From the Financial Crisis to a Real Estate Empire with Greg Friedman, Founder & CEO of Peachtree Group

Speaker A: Hello, this is Mark Gerson and I am the co founder and chairman of three I members. And uh, I want to welcome Everybody to the 3i podcast where I am delighted to have as my guest this afternoon Greg Friedman, who is the founder and CEO of the Peachtree Group. Greg, welcome to the 3i podcast.

Speaker B: Yeah, thanks Mark for having me. I'm excited to be part of this podcast and I'm a proud member of 3i as well. So.

Speaker A: Yes, and we are so delighted by your membership. So Greg, you started Peachtree in 2007. Uh, tell us what Peachtree does.

Speaker B: Yeah, sure. So Peachtree, we're a private equity firm that invests across the commercial real estate landscape. We do some stuff outside of commercial real estate. We're very heavily focused though within credit as it relates to commercial real estate. On the equity side we are very heavily exposed to hotel properties. So a lot of people know us because we own a bunch of limited select service extended stay hotels branded under the Marriott Hilton flags. Um, so we have, you know, currently about 120 hotels that we own and operate across the U.S. um, we also have on the credit side we have a lot of exposure where we do a lot of direct lending to real estate owners as well as we buy a lot of loans from banks and then we do some stuff outside of real estate as well. So as we sit here today, we have roughly about eight and a half billion of total assets under management. Between our credit and our equity exposure

Speaker A: from zero to eight and a half billion. You started at kind of a crazy time. You started in 2007. What month in 2007 did you start and what was the state of the credit world then?

Speaker B: Yeah, so we started the business in May of 2007. So back in May of 07 capital was flowing very well. It obviously in the fourth quarter of 2007 if you recall, that's when the market really started to fall apart and you saw a lot of the CMBS market pulled back. Um, you started seeing a lot of just challenges in the more or really on the debt side you started seeing challenges pop up. The bank market continued to be able to provide lending like community banks and regional banks and so forth. And back in 07 we had acquired and developed eight or nine assets when we started the business. So we were able to do it primarily through credit. But we definitely started the business at the peak before the great financial crisis.

Speaker A: Let's take ourselves to the beginning. Great financial crisis, um, let's say, ah, Q407, Q108. Are you fearful or do you see opportunity at that time?

Speaker B: The cracks were first forming then. So, you know, no one really knew where it was headed. Everyone, you know, didn't think it, you know, again, everyone thought, you know, it was going to not be as bad. Um, we were, you know, very young. Um, today as I sit here, I'm 48 years old back then, you know, again, it's 18 years ago, so I'm like 30 years old.

Speaker A: Wow.

Speaker B: And, uh, and so at that point in time, I was probably a little bit naive and inexperienced and thought we were going to be able to get through the blip that we were experiencing. It was more debt driven because our assets were still performing on the hotel side. It wasn't really till the summer of 08 that we started seeing major softening across the performance of our hotel assets. And that's when I started to realize, okay, there's a bigger issue forming here. And then by 2009, that's everything. The GFC was in full force by then. And that's when we really pivoted our model to go out and start buying debt, which we did very successfully during, uh, during the great financial crisis where we bought over 50 first mortgage loans secured by different hotel assets, different commercial real estate assets, bought debt against like busted subdivisions and so forth. You know, we became very active at the end of 09 and you know, into 2010 and the first half of 2011, you know, buying debt positions.

Speaker A: So was there a moment in that period when you and your partners said, uh, that this is the buying opportunity of a lifetime?

Speaker B: Yeah, it was probably the end of 09. You know, the was when we were like, hey, this is going to be a once in a lifetime type opportunity. Um, it wasn't till, you know, candidly, till the mid part of 2010 where the market really heated up, where valuations and pricing fell to a level where you could start buying stuff at a, you know, at a level that made sense because up until then the market was relatively, um, frozen. And it really started to, you know, it obviously started to move in, you know, mid part of 2010. Part of that was, as you may remember, um, a lot of banks, you know, you had a lot of banks that were taken over by the fdic. So a lot of the assets, especially as it related to debt, was just sort of sitting dormant, you know, within the FDIC as they were waiting to, you know, put them on dedex or, you know, to sell the assets, or even banks itself were holding on for dear life. And you know, most of the loans that we acquired, although we did buy some from like the FDIC through Dedex and some other systems, most of the loans we ended up buying was through, you know, regional banks and community banks that still exist today. But they were finally pressured to sell those loans at discounts. And, and uh, and that's what, you know, back in 2010 they were forced to sell them, um, because the regulators weren't going to allow them to keep holding those assets. And that's what, you know, caused us to be able to buy some of the once in a lifetime type trades where we were getting huge discounts, you know, relatively speaking back then.

Speaker A: So in 2007, 2008, you were a young man, but you were pretty experienced investor because I've read that when growing up you would take your birthday money and invest it.

Speaker B: Yeah, so I was uh, I was definitely a little bit more, you know, experienced than the average 30 year old at that point in time. I grew up in a family that owned real estate. Um, my, my grandfather who was a, you know, a huge, you know, I would say a huge influence on my life. He was a mentor, um, was big into. He was a very entrepreneurial person that owned, he was a doctor by trade, but he owned real estate. He owned um, like a home building business, owned movie theaters and so forth. So he was very entrepreneurial. But at a very young age he taught me a lot about real estate, taught me about the hotel business. And I used to invest my money at a very, to your point, like birthday money and money from, you know, other special occasions I would get or even from jobs that I had back then, um, I would invest it into the public markets.

Speaker A: Right. I've always thought that the um, bar mitzvah is a great opportunity to teach, uh, boys and girls the laws of compound interest. I mean you can spend all that money on a party or see what it's going to be in 20, 30 years, just compounding at a normal stock market rate.

Speaker B: That's right, yeah. Like if you, I mean I'm a big believer of, you know, you buy, you invest capital and you buy, you know, great real estate. You buy great companies in the public markets and hold them long term and let the compounding effect, especially if you can hold it in a very tax efficient manner, you can, you know, that's the best way to really grow wealth is through that tax efficiency where you don't, you know, where you don't sell those assets or trade in, trade out or if you do trade, you know, make sure you do it, in a very tax efficient manner. If it's in, you know, an IRA or some other, you know, type of, you know, account like PPLI is a big thing for, you know, investing through debt today and so forth.

Speaker A: You've described uh, your business or your discipline. You've said you're in the business of mispriced risk. What do you mean by that and how do you operate accordingly?

Speaker B: Yes, so we, you know, we're big on saying mispriced risk because at the end of the day we're trying to find inefficiencies in the marketplace that we can take advantage of. So we want to find mispriced risk, that's to the benefit of us. So it's, it's finding things that we can buy where we believe that we're buying something at a, you know, at a discount to its true intrinsic value. And we can drive returns that are, you know, where we're getting risk premium spreads a lot greater than what we should be against the risk free rate. And the risk free rate is really the ten year Treasury. So when we're investing capital today, you know, we're looking to buy assets where, you know, like take the average commercial real estate asset for instance. Historically, you know, the average commercial real estate asset that includes hotels, multifamily, office, retail is traded at 275 basis points above the risk free rate. So if the 10 years at 4%, it's slightly above it. As we sit here today, I think it's closer to 415. If it's at 4%, that would put, you know, the average cap rate should be at 675. So if you're buying assets today at a uh, 5 cap, I mean, to me it doesn't make a lot of sense. I mean there's certain situations where it could make sense if you can grow rents or maybe it's, you know, a very specific asset that has some type of element to uh, where you can't develop other properties around it. But most cases, I would say most of those trades don't make a lot of sense. That's part of the reason the market's a little bit anemic on sells. But still you're seeing some of those trades happen. But if you're buying something below 6 to 75, using this as an example, it's a typical commercial real estate asset where you're probably buying it above its intrinsic value, you know, long term intrinsic value. And if you're buying something at a higher cap rate, you know, that's probably mispriced risk in the case of our credit strategy. And why we love the credit strategy is the fact that you can go out and lend and we're usually attaching to debt yields that you know, are on a stabilized basis. We're going to be at a double digit or close to a double digit, you know, yield on cost or debt yield, which is effectively the cap rate. And so you're getting, you know, you're attaching at a very protected position. And, and we're getting equity like returns because in a lot of cases we're selling off an apiece, retaining that uh, B piece or doing note on note financing. So we're getting GROSS returns around 20% but we're not taking on last dollar risk because again we're financing 60 to 70% of the acquisition. So to me that's mispriced risk. Um, and that's, you know, that's why we, you know, we try to focus on those areas when we're investing capital. Um, and that's how we really get outsized returns ultimately, you know, relative to the risk that we're taking.

Speaker A: So when you make an analysis and you say this is mispriced risk and then you want to buy, what is the seller thinking? Is he making a mistake? Is he making a mistake in assessing the risk or are there extrinsic factors that force him to sell like you described was the case in 2009, 2010?

Speaker B: Yes, I would say in most cases, like when we're buying assets, I mean, because there's always, when, whenever you're trading, if you're trading in the public markets, if you're trading in the private markets, you know, there's always going to be, you know, it's, everyone's taking a position one way or the other. They think they're, you know, they're selling, they think they're price selling at the right time. We tend to, we don't tend to like to buy the market. So when you're buying stuff on the market, I would say, you know, that's probably trading uh, at market pricing. So you're probably buying something at intrinsic value or above it using as an example. So that's probably not the best trades for us. But when we're buying stuff, usually it's because someone's being forced to sell like in this type of market or even during the gfc. So I wouldn't call it like truly distress. It's more stress type trading where someone's being forced to sell. They need someone that they need certainty on execution because most of our, uh, you know, acquisitions on the equity side historically have been scenarios where we're getting, you know, we're getting those assets because someone has a loan maturity, they need that certainty and they're not going to chase the last dollar. And, and those are the type of trades that we like to execute on. And then on the credit side, you know, we find that a lot of cases we're winning our business because, you know, maybe a cheaper lender is willing to be there. They're just not willing to get to the proceed level. So we're going a little bit higher in proceeds. Right. Um, but we're getting paid for it. Um, we think that's, you know, mispriced to the reasons I gave earlier. Or in other cases, what we found is, you know, they, they go down the road with a bank, they run into an issue, they're not able to m. You know, meet the closing date or they start to pull back proceeds or they just, you know, bail out on the, the borrower. And we step in and we're able to get, you know, we're able to drive in higher yields and attach at levels that we're very comfortable because we're not, uh, a loan to own type shop when we're lending. I call it loan to okay to own in the sense that we're able to lend at levels where we're very comfortable being a long term owner of that real estate if the borrower ever was forced to hand us back the keys, which we don't want to happen, but if we did, we're very comfortable.

Speaker A: Right. I think I, I think I've read that you said that happens about 3% of the time and it's no problem when it does.

Speaker B: Yeah. So 97% of the time we've, we've made over 700 credit investments and over 97% of time we've gotten paid off through the borrower.

Speaker A: And it's no problem in those other 3%.

Speaker B: That's right. And the 3%, you know, less than 3% of the time when we've taken back assets. You know, we've ultimately, um, we've actually, most of those times we've actually not only gotten back our capital, um, we've gotten obviously positive returns and returns that are pretty close to what we originally anticipated receiving. In some cases we got even better returns, um, than we originally anticipated getting. Just being the lender. Um, in some cases we have, you know, taken losses. So it's not without risk. You know, when you invest through debt or equity. Ah, you know, as we all know, um, but it's uh, I would say the majority of the times it's worked out extremely well for us.

Speaker A: You just spoke about, um, banks and how you interact with banks. And you've also said that, um, that when banks can't get to the finish line, it's often a function of their speed. How can you move faster than a bank?

Speaker B: You know, you look at a bank, they have investment, you know, they have their investment committee, which is really their credit committee process. And what you find is banks, depending on the size of the bank, they may have, um, they have a loan officer, um, they may have, ah, you know, senior credit officer. And then it's got to go up their chain. You just find that banks aren't as entrepreneurial as a company like ours. Like our company, you know, corporately, we have about 300, over 300 team members on the corporate side, about half that team's focus on investments and asset management and so forth. And we have within that 150, call it of investments, asset management, um, that's outside of the operation side of our business. You know, that specific team, you know, you have, call it about 40 or 50 people focused just on our credit business. And we, you know, we're solely focused on it. So when, you know, when we have deals coming in, we've built our processes so we can move quickly. Um, we have a better understanding of operating real estate, owning real estate. We have a better understanding of development because we do all that in house. So we, you, uh, know, we have, you know, a really good understanding of the different components there. So when we're making decisions, like we meet, obviously we have, you know, two times a week that we meet for investment committee. And when someone has a, you know, potential loan, um, they bring it to investment committee if they have a potential or someone's looking at a potential development deal that we're looking to do, you know, and provide the equity for. If we're looking for an acquisition, it all goes through the same investment committee. And again, we meet twice a week. We keep it very entrepreneurial. We keep it where we're very constructive so that we can move quickly, we can give answers. And then, you know, internally we have enough bandwidth because we do all the underwriting in house, we do all the servicing in house, um, do the closing in house. You know, we use outside counsel as well. But we have, you know, we have, you know, close to, you know, five or so attorneys and you know, on staff as well. Internally. So we're able to move a lot quicker than a traditional bank. And it's just having that entrepreneurial spirit and having, you know, building out a process that allows us to move quickly as well as just having the knowledge truly in house of what it means to own real estate. And as silly as that sounds, to a certain degree, it's pretty simple. It's just banks have, I mean, they have a totally different view. And that's part of the reason, because in, um, most cases banks are back leveraging our position, so they're still participating. A lot of banks have just gotten to a point where they'd rather finance a group like us versus, you know, being in the position where they're taking on that last hour risk because they're starting to realize they're just not better. They're not suited not only from the underwriting side, on the loan origination side, they're just not suited as, as servicing these loans when there's market disruptions. Being able to analyze what's happening and it's easier shift that risk to groups like us. And that's why you're starting to see more banks and even insurance companies partner with us. We have several insurance companies that are not only buying aid notes from us, but they're actually investing in our funds as well.

Speaker A: Huh. So you're, you're able to say to borrowers, um, the bank process might take 120 days. It may or may not consummate. You come to us, you got certainty to close in 30 days. So it might cost you a little more, but you have certainty to close and you have speed.

Speaker B: That's correct. And the borrower is looking at it as like, you know what, I'm, I need to close this deal. Because there, you know, there's something is happening at the asset level where they're super excited about. So they're like, I'm buying this asset, I'm getting a good deal. I'm getting 65, 70% financing from Peachtree, um, for this loan. And so they're like, this is going to be a short term loan. Because in most cases our loans are set up to be three years with a couple of 12 month extension options on average. Most loans pay us off after 18 to 24 months. And so they're looking at utilizing us for a short term period to create the value at the asset level. And in most cases, uh, our borrowers end up paying us off through a refinance where they get substantially cheaper debt. In a lot of cases, they're able to cash out additional proceeds because they've grown cash flows pretty dramatically over our loan term, um, or they're able to go sell the asset. We've seen that in many cases as well too.

Speaker A: You've talked about the difference between, uh, happiness and fulfillment. So, um, what do you think is the difference and uh, how has that distinction guided your career and your leadership?

Speaker B: You know, happiness, I think is more short term. You know, it's like you, you get a, you know, you get a new car, you're happy for a week. You know, some, some people may be happy for a couple weeks or a couple of days, but it's, you know, it's a short term impact, you know, so I, I look at a lot of times, you know, someone goes out and buys something, you know, materialistic, they're typically. Or m. That's, you know, more m. Materialistic driven, that's going to be more short term happiness. And, and you gotta keep on, you know, buying things to stay, you know, necessarily happy. And then, uh, on the flip side, like when you think about the workplace, you know, a lot of times people are happy because they have a short term win, like they get promoted. But if you don't really enjoy what you're doing on a daily basis, if you don't have joy in your function of, if it's on the personal side or professional side, it's, you know, it's very hard, you know, sustained through being in that position on a job wise or even being in relationships on the personal side. So you want to really enjoy the people you're with, you want to enjoy what you're doing on a daily basis. I'm a big believer in putting people in a position if they're working for us at uh, Peachtree, where they're really doing what they want to do. So if you're hiring just because we've been talking about lending a lot, and we do a lot more than that, obviously. But for hiring someone that's going to be an originator of loans, I want to know that they really enjoy being with people. They enjoy, you know, because that's part of business development. I want to know that they really enjoy the process of business development and going out and calling on people, you know, looking at the actual opportunities itself and being able to do the front end underwriting analysis. Because if they don't, you know, if they don't appreciate commercial real estate and they don't have, you, uh, know, an enjoyment towards it, they're going to quickly burn out because all they're going to be doing all day is talking to owners of commercial real estate and trying to find new loans to give. And if they don't, you know, if they're, you know, say that they're, uh, an introvert and they just don't want to be out there talking to people, it's going to get very draining very quickly for them. And so you don't want to put somebody in a position to fail, and you want to see that someone has sustainable success. And that's why I believe sustainable success, both personally, professionally, is all about finding enjoyment or finding joy versus finding happiness.

Speaker A: I totally agree. Um, now when you hire for these kinds of positions, um, do you hire people who have the characteristics that will lead to this kind of fulfillment, or is it something that you can teach and train?

Speaker B: When you're hiring people, it's really trying to find people that are truly, truly passionate about what they're doing. It's not to say we get it right all the time, because I'm sure you've dealt with this, you know, for businesses that you've been part of.

Speaker A: Sure.

Speaker B: Hiring. The hiring process is very hard, and no one's, no one's actually cracked the code. At least no one I've ever talked to. It's like, if you get it right, 75% of the time, you're probably doing better than most. I mean, I do spend a lot of time wanting to find people that truly are passionate about what they're doing, because a lot of that leads to that. You know, like, if someone's really passionate about it, then they really do enjoy it. And when they have, like, when all of a sudden you're going through the GFC or you're going through the pandemic. Because I enjoy what I do on a day, daily basis. And when we have a market disruption, most people are. If they don't enjoy what you're doing, you're like, you know, this is, like, horrible. Whereas I'm looking at it as, okay, well, let's, let's figure it out. Like, this is not the end of the world, and I love what I do. So I'm happy to be at the office working through it and figuring out the puzzle and figuring out how to move the pieces. Because I enjoy, you know, I enjoy my job, I enjoy the industry I'm in. I enjoy, um, interacting with people as it relates to, you know, being a private equity firm and, and how we help people on doing, lending to them or even buying loans from banks and all that. I get, you know, I Get excitement out of it.

Speaker A: So you optimize for hiring people who enjoy the process, the discipline and the business, not the outcome.

Speaker B: That's right, because it's. I mean, it sort of. It sort of sounds somewhat, uh, cliche or corny to say, but, like, I mean, Nick Saban's probably proven it the best, you know, so if you, if you like college football, I think Nick Saban has proven it with, you know, every place he's been as a coach. It's all about, like, to your point, it's all about, you know, not focusing on the outcome or the scoreboard, but really focusing on the process, having discipline in the process. And discipline in the process really comes down to people that enjoy what they do. And that's, you know, that's the problem with college football right now. And I don't want to necessarily make it a college football discussion, because I could talk about that all day. But with nil, all these, you know, young players are getting paid and they're moving around because of money, not because, uh, they enjoy what they're doing, what position they're doing, or where they're at locationally. They're just chasing the money. And that's one of the worst things you can do. Although we all want to m. Everyone wants to financially benefit, right? To a certain degree, because everyone needs money to buy food and live and shelter and so forth. So I have an appreciation for that piece of it. But you. You don't sustain success by just chasing money. You got to really enjoy what you do. And when you do find people that enjoy what they're doing and they maintain that discipline in the process, and they're not worried about, okay, uh, am I going to make, you know, a million dollars or I'm going to make $20 million. They're just focusing on doing what they're doing. Usually you find over time, they end up making a lot of money because they're willing to put in the hours. And when the market falls into a position where they can be successful, like, for a group like us, we were very successful during, you know, the great financial crisis and the pandemic because we went out and bought so many loans. Well, all of a sudden, when you enjoy what you're doing, you're willing to go out there and grind it and make it happen. And you'll end up, you know, finding these pockets where you do make a lot of money or a lot more money because you're able to, um, you have that process down. You have the discipline to focus on it. At that point in time, had a

Speaker A: conversation with, uh, another one of our three eye members, Sean, ah, Livingston, who was the, uh, fourth pick in the 2004 NBA draft. And he said the first time he played against Kobe, um, Kobe pulled him aside on the court and said, young man, do you love this game?

Speaker B: Right?

Speaker A: And Sean said, yeah, I love this game. And he said, no, do you love this game? Because what, what Kobe was effectively saying, Greg, is exactly what you just said. If you truly love this game, whatever your game is, you'll excel in it.

Speaker B: Yep. No, that's. That's right. Like you will. Absolutely. I'm a complete believer in that. Like, you will excel. You'll end, uh, up because you're going to do whatever, you know, using Kobe, using, you know, like even Michael Jordan to a certain degree. You're going to end up coming back after, you know, because you're. Everyone's going to have losses. Like in business, you're going to have things not go your way. But when you lose and you enjoy it, you're going to come back to the office at midnight and try to figure out what went wrong. And you're going to, you know, be willing to spend the time so that you don't repeat mistakes. And people that don't enjoy it, they're just like, okay, it didn't go my way. I'm going to move on to the next task at hand versus trying to correct what went wrong. So you don't keep having repetitive mistakes in that regard.

Speaker A: The greatest coach of the 20th century, uh, John Wooden, he coached for something like 50 years. And, uh, from when he was a very young man, he had what he called the pyramid of success. And the components of the period changed over time. But one didn't. And that was enthusiasm. No matter what the culture, what the climate, what the teams were, enthusiasm was, according to John Wooden, the indispensable component for success.

Speaker B: I totally agree there. That totally makes sense to me.

Speaker A: Going back to Peachtree, um, now you have a business which I found fascinating, uh, because it seems unrelated to your other businesses. And this is film financing. So how did you get into film financing? And why are you enthusiastic about film financing?

Speaker B: Yes. So we sort of fell into it. It was one of these where, um, you know, I don't even watch that many movies. So I'm not. Like. A lot of times people are like, oh, did you get into it because you're artistic or you're, you know, big into the entertainment space or something? M. I'm like, I don't even watch. I don't even watch most of the movies that we even finance, to tell you the truth. And we've done, you know, a couple of dozen films at this point. But we sort of fell into it because we were looking at different things from a tax perspective. And we were looking at these 181 cells. And that's what originally started our, you know, interest into the space at the time. Our banker, who specialized, um, within the media space, sort of introduced the concept of doing the 181 cell where you buy a film and you can turn around and depreciate the expense and you have recapture over time. So it's a way to delay tax. So as we research that, you know, that trans. That type of transaction, what I started really getting interested in is who's actually doing the leverage underneath these structures and how does it work, because, you know, the 181 side, that comes with a lot of risk. And as I started researching it and talking to our banker about it, he's like, yeah, we, you know, this is what we do. And what he specializes in doing is doing these loans or where he was financing the distribution rights. So, like, when a film is being made, you know, a lot of cases someone will just take on creative risk where they're not going to sell any distribution rights. There's no guarantees there's going to be a theatrical release. They're just going to put up all the money and take that risk. That's not what we do. But what most banks, and there's only very few banks actually that does film finance. But the ones that do it, they basically go in and say, okay, look, we're going to leverage against the, um, distribution rights and we're going to require you to pre sell those distribution rights to, you know, across the world. So they'll sell distribution rights domestically here in the US and then across the world, there's, you know, call it 50 or 100 different territories that you can then sell rights for the streaming rights. In some cases, you may get a theatrical release, but you can't really, you know, there's no guarantee what that's going to show, so you can't really leverage against it. We're really leveraging the distribution rights and the tax incentives that. Because when you make a film, like in the state of Georgia, we've done a bunch of films like in Australia, New Jersey and so forth, there's these tax credits or tax incentives that you get upon completion of the film or upon making that film. And so we'll leverage against that as well. So we'll take the tax incentives as collateral, we'll take the distribution rights, we'll take the um, in some cases there'll be unsold territories where they don't sell them strategically, we'll take that as additional collateral as well. And so we'll make a loan against a film and usually or you know, we're financing 70, 80% of the production costs. Uh, and so the filmmakers putting in real equity, we have the collateral as I mentioned, and then what we require, because these buyers of the film, all they require, you know, when Netflix is buying the film or whoever it is, they're requiring that the film is completed with, you know, this cast of characters that you've laid out or the, you know, the actors or the talent and so forth. And so we'll turn around and uh, and so we'll require them to bond the film. The bonding company, you know, effectively guarantees the completion of the film. They don't guarantee the quality of the film. The buyers of these films, of the distribution rights, they don't. You know, all they want to see is the film is completed as stated. And so effectively it's insurance for us. And uh, and so that's, that's what how we end up doing. So it's again going back to mispriced risk. As we talked about at the beginning we started looking at this, we're like, okay, so we're making loans charging like a 12 to 14% interest rate. We're getting equity kickers in a lot of cases in addition to it. So we own a piece or we get some type of profit participation or some type of piece of the film in addition to it. And it's, you know, mispriced risk because effectively as we leverage our loan, we're making like 20% plus returns without even putting anything against the um, equity kickers. Like assuming the equity kickers turn out to be worthless. You know, we're still getting most cases

Speaker A: gross returns north of 20% moving from films to hotels. So you own and operate around 120 hotels?

Speaker B: Yes, so we own and operate about 120 hotels across the U.S. that's right.

Speaker A: Which flags do you uh, partner with the most?

Speaker B: Yeah, so it's mostly just Marriott, Hilton branded hotels in some cases. We have done some with like Hyatt and Intercontinental hotels, but by far I would say 75, 80% or really probably 80% plus of our portfolio is Marriott and Hilton. Um, they're about even between those two, um, brands. And you know, we pretty much you know we have like a lot of Marriott acs, Marriott Courtyards, Residence Ends, Hilton Garden Inns, you know, Hampton Inns, Homewood Suites, Embassy Suites, those types of brands that we typically invest into. Home2 Suites, which is part of Hilton as well.

Speaker A: So such a prolific ah, hotel, ah, owner. Um, do you have any tips for the listeners which is probably everybody who stays in hotels like in terms of booking or staying like, like, like are there any hacks that we should all know?

Speaker B: I mean I think it's, there's no necessarily crazy hack or anything like that. I think it's probably the big things are, you know, it's probably a good thing to stay loyal to certain brands because you get the points, you get more free nights. I think the brands have done a good job of being a uh, police to make sure there's consistency within these brands and the quality of the hotels. So I'm a big believer in staying in the Marriott Hilton brands because they tend to, you know, they tend to be the most disciplined. You know, as well as Hyatt and Intercontinental to a certain degree too. They both, all four of them tend to be more disciplined in the type of product they're delivering. That's why we try to stay focused on those brands. Um, but it's, I mean the hotel business is uh, you know there's nothing I would necessarily say for guests. I would just say as an investor, you know, make sure you're investing with somebody that's got a lot of experience. If you are investing or if you're doing a project on your own, make sure you're bringing in the right team because there's you know, it's a very tough industry to, to make a lot. I mean you can make a lot of money investing in hotels. You can lose a lot of money too if you don't do it correctly.

Speaker A: So uh, well Greg, thank you so much for sharing, uh, sharing with us what a fascinating uh, business you've built at Peachtree, uh, across so many industries and just applying your principle of identifying mis priced risk and acting accordingly in so many different ways in so many different cycles. Um, so if you could just uh, reflect on a, for a moment about your uh, 3i membership because we're so uh, gratified by your participation. So just tell us uh, what it's meant for you.

Speaker B: Yeah, I mean it's been great from a, ah, you know, like networking perspective. It's been great from being able to see you know, new opportunities. But I would say hands down the networking piece because I'm a big. I mean, I really do like the networking piece because a lot of times you're not able to, like, you get so caught up in the industry you're in. And so a lot of times you're not able to meet people outside of your industry or your neighborhood. And with three I, I mean, you're meeting members across the country or even across the world, I guess. Um, but, you know, I've met so many unique members and being part of, like, different networks, like the real estate network, I've enjoyed, um, being able to participate on a lot of those calls and so forth. So it's. It's just, you know, it's really the. It's. That network, I would say, has been the biggest benefit and the thing that I've appreciated the most since being a 3i member.

Speaker A: Well, Greg, thank you so much for your, uh, membership and for, uh, this fascinating, uh, discussion. Really appreciate it. Thank you.

Speaker B: Yeah, no, Mark, I appreciate the time and really appreciate everything you're doing for 3i to make it happen, so thank you.