Canada. Alexis Assadi has helped capitalize over 50 projects across British Columbia, Alberta, Manitoba and Saskatchewan.
Most of your investments are structured as debt, rather than equity. First, why is that? Second, do you have many equity investments?
I prefer taking a debt position on a deal because I think it is safer in most cases. There’s generally less upside to be had, but you also have a degree of certainty and oftentimes collateral. It’s what I know and what I’m good at, so I try not to veer too far away from it.
Part of due diligence means trying to predict the worst-case scenario. What happens if the entire deal fails, the project goes bankrupt and everyone is at risk of being wiped out? Lenders can have the best chance of survival, especially if there’s real estate involved.
I do have equity investments. I’m not 100% exposed to loans. Whenever I look at a project I try to assess the best potential risk/reward profile. Oftentimes, I find that being a creditor is more attractive.
Do you think that debt investments are inherently better than equity plays?
They are for me. I find them to be so much simpler and they can also be quite lucrative. But that’s my personal preference. When it comes to money, I like to be boring. I get pitched on cool projects all the time and turn them away because I don’t understand the business as well as I’d like to. You probably won’t see me invest in shares of private media companies or tech start-ups. I’d rather be a plain old lender.
With that said, I think investors can do well at whatever they focus on and are passionate about. For instance, I know a guy in the film business who invests in camera lenses and makes a killing doing it. But he’s a professional in that particular space. He knows what he’s doing. Another one of my friends is a financial advisor in Vancouver. He only invests in blue-chip stocks and does well with that. I don’t think there’s such thing as “the best investments.” A lot of it depends on how good the investor is and how well they do their research.
What’s been the most confusing deal you’ve been involved with?
I was looking at financing a project in Michigan. We hired a lawyer there to help with the due diligence. After a few days, our attorney told us that it was unclear who owned the property. One entity had the deed, but there was apparently someone else who was contesting it.
I pulled out right away. The last thing I needed was to be unsure of who actually had legal title to the real estate. It was an unnecessary risk. It was too bad, though, because it was one of those income producing assets that could have done quite well.
Do you invest in any cryptocurrencies, like Bitcoin?
No. I think it’s sort of like any other currency in that it’s unpredictable. Some of these virtual currencies have humungous price swings. I haven’t found an opportunity that is within my risk tolerance.
Do you have advice for investors reading this piece?
Be boring, read the fine-print and be thorough in your research.