How Blockchain Is Changing Multifamily Real Estate Development Financing

Mark Brennan (00:00)
These relationships are everything, and we’re brand new and we don’t have a long history here. So we basically, our plan is to is to we come into this with four guys with very good reputation, great integrity. I’m very careful about who comes into the company. And we are in a place where we’ve evaluated six projects so far and five of them we’re not gonna do.

Quentin Edmonds (01:55)
Hello, everyone. Welcome to the Real Estate Pros Podcast. I am your host, Q Edmonds, and I am excited to be here today. I have the founder of Kynoch Bridge. And listen, he wants to help property developers connect with a new class of capital.

He’s a tech and service company. And I he wanna connect dreamers with this company. He wanna connect dreamers to the soul of what it is that they want to do. And so I’m so excited. I’m so excited that we get a chance to peek through his lens, connect with him, learn from his experience. So I want to introduce you all to Mr. Mark Brennan. Mr. Mark, how you doing today, sir?

Mark Brennan (02:34)
Alright well thanks Quentin, how are you?

Quentin Edmonds (02:35)
I’m doing great, sir. Doing great. glad that you’re here. you’ll hear me reiterate this at the end, but thank you for your time. I think time is our most precious commodity. And so please know that I appreciate your time. You’ve been here today. And sir, Mr. Mark, I’m gonna type I like to dive right in. So I would love for you to tell the people what’s your main focus these days. If you don’t mind, give us a little bit of an origin story, how you got into the space that you’re in.

And then tell us what market you’re in, where you are in the world. And so Mr. Mark, my friend, you have the floor, sir.

Mark Brennan (03:07)
Thanks, Q. Okay, so Kynoch Bridge is only a six-month-old company. It was born on February first this year. And so I’m a software guy. I work in the Salesforce universe and I’ve had a Salesforce systems integrator company. this is my third one, but I’ve I’ve been doing this for a long time. And I had a client who had me build a a portal for his customers.

And he’s he’s in the surety business, surety bonds. And I actually own the IP of what I built for him, and I went looking for this could be doing something, something like this could be taken to another level. and I stumbled upon I’m a good researcher, I’m a good kind of a curious guy, and I stumbled upon a gap in the universe where

There’s about a two hundred billion dollar gap in the real estate construction industry. and what it is, is institutional money is fine for the big, big projects. Those are nationwide companies that basically they have pipes into institutional finance. And when they want to raise two hundred million for a giant building, that conversation is already it’s ready to go and it’s just about numbers.

At the tiny end, there’s a builder wants to buy a piece of land and do a duplex. He can do that with friends and family and top it up with a bank loan. He’s he’s probably gonna be okay. In between those two, the tiny and the huge, there’s a huge gap of twenty unit to hundred unit multifamily apartment buildings.

Nice ones and medi medium ones that they can’t get built because the people who want to build them don’t have access to the capital. They go to the high street bank and the bank wants they want collateral, they want you to put your house up against up against it, and they want you to have enough skin in the game so that the LTV, the loan to value ratio, is acceptable to them. When you’re trying to raise twenty million dollars, there’s not a lot of people who have enough skin in the game themselves.

So they get told no, or they get told, well, we have a bad loan for you at like sixteen percent. Yeah. Now look, guys, sixteen percent, you’re not gonna make any money. That’s your whole upside is gone. and the other thing they can do is they can go to local syndication groups, same thing, it’s stuffy. the financial system for this corner of the market is not serving people well. So we came in with a this idea.

that we stumbled upon real world asset tokenization. So essentially this is a blockchain play and it’s new. It’s only three years old. It’s gone from zero dollars under management to about thirty five billion dollars. It sounds like a lot of money, but in the crypto world that’s nothing compared to, the Bitcoin and the and the big currencies. but it’s the important part is that it’s grown dramatically.

And what it does is it makes investor money safe.

So I’m asking you to picture, without this, you’ve got fiat currency. You’ve got imagine the bank did say yes, or there’s a group of investors locally that came together and they said, Yeah, okay, here’s here’s the 20 million made up of several different people, the bank and four high net worth individuals, and you’ve raised your money. Now you’ve got it in a you’ve got it in an escrow account in in your local bank.

Quentin Edmonds (06:59)
Yeah.

Mark Brennan (06:59)
It’s semi-safe. Yeah,

Now one property developer could have multiple projects running and another one might need a bit of help and he might just borrow some money from here to help over there. Can’t do that with our with our mechanism, you can’t do that. And then the general contractor might be a bit squeezed and he might draw, take a draw and not pay his subs. Now we’re all in trouble, all of us. again, we can’t do that.

what we do is we take in that twenty million. Now the investors don’t have to be local. They could be far away. They could actually even be outside of America. One could be in London, one could be in Dubai, and one could be in Hong Kong. No problem. They’re interested in the project, they like it, and it pencils and they say, Okay, I’m in for X dollars, somebody else is in for Y dollars, and we eventually we raise to our target. The money is safe on the blockchain.

And it’s managed by a smart contract. Yeah. So the smart contract says it’s time to bring in the digger to demolish that strip mall that’s old and tired, and we’re gonna put in a 37-unit multifamily, and it’s gonna be beautiful.

Quentin Edmonds (08:05)
Yeah.

Mark Brennan (08:05)
Time to pay this guy, and so the draw comes out of the blockchain, drops down to fiat currency, and the GC pays his demo guys and nothing else.

We manage that all digitally. Okay. So then we manage this all the way through until the construction is complete, the lease up is beginning, and then all 37 units are leased, maybe except for a demo unit. and so we’re at 95% occupancy, and we keep it that way for a year. We have now stabilized the build the assets income, and it’s time for an exit. We manage the exit and then we manage the distributions.

And if the project does what it was supposed to do, everybody gets a two point two X equity multiple and and we’ve done well and everybody’s happy.

Quentin Edmonds (08:47)
Yes sir. Yes sir. I love it, man. Well so talk to me, Mr. Mark. Why this? Like why is this your passion? Or where did the passion come from to go to this?

Mark Brennan (09:36)
Great question. So I’ve always, I drew buildings. I was like a kid architect when I was eight. And something happened I forgot. I just I forgot to do that when it was college time and I went into software. I s I started writing code and I’ve always loved buildings. Obviously beautiful buildings, nicer than boring buildings, but I’ve always beautiful homes and beautiful

apartment buildings, hotels, ever so and I’ve always wanted to play to to have a part in this and I just didn’t. I’ve been building software and so I’ve I’ve got into real estate a couple of times in a small way and it’s been interesting. It’s an interesting world and I know a little bit about it but not not really as as a guru. And I stumbled upon this opportunity and I thought, my goodness, look at this. With an innovative

financial mechanism and an innovative security meant mechanism that keeps everybody’s money safe. I could come and offer a corner of the market something that it’s hungry for. Yeah. It’s indisputable that there is a $200 billion gap of there are there are projects that want to get built and they’re not getting built. So we could be the catalyst that actually addresses that void.

If somebody comes along and they want to build an ugly building, that’s okay. You know? that’s okay. we prefer beautiful buildings, but that’s not the point. The point is that here’s a dreamer and they have a plan and and we might be the door that opens for them when the other doors didn’t. That’s

Quentin Edmonds (11:02)
Absolutely.

Mark Brennan (11:03)
really that’s really where my passion is.

Quentin Edmonds (11:05)
I love it, man. So listen, of course, some operational things, need to be put in place. I know, six months old, but what are some operational things that you’re going to put in place or maybe have already put into place that is going to be valuable to your success?

Mark Brennan (11:19)
Good question. so these days, especially if you are a software geek, you could do things really quickly. so I wrote a million lines of code last year, so writing code is not a problem. so Claude and I got together and we went furiously at this. And we essentially built a portal that

Is able to manage a project from beginning to end. It basically it creates an AI generated project plan. Obviously in collaboration in a real project, we’d have a general contractor, an architect, a construction manager, and of course the property developer. This is a team effort. But we eventually have a finalized project plan. We keep it on the blockchain and we manage.

Off chain events like the demolition is complete. great. The land is leveled. It is the land is prepped and leveled. Okay, so we checkbox that off the blockchain, and we have an oracle that connects it up to the blockchain and it tells the blockchain that this milestone is complete on the project. It

then reports out to everybody who has access, private, secure access to this project. These would be the investors.

Okay. Now we also connect to a tokenization platform, which is we decided to go for the Apex Group. It’s the biggest one. It’s a global platform. They have offices in locations all around the world. They have three and a half trillion dollars in assets under management. That’s difficult number to even imagine, but that’s how much money they they manage. And

we connect into them. So we’re sitting on a huge mountain of institutional trust. Because if we were just a little company with, four guys, that doesn’t necessarily carry any institutional trust at all. So we’re sitting the money is actually sitting on top of Apex Token and T-REX. So it we want our investors and our builders to know that it’s safe.

Quentin Edmonds (13:08)
Yeah.

Mark Brennan (13:09)
so we’ve built a lot of feature, a lot of code. it’s not finished, but it’s at a place where it’s ready for the first project.

Quentin Edmonds (13:16)
Yes, sir.

Mark Brennan (13:17)
And the biggest work that we’ve done is actually non-technical. We’ve gone out and talked to a whole bunch of property developers and builders. And we’ve learned a lot. So this has been a very interesting the first two months was really just geeking out on building something that we can demo. Yeah. We decided stop there.

It’s good enough to demo and we don’t want to go too deep without conversations. And so we’ve had a lot a lot of really interesting conversations. property developers are are are great. They’re they’re bold and they’re brave and they don’t panic when one thing breaks. Yeah. So we have this attitude like, yeah, we’ll fix that.

Quentin Edmonds (13:52)
Yes, sir.

Mark Brennan (13:53)
but at the same time, we all know that construction projects can get out of hand, right? They can actually fall over. So

things breaks, another thing breaks, next thing the project is behind, but then something happens that makes it really broken. and so our job is to to manage the risk and manage the execution so that everybody can see what’s going on. So we never have an Enron situation that it’s bad but nobody knows it. That can’t happen in our world. But lot of property developers

started off as hammer and nails guys and they like they like the information in their heads. They don’t necessarily like the world knowing exactly what’s happening. That’s they feel like they’re exposed. Yeah. They are. We are

Quentin Edmonds (14:33)
Yeah, yeah, yeah, absolutely.

Mark Brennan (14:35)
So we

think that there’s a new level of transparency that’s pervasive across everything we do. our credit score twenty years ago it was just a number, but now institutions can see deep inside what we’re doing and whether we like that or not. And this is the same same idea.

Quentin Edmonds (14:51)
Yeah.

Mark Brennan (14:51)
So yeah, it’s been a really interesting a lot of developers are really excited about this.

And the biggest lesson that we’ve learned so far, Q, is that not all projects are good. Right.

Quentin Edmonds (15:01)
Yeah.

Mark Brennan (15:02)
So we can get we can meet a developer who gets super excited about what we’re doing. they understand it, they like it, and they say, I’m in, and they bring us their project. We look at the numbers, and then we ask Claude to look at the numbers, and Claude comes back and says, You shouldn’t do this project.

And then and sometimes it’s like two or three things that are fixable. adjust this number up and adjust this number and then fill in a blank that was just missing, and then you’re okay, your project pencils. But in other cases, we’ve been too optimistic about the costs, they’re actually higher than that. And we’ve been too optimistic about the rent, it’s actually lower than that, which means your sell value is lower than that, which means we’re working for free, and which means we shouldn’t do the project. And that’s the hardest lesson we’ve learned so far.

Quentin Edmonds (15:44)
Yeah, yeah, yeah. Well, you’ve talked about reaching out to people. So I want to hear your philosophy on relationship building. Built some relationships, got three partners. So talk to me about building healthy relationships and how important it is to what you’re doing.

Mark Brennan (15:58)
I think it’s everything here. And the great thing is that we’re that we’re we knew this, but we’re it’s confirming as we go, is that every property developer and every builder that we’ve spoken with so far, their entire world is built on relationships and reputation. So I have a good friend who’s a very good surgeon, it’s like a top surgeon, and he knows that

His next surgery could go bad. And over a long career, he’s had one or two surgeries that haven’t gone well. But overall, he’s a top surgeon for a reason. it’s his track record. And same, same with these guys. So a really good property developer has had a project somewhere that didn’t go well, and maybe one that was actually cost everybody money and it was all bad. But the others are are good and so his integrity and his work ethic.

are what will make the project successful if that is humanly possible and most of them are and also the integrity of actually saying no to a project that doesn’t look healthy. So these these guys have to be they have to have excellent judgment, they have to be numerate and they have to be smart, but really the integrity and the relationships there the relationship is not broken if you say no to a project, right? Which just means this is a this is the person

That you have a professional relationship with, they bring a project to you, and the developer goes, spends a lot of hours on it, evenings and weekends, comes back, a week later, I’ve analyzed it, I don’t want to do it. Yeah, yeah. And that’s okay because the next one could be different.

Quentin Edmonds (17:23)
Yes, sir.

Mark Brennan (17:24)
These relationships are everything, and we’re brand new and we don’t have a long history here. So we basically, our plan is to is to we come into this with

four guys with very good reputation, great integrity. I’m very careful about who comes into the company. And we are in a place where we’ve evaluated six projects so far and five of them we’re not gonna do.

Quentin Edmonds (17:45)
Yeah.

Mark Brennan (17:46)
One is one is we’re still under evaluation. We’re we may not do it, but it’s they’re all very exciting. It’s just that when you can’t get it to pencil and when you

When you can see that you’re going to make a loss, you’ve got to go back to those relationships and say, Here’s what I’ve got. What can we do? Sometimes

Quentin Edmonds (18:02)
Yeah. Yeah.

Mark Brennan (18:03)
there isn’t anything we can do. It’s just not it’s not made to make a profit.

Quentin Edmonds (18:07)
Absolutely. So well said, Mr. Mark. Listen, sir, if someone wanted to reach out to you, connect with you, collaborate with you, learn more about what you’re doing, how can they get in contact with you, sir?

Mark Brennan (18:17)
Absolutely. [email protected]. So that’s the main way. Also on LinkedIn, Mark Brennan. And so that that’s basically how to get in touch. we’ve got a contact me page where the website doesn’t actually give out a whole lot of inside information because it’s a p it’s the out the public part of the website. but once you get in, then you can access projects and you can access

investor opportunities. So would welcome all conversations with anybody interested from any angle.

Quentin Edmonds (18:46)
Yes, sir. Well, listen, let me say three things to you. One, I’m gonna reiterate it. Thank you for your time. I think time is our most precious commodity. So again, thank you for being here. Two, thank you for your story. Thank you for coming, sharing about your business, sharing a little bit about you. I believe our stories, they plant seeds for people. And we never know when those seeds are going to take root, but they can take root in any given time. So thank you for coming and sharing and really planting some seeds.

Lastly, thank you for the way you think, even just the thought behind what you’re doing. Thank you for your brain, your the way you think and bringing that thought process to this platform. I greatly appreciate you coming on today. Absolutely.

Mark Brennan (19:19)
Thank you, Quentin.

Quentin Edmonds (19:21)
So listen, y’all heard Mr. Mark. The information is in the show notes. Please get in contact with him. But definitely make sure you’re subscribed here. I promise you we’re going to continue to bring up amazing people, just like Mr. Mark. So, sir, I say thank you again. And everyone else, y’all have a fantastic day.