Thriving in Competitive Markets: Insights on Grit and Growth Strategies

Dylan Silver (00:00.77)
Hey, folks, welcome back to the show. I’m your host, Dylan Silver. Today on the show, I have Jesse Welch, investment banker in the real estate space. Jesse, welcome to the show.

Jesse Welch (00:12.742)
Thank you, I feel welcome.

Dylan Silver (00:14.99)
I see the beautiful weather over there. Where are you having this call from?

Jesse Welch (00:20.338)
This is from West LA. on my balcony in my office. I got the power lines for the effect, so you can see that it’s an urban environment. my beautiful, I don’t know what kind of plant this is. It’s too heavy to move anymore.

Dylan Silver (00:25.899)
I see.

Dylan Silver (00:44.098)
I always like to start by asking my guests how they got into the real estate space. Your journey is probably different than most as an investment banker. Let’s talk about that.

Jesse Welch (00:58.416)
Yeah, yeah, so, man, my background is actually in entertainment. I was a film producer in mainland China, of all places. And then I moved into tech briefly, and then I moved into capital markets more properly, right at the right time to do it, December of 2029. So that’s when I founded MidCap Global. That went about as well as you could expect. About two months later.

I ended up pivoting from what I was originally doing and raised some money for a private equity firm in the real estate space. That was really my first foray into it, an extremely complicated large scale community, luxury community on the big island of Hawaii, on the Kona coast, really special project. Didn’t realize how difficult it was to do real estate in that jurisdiction or during that time, COVID was a particularly complicated time to be doing.

real estate in Hawaii. And then I really kind of strayed away and back into finance more properly until I got a new partner who was a former director on the REIT desk at Blackstone and he had really deep real estate experience. And so together we’ve really pushed the company forward and it’s been growing and it’s very organically moved into

the real estate space, more on the luxury hospitality side, but we’re doing a lot more real estate and infrastructure. And that’s really not necessarily because we’re targeting real estate, but because our capital sources and the products that we have just lend themselves to certain types of real estate very well, like ground-up construction and development and those more complicated projects.

Dylan Silver (02:50.222)
Do you have a buy box per se?

Jesse Welch (02:55.122)
Yeah, yeah, yeah. So we’re actually industry agnostic. So somebody comes with a data center, somebody comes with a luxury hotel, or occasionally a large scale apartment complex or something like that. Seaport, airport, those are all fine. Really, or a factory, we do industrial, light industrial. Really our buy boxes, we’re looking for something that’s at least $100 million. We want to make sure that the…

that the sponsor comes with at least 5 % of the cash, 5 to 6 % already ready to go, and a data room to underwrite and a project overview. From there, we can start requesting anything additional that we need. I also usually say, if you’re serious, there’s not ever a time that’s too early to reach out to us unless, of course, you just have some idea.

but we can actually come in even before you’ve acquired the land, provided it’s ready to be built on. if you just have an idea, a plan, and you’re able to afford our services, which generally we’re looking for somebody to have one year interest payment and a little bit extra ready to go up front, we can finance an acquisition. We have a lot of tools in our toolbox. We utilize overseas…

banking, some different tax advantage jurisdictions, and some investment banking techniques to put together really creative solutions. Aside from that, we do take on some of more traditional stuff, like large scale things in the United States here and there. Finding third party, we have a lot of banks that are our clients and are looking to go a little bit outside of what the typical bank will do.

But that’s really our bread and butter is that 100 million to 500 million large-scale project financing.

Dylan Silver (05:01.08)
You mentioned before we hopped on here about a deal or a offer on a stadium. How does a deal like that come together?

Jesse Welch (05:08.025)
Ha

Well, our bid wasn’t accepted, so I don’t know how comes together, but I can tell you how it comes to someone like me. Our capital sources are large capital groups, sovereign wealth funds. I mentioned we have some banks.

Dylan Silver (05:18.318)
to you.

Jesse Welch (05:33.554)
Because of that, and just because of the space that we play in, we really don’t play in the large or mega cap kind of area. And then the small caps are really covered by regional community banks and a lot of private investors. So that mid cap space is what we really like because I feel like there’s opportunities to do large stuff, interesting stuff, but it’s also, I don’t have to compete with Blackstone or BlackRock.

And because of that, we work with a lot of pretty well-known names like…

like Marcus, JLL, some of those Jefferies, maybe tier two, tier three kind of investment banks that have deals on the sell side. And when they need somebody to put a bid in on a big project that is very unique, they’ll reach out to us. But really, those things come together with relationships, quite frankly. As much as I would like AI to take

everything over and do my job for me. I used to work in AI, that was the tech that I got into. I got out about 10 years too early, should have another comma on my net worth. But it’s extremely relational, especially at this level. I work with guys, some of our sponsors who are guys who, they’re doing small projects in the grand scheme of things, 100, 110 million dollars, but they’ve won deals from

Goldman Sachs, they’ve won deals against some of these bigger players. And they’re ready to step up and start eating at the big kids table, or I would call it the medium kids table. But it’s extremely relational based, so you have to be very charming at all the lunches. And just know once you meet somebody, really chase that relationship.

Jesse Welch (07:34.33)
And when you connect with somebody, we had a really spectacular, I don’t want to name drop her, but I met this woman who was, we clicked, very sharp, very charming. She told me a little bit about what she was doing and that she wanted to bring this program to a pretty well-known firm. fast forward two months.

She had done it, fast forward three months, she had built out a pretty substantial team under her and now I’m plugged in with a managing director at a very large broker dealer, a global broker dealer, and next thing you know I’m being introduced to this guy, introduced to this guy, introduced to this guy, and then it’s hey, do you guys finance NFL stadiums? Hey, do you guys finance the purchasing of F1 teams? And I say yeah, well actually we do. What do you got for me?

And you might feel 10 of those questions, but one of them will get to the point where you’re actually putting an $800 million offer in and ultimately having to turn around to your investor and saying, it didn’t work out, but it’s a fun process. And you build a lot of relationships along the way.

Dylan Silver (08:50.082)
I’ve heard now the exposure to multiple different industries. You mentioned AI. I think you mentioned film or production. You mentioned travel. And so someone like yourself who’s a multiple potential, multiple different industries that you’ve been a part of, is there one core skill, Jesse, that has made you successful? Or is it a culmination of a lot of things and it’s not like you can point to one thing in particular?

Jesse Welch (08:58.61)
Yeah.

Jesse Welch (09:19.762)
You gotta be gritty. You gotta be really gritty. I mentioned I was a film producer. This was in mainland China. One day they changed a law and it was illegal for Americans to raise money for domestic Chinese films. So I had 24 hours to leave the country. My career was over. Same thing, similar thing happened in 2020. MidCap was not founded to…

It was not founded as a company that was meant to be doing real estate. Originally, the idea was that I was going to, a little bit lofty, but there was hyperinflation in Argentina. And I realized I had paid a guy to develop an algorithm to use small cap, mid cap, buzzword, and micro cap stock as collateral for loans.

Tesla, these mega cap companies, they can do it. That’s Jeff Bezos makes $77,000 a year. Well, he takes loans on his stock is actually what he’s doing. Banks will loan on that. They wouldn’t loan on that to those $1 billion market cap companies, the small ones, $500 million. And I was going to redo all the debt in Argentina, and I was going to save the country. That was in December of 2019. I got capital groups to give us money.

We issued like $50 million in loans. Two months later, all the liquidity dries up and I suddenly owe, you I was able to kind of work my way out of it. I owe $12 million. So I’m less than bankrupt. I’m screwed. I was able to, yeah, lost everything, so to speak, but was able to, you know, make some moves, do some pivots and ultimately get out of it. But, you know, I’m on a plane.

twice a month. I’m in Dubai, I’m in Switzerland, I’m in Spain. There’s just a couple things I think that makes me a little different. If a lot of guys or girls are maybe not willing to go a little bit further, work that weekend, it’s not really a great example, but if somebody wants to meet with me and shake my hand in Idaho, and that’s gonna be the difference between me getting a deal or not, I’ll be in Idaho that afternoon.

Jesse Welch (11:46.578)
I’ll go to Spain and I’ll meet with people. I’ll go to Switzerland for a 30-minute meeting. And that FaceTime and just that expression of sincerity and showing people that I’m real and I’m willing to do whatever it takes to get this deal done and meet them at their level, yeah, it’s hard. There’s harder things to do in the world, right? I’m not mining coal. But 10 hours on a…

or 21 hours if I’m heading to Dubai on a plane just to meet with somebody for one hour and then 21 hours back. Not everybody’s willing to do that. Not everybody’s willing to go that far. And then being willing to learn all the different business cultures. If I’m doing a deal in Ohio versus Idaho versus Los Angeles versus Florida versus Texas versus Switzerland or mainland China, these are very different business cultures. And it’s a lot of different people that you’re dealing with.

Meeting people on their level and actually listening and being willing to go that extra mile, that’s how you win deals, that’s how you win relationships. But there’s this phrase that I like, it’s as shitty as that stuff is, the work works on you more than you work on it. You develop that grit that you need to where after a little while, it’s not such a bother.

that you have to get on that plane because the worst case scenario, you’re going to walk away with a friend or at least somebody who respects the work that you do and the effort that you’re willing to put in. Five years down the road, I’m starting to get deals and even capital from people who turned me down years ago. And out of the blue, they’ve called me because I put in the legwork to plant those seeds. And I surround myself with people who are also gritty.

or, well, everybody’s got a pretty spectacular resume other than me, but I went to Ohio State, I went to state school, and I’ve got some Ivy Leagueers and really impressive people around me, but they’re all very hardworking, very gritty.

Dylan Silver (13:46.35)
That’s huge.

Dylan Silver (14:01.262)
critical the piece you mentioned about surrounding yourself with those people I call it growth through osmosis it’s almost unconscious if you have that ability or even if you don’t if you have some way where you could potentially put yourself around people in my life that has been the biggest single indicator of of growth and potential if I’m able to put myself just in the

Sphere of people who are doing or thinking or acting as if I want to be

That’s been it for me. And I hear that in what you’re saying as well.

Jesse Welch (14:44.71)
Yeah, absolutely. mean, there’s only so much, you know, I was able to do a little bit of work on my own, but things really turned when I brought on a couple more people. And especially people who were better than me at hopefully everything. It forces me to be better, but everybody on my team challenges me in some way. You know, even if it’s just challenging my patience, that’s…

That’s fine too.

Dylan Silver (15:14.35)
Jesse, where is the growth right now in your company and where are you? Have your sights on.

Jesse Welch (15:22.93)
Yeah, so I mentioned that the real estate and that side and the private debt side really kind of opened up when I started when I brought on my partner who was at Blackstone. We’re opening up and trying to grow the equities. So we don’t do a whole lot of this. But you know, there’s a high number of investment banking while I’m a little bit like the anti Wall Street investment banker.

I’m not a huge fan of public markets. They’re great for an exit. But to actually invest, if you’re an employee who’s collecting a W-2, you just want to put your money in the market and forget about it for 30 years, perfect. Do that. Those markets are designed to take money from impatient people and give it to patient people. But as an investor, the really, really good deals, they don’t even hit the market. Like I mentioned, we got the opportunity to purchase an F1 team.

and we got to take a shot at a stadium. We really only touch the top 5 % of deals. Those are the ones that actually make it into the market and get a couple bids. And if it’s not a really, really top deal, we don’t really touch it. But there’s a lot of investors who maybe have 50K, 100K, 500K to invest.

And generally they end up with really crappy deals because they get shopped around and eventually they end up on your RIA’s desk who he really wants to put you in an annuity because he gets like a 50 % commission. But we’re starting to open up a little bit of allowing some Main Street mom and pop type accredited investors into some deals and get them to participate in stuff that’s really good and get them to take shots. So we are…

starting to grow out the equities vertical a little bit. And then at the same time, I think I mentioned, even though our bread and butter is those hundred million dollar deals, we are starting to do some smaller, more traditional, somebody wants to build a fourplex or acquire a fourplex or something like that, or a refi maybe. We’ve now opened up that. So I think the biggest growth will come from equities.

Jesse Welch (17:47.57)
That being said, you you look at the macro environment and I see private credit, the private debt, I really see that growing for another three to four years before the banks rip it back and take their money again. But yeah, I see equities long-term growing that out.

Dylan Silver (18:11.426)
How much exposure do you have to medical and medical office space? And what is your perspective of that space? talk with lot of investors who have actually done some quite substantial things in this space. I’ve talked with both the retail front of it. I’ve also talked with investors who develop trauma centers and hospitals, one in Minnesota, one in South Florida. And it’s remarkable what people are able to get into.

Do you have any exposure to that? What’s your thoughts on the medical space?

Jesse Welch (18:43.548)
Yeah, hospitals, yes. We financed a few hospitals. Those are those large scale, 400, 800 million, a billion dollar tickets. We worked with a government. They wanted to build a new city. And in that was a hospital. And that was about a $300 million chunk of that deal, which was $2 billion.

We have exposure to hospitals. They’re great, they really are. One of the more exciting deals that we’re working on right now is actually a company that builds, they don’t build full hospitals, but they build like trauma centers or urgent care centers or those type of facilities. Not like medical offices, although that is, if you can underwrite it.

and you get the right team in there, which is tough, because you’ve got to find, you know, essentially a doctor who’s good at business and also a business person who understands medicine, which those are not super common. Yeah, but if you can underwrite it you got the right team, they’re really great. Our exposure is finding people who, again, who are either building hospitals or, like I mentioned, they’re doing something that’s definitely hospital-adjacent, building lots and lots of trauma centers or maybe medium-scale medical centers, and they’re building

Dylan Silver (19:43.758)
That’s exactly right. Yep.

Jesse Welch (20:06.154)
You’re like, you two in Texas, one in New Jersey, one in Maryland, one in Seattle. So they need a lot of money to get all those going. So those are really exciting. Those are really interesting. There is quite a lot of opportunity in the medical space. I will say, you better know your shit.

Dylan Silver (20:26.272)
Amen to that. There’s a lot of leverage that comes in and there’s a lot of a lot of risk. mean, I’m in Texas, right? So we’ve had hospitals go out of business and I was surprised that that happens, but it does happen, right? So people think, you know, these places are making a lot of money and in many cases they are, but also they’re footing the bill in many cases as well. Sometimes to a not so good end, but

Jesse, we are coming up on time here. Where can folks go to get a hold of you?

Jesse Welch (20:59.806)
You can go to www.midcapglobal.com. You can find us there, anywhere you are in the world. Non-sanctioned countries, don’t deliver capital to like North Korea or Russia. But we can finance anything in a reasonable jurisdiction on the planet. I suppose if you’re on social, you can go find our newly minted

at MidCap Global Instagram page. I’m pretty easy to find on Instagram, at Jesse Welch. You’re not gonna find any business stuff, it’s all very personal, but if you really find me that charming, you can try. yeah, go on the website, midcapglobal.com, you can get ahold of us. And we’ve got a submission form, I think there’s also an email there. And then if you’re in the Middle East, our Dubai office phone number is there too.

Dylan Silver (21:59.32)
Jesse, thank you so much for coming on the show.

Jesse Welch (22:02.716)
Well thank you for your hospitality, I appreciate you.