[EO Silicon Valley] Real Estate’s Best Kept Secret: Land Development Investing With Alice Chen

Alice Chen: 13:47

Okay, there you go. Yeah. Well, that’s actually, you know, some people have made really good business out of that thesis. But for me, my first business was in international trade, exporting Canadian wine to Asian markets. And that got me a top 40 under 40 title back in 2013.

It’s hard to believe that’s more than ten years ago. So from there, I then went back into mergers and acquisitions. I ran a boutique advisory firm, which was then acquired by PricewaterhouseCoopers. So when I did these interesting things, I got a lot of media attention in my home market of Vancouver. And I think James looked me up on LinkedIn when I was doing M&A advisory firm, and he was just building his very first private equity fund.

And in my mind, I’ve always wanted to work with capital, right. Because who, like whoever that harnesses capital, can do a lot of good things, right? And could do a lot of big things. Hopefully not bad things, but you know, it’s just such a valuable asset. So I wanted to learn everything about capital.

So I figured, well, you know, James is building his first private equity fund. He has a temperament of a teacher and coach. Like he really loves teaching. And so he said, okay, well, this is what I’m doing. I love to teach you everything about private equity.

So I was a very willing and again, lucky student to have a comment on my teacher. So I invested as his early investor. His fund did really well. I went on to kind of cut my teeth.

Dr. Jeremy Weisz: 15:25

Fundraising was that fund in real estate as well? The one.

Alice Chen: 15:29

It was actually traditional private equity. So buying businesses, boring gadget factories that spit out a very quality, you know, earnings stream of cash. Right. So we like those businesses and private equity. So yeah.

So just kind of, you know, practice and fund raised using his fund and eventually She learned enough to aggregate all the top real estate funds in Canada and became a fund and fund manager myself. So this is apart from what James was doing. Yeah. And then we reunited about two years ago when he’s exited his prior venture. And I, you know, have done a five years or so of startups and wanted to come back into investing.

And coincidentally, we’re both looking at real estate and wanted to come come together. So it was a little bit like the band had disbanded. The band members went on to do their solos, but then they came back to do a reunion tour. So this is a little bit of that reunion tour for us.

Dr. Jeremy Weisz: 16:28

I’m curious. So you’re like, okay, let’s let’s start Pender Hastings Capital. We have a thesis. We have what you call real estate’s best kept secret. That should be a tagline on your web page there under Pender Hastings.

But how do you decide how much money? capital to raise. And then also, I don’t know how many different funds you have to raise, you know, throughout.

Alice Chen: 16:54

Yeah, those are great questions. So one, it took us a long time to decide on a strategy because we took it very seriously. Right. We didn’t want to just become yet another multifamily value add strategy fund manager. So we were looking for something different. And I just explained how we got there.

And so we wanted to raise a fund that can accommodate our thesis in a way that’s maximizing capital return by minimizing risk. So the difference between a syndication and a fund is that a syndication is typically a singular asset, and a fund is typically multiple assets, but in the same thesis. So how much goes into a fund. Whether a fund is 5 million, 15 million, which is our kind of, you know, ceiling or 500 million. It depends on a variety of factors.

So for us, each project that we invest in are typically requiring about $2 million of investor equity. So if you think about a $10 million land development deal, horizontal development deal that builds 500 homes, for example. So typically in that capital stack, 75% comes from the debt. It’s a loan acquisition and development loan. And then there’s a portion.

The remainder of the 25% of a portion of that actually comes from the home builder themselves. They have a deposit of 10 to 20% of the ultimate sale price or buyback price that they have to pay, like throughout the project length. So in the two years that the project is underway, you have a take down schedule you got to follow. So every 50 lots delivered, you pay down a little bit more towards that deposit. So our fund actually funds the rest which is called investor equity.

So because on average. We are typically looking at, you know, the projects needing about anywhere from 2 million to 8 million of investor equity. So if we are fine, we want to diversify our risk by investing in multiple projects. Let’s say in a $15 million fund, we’re looking at investing 4 to 6 projects. Then then, you know, you just kind of work backwards to decide what is an appropriate amount.

And also you want to maybe do a smaller fund one. And then once you prove out the concept, you can then go to a fund to maybe fund two would be 30 million or 50 million, right. So there’s different. It’s an art. It’s a science.

But it’s more of an art, I find. And it’s just, you know, you have to rely on your business judgment and understanding of the market conditions to, to make those determinations.

Dr. Jeremy Weisz: 19:34

Is there an active fund raising now or are the funds closed?

Alice Chen: 19:38

Oh, no. We actually just launched the fund beginning of the year. So we’re very much active. Yeah. So we are looking.

Dr. Jeremy Weisz: 19:44

A fit to invest. I know not everyone is. Obviously. Yes. Who do you find is a fit?

Alice Chen: 19:49

Yeah. So we are a Reg D 506 C fund, which means we only work with accredited investors. So if you’re accredited investors, if you’re an accredited investor and you are in the growth mode, you want to multiply your capital. We are a short term fund fund of three years. So if you want to look at a quick multiplication or, you know, we have a equity multiple 1.75 to 1.81, and I’ll explain that what that means in a sec. You want to see kind of this fast paced growth of your capital.

Then we are for you. So we don’t do distributions right away because we are deploying your capital into these projects. And then we exit to the home builders. But because your capital is tied up in the project, you can expect a higher, you know, higher return. So we are, you know, looking at a targeted 25 to 27% annual return and it would be three years.

So that’s why a 1.75 equity multiple means if you invested 100,000 with us into the fund three years later, you can expect to come, you know, to see 175,000 back. So that’s that’s the, you know, the terminology.

Dr. Jeremy Weisz: 21:07

And then obviously accredited investor, someone wants to growth mode. And is there a minimum amount that someone needs to invest.

Alice Chen: 21:17

Yes. Yeah. So it would be 100,000.

Dr. Jeremy Weisz: 21:21

Got it. And then you know, I guess you know, the the question around, you know general like hiring. At what point do you decide okay. Like I saw on the team page, you have several team members. And you know, at what point do you decide, okay, we need another general partner.

Alice Chen: 21:47

Yeah. So we are actually interested in meeting the right one right now. Because James and I are both Canadian and we came from the Canadian market. Our current fund, the land development, is not set up to taking Canadian capital. So it’s only for Americans.

And so we’re very interested in meeting a potential general partner, or maybe two of them that have a very strong foothold in the American market in real estate and really see the potential in this land development strategy and thesis and want to join us.

Dr. Jeremy Weisz: 22:24

What kind of background do you find that person would have?

Alice Chen: 22:28

So we are looking for someone that has actually done fundraising successfully for funds for for many years. You know, if not a couple of decades. So yeah. So someone that is very fluent in the space and has commands a following that would like to invest with them. So someone like that would be very ideal.

But of course, you know, this person would offer other type of input. You know, whether it’s marketing, whether it’s operational efficiency. And you know, they they would have a say in terms of the in terms of being a part of the investment committee as well.

Dr. Jeremy Weisz: 23:07

Yeah, that makes sense. And then what about what do you look for in a team member? I know it’s you and James and you have several team members. I’m curious just from like a culture perspective. You’ve worked in a lot of companies.

What about from that end?

Alice Chen: 23:21

I think we’re looking for someone that is open minded and very keen to learn, because a lot of the success that you find in investing has to do with understanding patterns and understanding the economy and macroeconomic factors. So we want someone that is a very open minded learner in terms of their disposition. And we want someone that is a great team player. Right. Because we are going to be in this partnership for a long time.

And, you know, even though fund 1st May wrap up in three years, we want to go on to do fund two, fund three. So we want to look for someone that we can get along with for a very long time.

Dr. Jeremy Weisz: 24:03

You know, I have someone coming on. Maybe by the time this releases it will already be happening. So I’ll have to mention Scott McGibbon of Matterhorn Venture Partners. He’s on more of the commercial side, but he may know some people he I know, acquired and developed 10.6 billion in transactions as some principal deals, but in more of the industrial office hotel sector. But he may know some people so I’ll do share this with him.

Alice Chen: 24:32

Yeah.

Dr. Jeremy Weisz: 24:33

Please do. Some good people. You know, I want to talk about it’s really interesting your portfolio companies a little bit because they just span the gamut, right? Even from a tequila seltzer. Okay.

So in a family office, software and the wine company. Talk about the tequila seltzer for a second.

Alice Chen: 24:56

Yeah. So that was kind of a Covid hobby company or company that that kind of got spun up because my co-founder, Brent and I were so geeked out on mixing tequila and seltzer water or tequila.

Dr. Jeremy Weisz: 25:12

To drown our sorrows during Covid.

Alice Chen: 25:14

Well, there you go. Yeah. And then so we went to the stores, like, we went to Whole Foods and we couldn’t find anything that we saw a lot of hard seltzers. So we said to ourselves, what is the hard seltzer like? Is it gin based?

Is it vodka based? What is going on? Right. So we realized that the hard seltzer is actually made from malt. And malt is actually kind of a leftover ingredient.

Once you’ve done making the beer, you have leftover ingredients. So brilliant marketing play where they reposition something that’s basically of no value into the bases of a new, completely brand new category. So we, you know, we’re so geeked out and tequila. And if you’re going to drink tequila, I’m sure you’re probably the same. Like for me, if I’m going to enjoy tequila, I wouldn’t just drink anything, I would drink something of quality.

And so we couldn’t find anything in the, you know, I we couldn’t find anything in the market that actually was made with very clean and, you know, premium tequila. So if you know tequila, the back of the bottle usually has a four digit code. And that’s called a nom nom nom number. And that is a number assigned by the Mexican government. They have a branch called CRT that just governs agave and tequila, believe it or not.

And then they assign you this four digit ID that tells you where the tequila comes from. So none of the Rtds are ready to drink canned drinks in the market with tequila. Well, now maybe there’s a couple. But when we started, no one actually had that four digit number. We’re the first one to actually feature that, because we actually use very premium blanco tequila to make this product.

Dr. Jeremy Weisz: 26:56

What’s what’s your favorite flavor?

Alice Chen: 26:59

My favorite is actually Tamarindo because I like that kind of sour, tangy taste. And so that’s my favorite. That’s a crowd flavor favorite as well. I mean, a lot of people really like they like guava spice. If you scroll to the left.

Yeah. So guava spice is kind of a popular favorite. Our mint is a great chaser. The guys seem to really like elements really light as my second favorite. Yeah.

So I mean all eight flavors are really, really good. And then they’re actually available in Whole Foods in Southern California.

Dr. Jeremy Weisz: 27:32

Unbelievable. And what about the so the we’ll talk about, you know, CPG. We have the private equity and then talk about software for a second. Myefo.

Alice Chen: 27:42

Yeah. So it’s interesting because even though it looks like my portfolio is such a wide range, I mean, I am not necessarily a founder of these companies. Some of these companies are. I’m just an investor. So this one, the fintech company, I am a co-founder.

And this is where I, I think I talked about how I exited my second business, which is a mergers and acquisitions boutique firm, to PricewaterhouseCoopers in Vancouver. So I went there and hung out there as a senior deals counsel for two years. And I would say probably my my biggest gain over there was meeting my co-founder of Myefo, Simran. So Simran is an accountant by training. She was kind of pegged as a next generation successor to the family office practice, and so her job is to advise family offices.

Like in Vancouver. We have family offices like Chip Wilson from Lululemon. You know, these different people and. Yeah. So yeah.

So that’s Simran and and so she always had this like knowledge in her head about how family offices actually invested or how they operated. And so, you know, at some point we decided to leave the mothership and to actually do our own multi-family office to set it up. And so we did. And then a lot of clients followed us. And as we were doing the service deliveries, we realized that everything was so zero tech, like low tech to zero tech.

We’re talking about managing billions of dollars, hundreds of millions of dollars on Excel spreadsheet. And we’re always dealing with lacking a document here, lacking document there, you know? So none of that was actually technology forward. So we decided to actually build everything and kind of transform the IP that Simran has on family office into a software. And so that was the beginning of my myefo.

I have since operationally exited Myefo as a co-founder, but you know the team is doing great. I’m really proud of my co-founder and the team.

Dr. Jeremy Weisz: 29:46

It sounds like two. There’s advisers of family offices that use the software to correct. Yeah.

Alice Chen: 29:53

Now. Yeah. So not not only do they license the software to family offices, they also license software to advisory firms.

Dr. Jeremy Weisz: 30:01

I’m wondering yeah, this is fascinating. And I encourage people, anyone who’s interested where we’re at. If you are listening, we’re at Alice Chen companies.com. There’s portfolio we’ve been on poking around Pender Hastings Capital than some of the other sites here that she has on here. But you know I’m curious going back to your background because you started as an attorney and I’m wondering, you know, what you saw some of the mistakes people were making in, in the M&A space, because I’m sure you saw a lot of different things throughout your early career, too?

Alice Chen: 30:41

Yes. I mean, you know, I saw a lot of companies suffer because of their decisions on timing. So sometimes, you know, when you look at a unicorn exit, really the stars have to line up like the the people, the company, the products, the timing, the timing has to be there. So like, for example, in in the beverage space, there was a company called nude. So nude was the first vodka based seltzer.

This is Canadian company based in Vancouver. And it was a huge thing, I would say ten years ago, 15 years ago, it was a really huge thing. And I haven’t fact checked this, but I think the rumor goes that right before Covid, they were actually offered to be bought for 150 million, and they turned it down because they were at their peak, you know, and then they. Exactly. And then they wanted to see how much more they can grow the brand and shoot for that much bigger exit.

Maybe the offer. I have no idea. This is not disclosed. But let’s say if the offer to buy was 150 million, maybe that thought was too low, so they turned it down. So then years later, they eventually sold, but they only sold for about 10 or 11 million and mostly to pay for debt, you know.

So. And the shareholders, the equity shareholders, actually the investors didn’t get any, didn’t make any money on this deal. And so I think in a lot of the ventures and this is what I’ve seen as a lawyer, what I’ve seen as a founder as well, it’s well, one, you have to have the right market. Another thing you’d have to have is the right team, the right partners, and then you have to have the right timing. So if you’re the right product but the wrong time, it’s not going to work.

Right. Because seltzer water is not a new thing like we’ve had that like 30, 40 years ago. There are some brands that you, I’m sure you’ve seen in the stores, but they didn’t pop because it wasn’t like it wasn’t the right time. Like recently, this functional beverage brand Poppy exited for a billion, right?

Dr. Jeremy Weisz: 32:52

So how much do they exit for?

Alice Chen: 32:54

I think $1 billion, I’m pretty sure. Yeah. So that would be an example of okay, the right kind of product for the right kind of market at the right time, but you can’t really engineer that. And and that’s I would say probably one of the lessons I’ve learned is that you can’t really engineer such a unicorn exit. You have to just work on something that you are naturally drawn to and you’re passionate about.

And then you you wait for the market to kind of mature into, into circumstances that facilitate such an exit. Right. So for example Nvidia you know Jensen Huang. He talks about this all the time, like when he started with the idea of making GPUs 30 years ago. That was not a thing, right?

But I mean, could he have forecasted that it was going to become the company it is today? He couldn’t because OpenAI wasn’t a thing. You know, AI computing wasn’t a thing. And so I think the lessons from what I’ve seen and from my own experiences is that it’s very important as a founder to just really focus on what really calls you and what really intrigues you. So you go to work happy every day.

So whether you’re making two more zeros, three more zeros or or no zeros, you want to be happy doing that. And if you can get to that place, then I think you’re in the right business.

Dr. Jeremy Weisz: 34:19

I remember no thanks for sharing that. There was someone posted on the poppy thing and they showed the before and after packaging. It was probably a marketing, you know, company that does branding and stuff, but they’re saying the reason they, you know, one of the reasons they were so successful. You look at their previous, like branding and then their current, you know, obviously everything’s popping and everything like that. The same thing.

People talk about liquid death. I don’t know if you’ve had that. Yeah. It’s like it’s, you know, carbonated water. But they’ve done a great job marketing and and doing that.

So I remember I had rant to your exact point, Rand Fishkin on who started SEO Moz, who he now runs Sparktoro, but he talks about they were having these just huge clips of growth, and they got offered a large sum of money from HubSpot. And with stock, I don’t remember what the amount was, but it was a lot because the stock was worth a lot. And he turned it down because like, no, it’s not enough because we’re growing at this clip and similar story to what you just what you just told happened. So I don’t know what the the lesson is, but I guess if you get a good offer, consider it.

Alice Chen: 35:36

I mean, if I. Yeah. I mean, if I were the person getting off, I would take it.

Dr. Jeremy Weisz: 35:40

Yeah. I do want to talk. First of all, thanks for sharing that. I do want to talk about something as near and dear to my heart and yours, which is health. Okay.

Because, like, all this stuff I feel like isn’t possible unless we’re feeling good, we’re healthy, we’re vibrant, and we can have the energy to do this. And I’d love to hear you have a cool morning routine if you can talk a little bit about that.

Alice Chen: 36:07

Yes. Yeah. So I’m totally with you. I think, you know, if you have a good foundation, a really calm nervous system that’s really the source of all good decision makings, right? So I do a lot.

I invest a lot, I do a lot, invest a lot of time and money on making sure I’m always in a very good state. So I have a morning routine that’s evolving. And I actually keep a score sheet. I’m looking at it right now. So every morning I wake up with a gratitude practice.

So three things I’m grateful for could be super simple things, but it’s just a good way to start tuning your brain’s frequency. And then I do a second thing, which is called lofty questions. So this is an exercise to transform your identity. So for example, if I want to I don’t know lift heavier weights, you know, in the next couple of months. But I’m not yet at that level.

I would say to myself or ask myself this lofty, lofty question like, why am I? Why am I such a badass weightlifter? So you can design these questions. They’re meant to trick your brain into believing that you’re the best version of yourself. So it’s an identity transformation exercise.

It actually works really well. And then I have been doing this is just in the last couple of weeks. I, you know, I kind of activated a new coach and she has a hypnotherapy background. So she gave me something called light shield meditation. So it’s a meditation that’s only three minutes and I do it and basically visualize a shield of light.

And that helps me create an energetic boundary between, you know, myself and the, you know, the person or the situation I’m interacting with. And so it keeps me grounded. So you’re not rattled, right. And and then I have a device called Lumen. So Lumen device actually measures carb versus fat burn.

And so I do it first in the morning before I have anything before I eat anything. And that gives me a sense of really how much carb I’m eating. Right. So unfortunately I have a bad habit at night of eating ice cream while watching Netflix. And so typically I wake up with Lumen score of three, which is middle of the road.

You know, like if I wake up at five, that’s a complete car burn that I know that I really screwed up my diet, right. But if I wake up with 1 or 2 bad burn, I know I’m in good shape, so it helps me measure and also moderate my eating habits. And then I have some sort of movement. So I work out with a trainer on zoom twice a week. I go to the gym and work out with trainer.

They’re lifting heavier weights. Another time during the week I would do yoga classes or go for a hike with my dog or do some, you know, stretching or yoga on my own. So I try to do some sort of movement because I think we’re always as entrepreneurs and investors, we’re always in our head. It’s important to kind of get grounded into your body. So movement is very important.

And then usually when I’m getting ready, like when I’m in the shower, when I’m getting ready, I listen to a podcast of some sort. Right. And that just helps me again tune my brain frequency. And then before I start work at my desk, I typically will take three five minutes to really focus, figure out, write down like the three things I must accomplish that day that will move the needle. And I do it at the beginning of the week as well to figure out my my weekly priority.

Yeah. So all of that.

Dr. Jeremy Weisz: 39:33

What do you have a specific diet or vitamin regimen that you follow?

Alice Chen: 39:37

I take a lot of supplements and I’m always experimenting. So right now my regimen has to do with maintaining and optimize gut health. Like it’s taken me a couple of years to actually get to that optimized level of gut health. So I take three different kinds of probiotics. I kind of rotate, and sometimes I’ll take two, two brands at the same time.

I have different adaptogenic supplements I take for, you know, focus. There’s one actually promotes oxytocin. So I can sometimes I take it before networking function, you know, so so you, you like, you know, more people you meet and and you can take relaxing ones too. Like I have one called calm. Right.

And I typically don’t have sleep problems. I sleep.

Dr. Jeremy Weisz: 40:27

That’s a popular one. I’ve seen that. Yeah.

Alice Chen: 40:29

You’ve seen that. Okay. Yeah. First person’s, first person’s I really.

Dr. Jeremy Weisz: 40:33

We have the gummies at our house. The calm gummies. Oh, okay. Yeah.

Alice Chen: 40:37

Yes. Yes. Yeah. So, yeah. So I, I take a lot of those, I take magnesium, I take a greens gummies.

Right now it’s called greens. So it’s basically all kinds of vitamins and minerals. And one I probably take too many. I’m taking creatine gummies. I think my my body I’ve been treating it like a lab.

Dr. Jeremy Weisz: 40:59

I do like creatine gummies. But I then got the naked creatine, which is just the powder, and I put it in cereal. Like, I like the Magic Spoon cereal or the three three wishes cereal, which is kind of a grain free version. So those are those are good ones. No.

Those are this is very interesting. What about from a protein perspective. What do you do.

Alice Chen: 41:24

Yeah. So I’m trying to eat more protein. So recently I’ve been experimenting with this muesli overnight muesli mix called hollows h o l o s, which is actually pretty good. They give you a jar and then they give you different flavours and you just have to pour milk. I’m typically using some type of plant based milk, so that gives me 20g of protein.

Protein shakes sometimes I’ll make I mean I like meat, I like eating steak. I like eating all kinds of animal protein, so I don’t shy away from that. I will do some plant proteins like tofu as well. Yeah.

Dr. Jeremy Weisz: 42:00

I love it. Alice, I love to hear your favorite resources. First of all, thanks for sharing your journey. This is the last question, but I do want to encourage people to check out AliceChencompanies.com and also you know, check out Pender Hastings which is phcfunds.com.

You can check it out. So you know if you heard that what they’re looking for Maybe at this time they’ve already found general partner, or maybe looking for more, but contact them if you know someone or if you are looking to invest and you fit those criteria we mentioned as well. But I’d love to hear your favorite resources. It could be podcasts, audible books, books. What are some of your favorites?

Alice Chen: 42:47

You know what? Like right now I’m super geeked out on AI, so my my best friend is GPT and I don’t seem to do anything without GPT. It’s with me when I’m creating a recipe for dinner. It’s with me when I’m working on work during the day, it’s with me when I’m planning my travels. So it’s just almost like a second brain.

I don’t know how I existed before, and now I’m actually kind of doing a deep dive into different AI tools out there.

Dr. Jeremy Weisz: 43:15

And what are some of your favorites?

Alice Chen: 43:18

Yeah, I mean, right now I’m just kind of looking at the common ones, right? So digging into the different ones. But yeah, I mean, I was just on a meeting a couple hours ago. Someone recommended Tripit for travel planning. I haven’t used it.

Opus Pro. Apparently it’s some sort of workflow for marketing or social media editing, so I’d love to check that out. Yeah, I think there’s a lot out there and there’s definitely a lot of opportunities in AI. So definitely very geeked out and, you know, working with it every day.

Dr. Jeremy Weisz: 43:52

And you mentioned podcasts. You listen to podcasts a lot. What are some of your favorites?

Alice Chen: 43:57

So right now I’m studying from this author. His name is David Gillham. So he’s actually.

Dr. Jeremy Weisz: 44:04

I know David.

Alice Chen: 44:05

Oh, you know David. He’s a teacher. Yeah.

Dr. Jeremy Weisz: 44:08

So yeah, he started Mary Ruth. Yes. Mary Ruth Organics and highly successful company. Yeah. Company.

But yeah I know he teaches. He’s big into Kabbalah and teaches. I mean, I don’t know how many like when I met him he said that, but he’s got a huge following on the Kabbalah front.

Alice Chen: 44:28

Yes. Yeah. So. And on the business front too. So yeah.

So I’ve been listening to his podcast last couple of months. Every morning. And so I feel I know him too. And I, I’m a student of Masterclass app and Mindvalley. So big fan of Vishen who’s the founder of Mindvalley.

He curates really amazing events with different authors on there. Yeah. I’m just always, you know, looking for for great podcasts and. Yeah, and thank you for this opportunity. I’ll be sure to tune in to.

Dr. Jeremy Weisz: 45:01

I love it. Alice. Thank you everyone. Check out alicechencompanies.com to learn more. And we’ll see you next time.

Alice, thanks so much.

Alice Chen: 45:09

Thank you.

Outro: 45:10

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