Opportunistic Real Estate and Hard Asset Credit at Mavik – Vik Uppal (EP.525)

Vik Uppal is the Founder and CIO of Mavik Capital Management, a $2 billion flexible special situations investment firm grounded in commercial real estate and hard assets that operates through a credit lens. Vik began developing properties as a teenager and after a difficult experience during the financial crisis, moved to New York to begin a career as a professional investor. Our conversation covers Vik's path from developer to distressed investor and the principles he built Mavik around: stable capital, alignment, flexibility, and finding opportunities where capital is scarce. We discuss filtering a wide funnel for ideas, creating downside protection, identifying opportunities in commercial real estate, avoiding the AI infrastructure boom, and growing an investment business without losing its edge. Learn More Follow Ted on X at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list (https://capitalallocators.com/) Access Transcript with Premium Membership (https://capitalallocators.com/signup) Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com https://thepodcastconsultant.com/)

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  They say they're flexible and nimble and agile and they have the right incentives. The reality is, it's just not true. A lot of them either have the right intent or they did do those things in the early days of their lifecycle, but now as the industry has become much more mature, the focus is a lot more on AUM growth, volume, scale, and these big platforms of effectively factories where their focus on how do we make as many widgets as we possibly can? And so a lot of those organizations have become so big and bureaucratic that there's no way that they possibly could be flexible and nimble and agile. I looked at a lot of firms where you're constantly in this hamster wheel of having to raise and deploy capital.

• 0:43Speaker 00

  Are you actually focused on investing when and where it makes sense? Or are you doing it by necessity? You have to be okay sitting on your hands and not doing anything for sometimes longer periods of time. As an example of that, in 2023, we didn't do a deal for almost a year. I wrote an investor letter right after that and I saw our deal flows a five out of a 10. And people were saying, how can you say that? Because most people say their deal flows always a nine or a 10 out of a 10. That's simply not true.

• 1:20Ted Seides?

  I'm Ted Seides and this is Capital Allocators. My guest on today's show is Vic Uppal, the founder and chief investment officer of Mavic Capital Management, a $2 billion flexible special situations investment firm grounded in commercial real estate and hard assets that operates through a credit lens. Vic began developing properties as a teenager and after a difficult experience during the financial crisis, moved to New York to begin a career as a professional investor. Our conversation covers Vic's path from developer to distressed investor and the principles he built Mavic around: stable capital, alignment, flexibility, and finding opportunities where capital is scarce.

• 2:05Ted Seides?

  We discuss filtering a wide funnel for ideas, creating downside protection, identifying opportunities in commercial real estate, avoiding the AI infrastructure boom, and growing an investment business without losing its edge. Before we get going, you're on a plane headed to an annual meeting. And this time of year, you're definitely on a plane headed to an annual meeting. With all the travel in front of you, it's a very busy time, so I'll keep this particularly short. Before you doze off in the thin air of the cabin, that's a great time to let the soothing sounds of Capital Allocators fill your ears. And when you find yourself at a cocktail party at one of those meetings, in that uncomfortable moment where you're not sure who to talk to or what to say, that's a fantastic time

• 2:49Ted Seides?

  to tell them about the Capital Allocators podcast. It's an icebreaker that's the gift that keeps on giving. Since you're at an event, if you've come to one of ours, that's a great time to tell someone you think highly of about our Capital Allocators summits. Because if you know, you know. Thanks so much for spreading the word.

• 3:10Ted Seides?

  Please enjoy my conversation with Vic Uppal. Vic, thank you so much for joining me.

• 3:16Speaker 00

  Thanks for having me.

• 3:17Ted Seides?

  I'd love you to take me all the way back to where your initial interest in real estate came from.

• 3:23Speaker 00

  I was born and raised in Minnesota. My parents were immigrants from India. My dad came to get his master's at the University of Minnesota and he was an engineer by profession. On the side, he would buy and build real estate, so mainly single-family homes and townhouses and things like that. As a kid, I grew up in the real estate business. I'd go to construction sites and see how things were built or would go collect rent. I learned real estate at a very early age on the front lines of how things are actually done from building, managing, leasing, so forth. And I became interested when I was in high school. Then when I was 18 years old with my dad, we built our first multifamily project, which

• 4:07Speaker 00

  was a 48-unit apartment building. At that point, I had read a lot of books, I'd experienced a lot of things with my dad. I had no history of building anything of significance. It was the best experience, but also one of the toughest projects because almost anything that could possibly go wrong went wrong, from dealing with contractors, construction budgets. It gave me a tremendous experience around how do you actually build things on the front lines on a hands-on basis? And after that, I continued as a developer while I was in college. We built 124-unit apartment building. I bought and sold different pieces of land, as well as develop other commercial property all around the Twin Cities area.

• 4:50Speaker 00

  I always had this vision of building something or renovating something in downtown Minneapolis. We'd identified a historic building that was owned by a family. It was mismanaged and undermanaged. We bought that in 2007 at the worst time possible, right before the financial crisis. And we worked with a lender that we'd done all of our project with. They had a very good reputation in Minnesota and we used historic tax credits to renovate the property. The whole thesis was this building, which was really well-located, but it was mismanaged, as well as had not been upgraded for almost 100 years. We'd bring a lot of the systems to market and that would greatly enhance the value of it. We were one year into the renovation.

• 5:34Speaker 00

  One day we wake up and our lender has been closed in 2008 by the FDIC. Nothing you could have underwrote going into the deal, but it was my first experience into distressed investing and just how unpredictable it can be and how many variables can change and evolve so quickly. That set off a two-year, very litigious process where we were working with the FDIC, trying to get them to fund and dealing with a failed bank. We had contractors that had done work and we had to figure out how do you pay them? And at this point, in the middle of 2008, there was no chance to bring in a new lender. That took me almost two years to be able to work out.

• 6:14Speaker 00

  I was 24 years old, rolling up your sleeves and dealing with lawsuits and the FDIC. And I thought about what I wanted to do long-term. Do I start back over again as an entrepreneur and start building real estate in the Twin Cities area? And I decided I was going to move to New York. I didn't know a single person. It's funny, when you're young, you think that two years feels like a lifetime. I didn't want to get my MBA, so I decided to go to a one-year master's in real estate program at Columbia. Knowing that I didn't have any relationships, I decided I was going to run for class president. I talked about my experience as an entrepreneur and what I could do as class president. Ultimately, I became the class president.

• 6:59Speaker 00

  I viewed it as a great way to meet people and to build a network. One day I was sitting in class and a guy named Blake Hutchinson, who's now the CEO of Omer's, was talking about the value of relationships. And he was saying that a lot of the things that you think about going into grad school is about the things that you learn, but so much of it is about the connections and those last a lifetime. He was talking about his best friend, who he had met while I was in the same program at Columbia, a guy named Mark McGoldrick, who was the co-founder of the special sits group at Goldman, this legendary investor. He made a big name for himself during the Asian financial crisis and was doing all sorts of distressed and opportunistic investing.

• 7:42Speaker 00

  When I was hearing this, I said, boy, this guy sounds like he can walk on water. It was just unbelievable, his story and the deals that he was doing. I went to Blake after class and said, could you introduce me to Mark? And so he gives me his business card, "Sure, email me." I emailed a couple of times, I don't hear back. And I said, look, I gotta find a way to meet him. I went to the Columbia administration and I said, did you have any connection to Mark? And they said, we know who he is, but we've had no connection with him for almost 20 years. Eventually Blake had introduced me to Mark. At this point, he had left Goldman, he'd started a firm called Mount Kellit, which was effectively a spin-off of Goldman Special Sits. He had raised almost $3 billion the week after Lehman failed.

• 8:24Speaker 00

  He followed that up by raising another almost $4 billion a few years later. I met Mark, it was supposed to be a 30-minute coffee. It started off as an awkward introduction because he was not the most warm and welcoming person. I told him about my life as an entrepreneur and how I started at a very young age. That business didn't go as planned and blew up during the financial crisis. And we talked a lot about our philosophy on life and investing. Keep in mind, at that point, I had no experience in any sort of institutional business. I knew how to use Excel, but very high level. And it ended up being a four-hour meeting. And at the end of it, he said, why don't you come work for me as a part-time intern?

• 9:08Ted Seides?

  What aspects of that meeting resonated that bubbled up from a half hour with a guy who's really busy to a four-hour conversation?

• 9:16Speaker 00

  Sometimes when you're an outsider into something, you look at it, how it could be versus how it is. A lot of times when people are in a system, they accept a lot of things. This is norm and this is exactly how things are done. I looked at an industry where I said, there's so many things that don't make sense to me. My whole career up until that point had been thinking like a principle. I saw that with my parents being immigrants, buying and building real estate. I looked at the alignment that I would see in a lot of these firms, did not make any sense to me. The focus on AUM growth did not make any sense to me because I was an outsider into this industry, especially for somebody at that stage of their life.

• 10:00Speaker 00

  That was something I probably Mark had never heard before and it was less about, here's my resume, I went to the best school, I'm an Excel genius versus just more philosophical. That then turned into a huge crossroads in my career that changed the entire trajectory of my life.

• 10:17Ted Seides?

  When you stepped in to work with Mark at Mount Kellit, What did you start to see, sitting in an institutional seat for the first time, that you hadn't been exposed to as an entrepreneur?

• 10:27Speaker 00

  I was working with some of the best and brightest minds, specifically in distressed investing. And at that point, Mount Kell was an $8 billion special sits firm, investing in all asset classes throughout the world, had this incredibly prestigious reputation. I remember the first day I showed up, the HR person was like, who are you? And never saw my resume. Literally, it was like, why don't you just start on a Monday? That was Mark's philosophy, even from the early days of Goldman of if I believe in somebody and it's a true meritocracy, then you have the ability to rise to the top. I knew from day one that I was never going to be able to excel by being the strongest

• 11:08Speaker 00

  in terms of technical skills. You had people that were geniuses in Excel and memos and underwriting. I thought to myself, even as an intern, what can I do to create value and separate myself from everyone else? And I said, look, there was two ways. I have to find some unique deals that either Mount Kell or other firms don't necessarily have access to, or I have to find capital. So for three months, I focused on that. And I found a couple of interesting opportunities that we ended up investing in. That then led to me joining Mount Kell at full time, once I graduated from Columbia.

• 11:46Ted Seides?

  What happened from there?

• 11:48Speaker 00

  Within two years, I was co-head of US real estate investments, which was about 25% of the firm's capital. And it was an incredible experience because I learned from Mark and some of the best distressed investors in the world. And that shaped so much of my thinking around how to invest and how to look for blind spots, especially at a special sits firm. You see so many unique differentiated things. And that was the whole Mount Kell philosophy of go anywhere, do anything, focus on the best relative value, regardless of what form it comes in. And we were buying companies out of bankruptcy. We were restructuring companies. We were doing development deals. We were doing management buyouts. So many

• 12:31Speaker 00

  unique things that gave me such diversity across all different types of deals. But also being an outsider, I would look at a lot of things. I'd say, there's things that don't make sense from a alignment perspective, from a culture perspective. That was always brewing in my mind. I was focused on how do we outperform and how are firms built in a way that allow you to outperform? From there, I was a managing director at Fortress and their real estate and their credit funds. And same thing, learn from some of the amazing people. But I felt like there was a opportunity to create a next generation investment firm, going back to the original principles where a lot of the great firms were built on it.

• 13:16Speaker 00

  Building a firm that does have the right of incentives, has the right philosophy, has the right investment strategy that's flexible and nimble and dynamic. And that was the catalyst of starting Mavic.

• 13:29Ted Seides?

  When you went to start Mavic, all of those principles or concepts you hear about, alignment and the right culture and being flexible, how did you take what you learned and then put structure around it?

• 13:44Speaker 00

  Any firm probably says all of these things. They say they're flexible and nimble and agile, and they have the right incentives. The reality is, it's just not true. A lot of them either had the right intent, or they did do those things in the early days of their life cycle. But now, as the industry has become much more mature, the focus is a lot more on AUM growth, volume, scale, and these big platforms of effectively factories, where they're focused on how do we make as many widgets as we possibly can. And so a lot of those organizations have become so big and bureaucratic that there's no way that they possibly could be flexible and nimble and agile. I thought about starting a firm, there's the traditional path, you start something from scratch. The challenge

• 14:28Speaker 00

  with that was, one, there's a huge amount of business risk, having the right infrastructure and making sure that you have the right processes in place. And then also, a big part of being able to outperform over the long run is having a stable capital base. That's the one thing where I looked at a lot of the great investors who have performed well over a long period of time, is they have stable capital. You could even be right over the long term, but over the short term with volatility, you could look wrong. Having a stable base is so critical. I looked at a lot of firms where you're constantly in this hamster wheel of having to raise and deploy capital. Are you actually focused on investing when and where

• 15:11Speaker 00

  it makes sense? Or are you doing it by necessity? If you're doing it by necessity, that creates so much business risk. I went down a more untraditional path. Could I look at a platform that I felt was subscale and was underliving its potential, but had a strong base? That set off the 18-month process. In February 2018, I bought a firm called Terra Capital Partners and took over their funds, which is now part of Mavic.

• 15:40Ted Seides?

  Every time someone wants to start a firm, there's some need for capital. As I said, Mark McGoldrick had the ability from his experience at Goldman to raise $3 billion and get going. When you went to buy Terra, how did that all come together?

• 15:53Speaker 00

  There was a couple of things. One was the founders of the firm, they were at retirement age. One was his late 60s, one was in his 70s. It was also at a time when there was a black cloud around the whole retail investor world. Now, there's so much interest in it. But at that time, there was a few institutional investors that were interested in that area. That's always how my mind has worked, which is where there are parts of the market where capital is not necessarily flowing rationally. That's where it started. And then this took a one-year process from when we started talking to when we ended up closing and buying the platform. I capitalized it with a combination of my own personal capital, some family capital,

• 16:38Speaker 00

  as well as some other institutional relationships that I known for a long period of time, and that helped put me in business.

• 16:46Ted Seides?

  What was it that you bought?

• 16:47Speaker 00

  I bought the management company, as well as I took over the funds that they managed. Majority of the capital was in a private REIT. That was a vehicle that dated back to almost 2009, had a strong track record.

• 17:01Ted Seides?

  How about the renaming of Mavic? Where'd that come from?

• 17:04Speaker 00

  The first two years, from 2018 to 2020, a lot of the focus was restructuring the platform to manage more institutional capital. At that period, we didn't raise any outside capital. It was much more focused on how do we improve all of our processes? How do we think about what's going to be the long-term investment strategy? What do we make sure in terms of the right players and the right seats? It was an interesting experience of coming into an existing platform that had a certain culture, a certain way of doing things, and then shift that to looking at things in a very different lens. And then 2020, COVID hits. All of a sudden, we're thinking, this is now going to be a great

• 17:46Speaker 00

  environment, especially more for distress, which, based on my experience at Mount Kell and Fortress, that was going to be a huge opportunity set. Starting in end of 2020, we launched our first institutional fund. From there, we renamed the platform and the management company, Mavic, which is much more aligned with the philosophy of how I thought about the business, which was having a level of stability, a strong foundation, but also being incredibly agile and nimble. The name Mavic is derived from a Hindi word called avik, which means the strength of a diamond, but also the fluidity of water. Those two things are emblematic of how the firm is operated, but also the way that

• 18:31Speaker 00

  you need to be able to have a unique edge in order to be able to outperform over the long run.

• 18:36Ted Seides?

  Once you start raising capital in a traditional institutional structure, how do you maintain the different alignment, the different incentives that you saw the rest of the institutional business gravitate towards over time?

• 18:50Speaker 00

  Anytime you're going against the consensus and especially market practice, it's difficult to do. That's why you see there's this herd mentality. This is what everyone's doing. That feels safe. My entire background of thinking like a principal, you would see these firms where very few people were investing in the funds. There was very few people that were sharing in the carry and the upside. That model never made sense to me. How do you not have an environment where everyone is eating their own cooking, where everyone is sharing in the upside, and you are shoulder to shoulder with all of your partners? In our funds, every single person that is legally eligible by the SEC is invested in the funds.

• 19:32Speaker 00

  And that's not just the investment team or some of the senior members in the organization. That's across the entire company. What that does is not only provide the right alignment, the right skin in the game, but also incentivize the right intellectual curiosity. Because people are looking at every single dollar as if it's their own. They're questioning every single thing. And I will have sometimes even now where investors will ask, why do you do that? Does that not create more complication for you? And the answer is it does, because you're having to answer a lot more questions. And there's a huge educational component to it. But when you're committed to something for the long term, you're willing to put in that hard work. We think the same thing about the incentive fee, where we share the

• 20:14Speaker 00

  incentive fee with every single person across the organization. It's a philosophy and a mindset where you're truly thinking like an owner. A lot of firms will tell you the exact same thing, that we want everyone to think like an owner. But the reality is, market practice is not to pay people that way. Where our philosophy is much more focused on long-term, consistent performance. And we want to make sure that everyone across the organization is incentivized that way, and they're all steering in the right direction.

• 20:45Ted Seides?

  The idea of being flexible and nimble is super interesting. It can get difficult when it comes to how are you filtering through ideas and sourcing ideas. How do you go about doing that?

• 20:57Speaker 00

  If you think about at a very basic level, what most firms do, they define a investment strategy or their mandate and they say, we're going to invest in this. Then they go raise capital and they said, we're going to invest in this. It's very targeted and for a lot of institutional investors, then they can figure out what bucket do I put you in? Are you in credit? Are you in private equity? Are you in real estate? So I know exactly where you fit. That is the traditional model that almost every firm uses. But the problem is if you have an idea today, in six or 12 months, the world is moving so quickly that it's impossible to say where you're going to find the best opportunities.

• 21:37Speaker 00

  That model never made sense to me of being beholden to rigid investment mandates versus let's go find the best opportunities, whatever form that ends up coming in. At Mavic, what we do is we say, let's keep a flexible investment strategy and let's let the opportunities shape where we invest. Our standards of our number one priority is capital preservation. We want to make sure everything we invest in has huge downside protection, margin of safety, yet we're generating attractive risk adjusted returns, but having a flexible mandate. Now, a lot of our larger peers, they do those things, but they typically do it with different funds, different teams.

• 22:18Speaker 00

  Across a big organization, it is hard to be completely integrated. Some of the best opportunities we end up finding are these tweener deals that end up not fitting with this fund or this team and they somehow get lost in the ether. We find those, that means we're investing across all different markets, public, private, debt, equity, and so it's a big funnel. But that allows us to be very patient, disciplined, and make sure that we're only moving forward with the highest conviction opportunities.

• 22:49Ted Seides?

  When you're communicating to whoever might be showing you opportunities, whether it's peers or folks selling assets, how do you let them know what the Mavic deal looks like so that they bring it to you?

• 23:02Speaker 00

  There's a huge educational component because there's no typical deal, there's no typical structure. It's much more around providing customized solution to that opportunity. That's both a blessing and sometimes it can be a huge challenge because you do all of this stuff, from the investor standpoint, where exactly do I put you? That's sometimes the challenge for us because we say, we don't want to be in a bucket because then you're very constrained and doesn't give you the ability to focus on the highest conviction opportunities. From a deal flow perspective, while there's an education component, it's a huge benefit because it allows us to look at a situation and say, what can we do for this situation

• 23:43Speaker 00

  versus we have to fit something and we have to impress upon our counterparty because that's what our mandate allows. So many of our deals will look a certain way when we'll start to look at them and by the time we end up closing, they look completely different.

• 23:58Ted Seides?

  As you start to filter what comes in the door, what are the things that draw your eye to go spend more time on?

• 24:06Speaker 00

  Our number one priority in anything that we look for is capital preservation. And so the first thing that we're looking at is, is there a clear line of sight to how we get our money back and are we accounting for both the known risk as well as the unknown risk? If you look at my career, a lot of it has been defined by ups and downs. That situation that I mentioned that happened to me during the global financial crisis, that's not anything that I could have underwrote going into that deal of your lender is going to be closed by the FDIC. A lot of that has shaped my thinking of you have to build in a lot of buffer for the things that you can understand. There's always these things that are completely unpredictable that you have to account for. I'd say the second thing is, how do we focus in the areas in the market where capital's

• 24:51Speaker 00

  not necessarily flowing rationally? Because that's what allows you to have a big competitive edge. That could be deals that are going to be too small for a lot of our larger peers. That could be business plans or certain industries that could be out of favor. You have to be comfortable when you're going against the consensus of dealing with a lot of scrutiny, both from a investor perspective, but also from a public perspective. You have to be willing to withstand that and have a lot of conviction in the things that you're doing.

• 25:20Ted Seides?

  Is there anything you do out of consensus in your underwriting process?

• 25:24Speaker 00

  We're constantly stress testing all of our assumptions. We're looking at what happens in these draconian situations. I think our process is fluid and so there's not one specific, okay, we're exactly doing this and it's rinse and repeat. For a lot of platforms, you're doing more commoditized type of transactions. You have more of a factory model. You can do that. No two deals, no two situations are going to look the exact same. And that's where making sure we run the platform in a way that's entrepreneurial is an important part of what we do.

• 25:56Ted Seides?

  How do you organize your team to go after opportunities and think this way?

• 26:00Speaker 00

  It's taking a lot of effort. It's not a philosophy that everyone understands right away. That's one of the things from an investment strategy perspective of being open to such a wide funnel and you're constantly triaging different deals. Now, being so many years into it, our team has developed from a cultural perspective where there's a lot of information flow. Everyone sits close to each other. We don't have multiple offices, both with our investment team and asset management team. That's important because you learn from the investment side, but then you learn from your asset management servicing team on what's worked and what has not worked. Now, our investment team, everyone is generalist and so they maintain a lot of flexibility how they invest.

• 26:44Speaker 00

  Of course, people have more sector knowledge or may have certain relationships depending on deals. We're constantly trying to make sure that people keep an open mind where the best places are to invest. I also think with this type of philosophy, you have to be okay sitting on your hands and not doing anything for sometimes longer periods of time. As an example of that, in 2023, we didn't do a deal for almost a year. For me personally, that was a difficult period because we had closed our first special opportunities fund in April 2023. I wrote an investor letter right after that and I saw our deal flows a five out of a 10. And people were saying, how can you say that? Because most people say their deal flows always a nine or a 10 out of a 10. That's simply not true.

• 27:29Speaker 00

  There's going to be periods of time when the quality of opportunities that we're going to have is going to be a lot higher. And there's going to be other environments that we're going to have to be comfortable being very patient and not doing anything. That's why having the right incentives in a peer like that is so critical because if we were incentivizing our team based on deals closed and volume and scale, then what would happen? We would be forcing things, even in an environment that we did not think we were finding the right opportunities. That's one of the things in our core philosophies in the organization where we have to have the right alignment, even if we don't agree. That alignment over an agreement is such an important part where we can sit down and

• 28:11Speaker 00

  look at a deal and all these different views and some people may have certain hesitations, they may identify certain risks. And we can't operate the firm like a democracy where every single person is voting and chiming in and we're all unified and then we go to war together. There's times as a CIO that I have to be able to pull the trigger. Yes, I listened to everyone's feedback and we pressure test what those are. The team is aligned with me in the right way, they're aligned with each other in the right way, and most importantly, they're aligned with our investors in the right way.

• 28:42Ted Seides?

  I'd love to talk about some of the opportunities you're seeing through this lens of where capital's scarce. As you look at the landscape over the next couple of years, what are you seeing?

• 28:53Speaker 00

  A big part of it is you have to look at where capital flows are. There's this huge bias towards larger platforms. Capital's flowed disproportionately to those larger platforms. The environment today is characterized by there's a lot of capital, almost an unlimited amount of demand for anything that's AI, space, robotics. Then there's other parts of the market, private equity or even parts of private credit that is much more anemic. When you look at in the middle market space specifically, you see relatively limited amount of capital that's flowing in that space. A lot of it has been, especially in private equity, where you have an environment that's been characterized by very anemic distributions and realizations have been relatively limited.

• 29:38Speaker 00

  You look at commercial real estate in specific, it's been very tough over the last six years and you've had, while you haven't seen a traditional distressed environment, you've had a lot of stress for a lot of groups. That's created huge performance issues. For institutional investors to put more money into an asset class that's been really challenged is incredibly hard. On one side, you see the fundraising environment be very difficult, but on the other side, when you have an environment like that, that's the best time to invest. Those things work in inverse. There's a lot of opportunities, let's say in restructurings, recapitalizations, in commercial real estate and hard assets, we think that the environment today is extremely compelling.

• 30:19Ted Seides?

  What's an example of something that puts light on how all this works?

• 30:24Speaker 00

  We've been very active our last six years in public markets. We've been big investors in REITs that have been privatized and ones that we think are undervalued. You'll have these periods where there'll be a huge discount between public valuations and private valuations. We've been very active in commercial real estate and investing and lending hard asset space. New construction has been an area that we found a lot of interesting opportunities and you've seen a big pullback since 2023 from regional banks. And while they've come back to the market, they haven't come back the same way that they were lending pre 2023. We're seeing a lot of opportunities to provide more creative, solution-based capital to those type of middle market lenders.

• 31:09Speaker 00

  We've been also active in these hybrid spaces that are not more traditional real estate, but not perfectly corporate credit. They're somewhere in between and those tweener deals, we find the best opportunities. An example of that is we lent to the manager of a commercial real estate bridge lender, but really to their management company. We looked at their real estate holdings, we understood their portfolio, we could value that easily and what we thought was compelling at the management company was very stable fee stream. It was permanent capital and so predictable. That's one of the things where we can look at things that are not necessarily direct hard assets, but could be one standard deviation away from that. The fact that we can capture all those in one vehicle gives us a huge competitive edge.

• 31:54Ted Seides?

  As you think about the commercial real estate market, where are you finding it attractive to look in making loans in basically a whole country that has tried to avoid a lot of that activity, not knowing where occupancies will fall out after COVID?

• 32:09Speaker 00

  The commercial real estate over the last six years has gone through incredibly tough period. There's been so many different events that have created big headwinds from Covid, rates rising, regional banks pulling back, tariffs, war in the Middle East. There was this hope, especially before 2025, that if you can survive until that point, then things are going to get a lot better because interest rates are going to come down, credit availability is going to get better. One of the reasons why I've never believed in having a crystal ball, it's from my experience of understand the world is evolving and changing so quickly. And the reality is, nobody knows. While you do have people that try to give you all these predictions and they say it with so

• 32:52Speaker 00

  much confidence, if you look at how many predictions they made and how many of those have actually been right, it is very few. Now, we've entered an environment that is much more uncertain. Rates have continued to stay extremely elevated. Credit availability, especially in certain parts of the market, is much more scarce. You have an asset class that is very capital intensive, is sensitive to rates. You have a lot of deals that were done over the last five to six years that have a lot of headwinds. The opportunity set, especially in restructurings, recapitalizations, was one of the best I've seen in a long period of time.

• 33:32Ted Seides?

  As you look at that breadth of opportunity set, how do you decide where to dive in?

• 33:38Speaker 00

  You could ask me that question today and it could change tomorrow. If I told you today, we're only focused on Sunbelt and the multifamily and we were sitting in 2021, you would say, that seemed like a really good idea. If you look at population trends, demand drivers, employment, and then what happened? Everyone got that same idea. You had tremendous amount of capital that poured into that space. You had a lot of overbuilding. You had valuations that ran really high. And now you started to see the reversal of that. When you see net effective rents have come down so significantly, occupancy has come down and you're seeing a very different environment five years later. That's why having the flexibility to pivot is such a critical part of how you outperform over

• 34:22Speaker 00

  the long run. Now, that sounds like a very easy thing to do, but it takes so much effort and it's hard. We're constantly be thinking about, okay, what's our thesis? Where's the best place to invest? What are we seeing that other people are not? Where's capital flowing that we should stay away from? Where's capital not flowing that we should be able to lean into?

• 34:40Ted Seides?

  How do you develop that flexibility once you own a portfolio of assets and exiting something so you can move on to the next opportunity?

• 34:48Speaker 00

  It's hard. When you make an investment decision, you have a lot of conviction in something, then you look at the facts and circumstances changed and say, I either have to cut bait on that, or I have to admit that I was wrong. To be a good investor, you have to have strong confidence, but you also have to be incredibly humble. You have to understand that everything is not going to go as planned. I saw that at Mount Kelly when we had a number of positions in 2013, 14, oil and gas, and those positions looked great. And then all of a sudden, what happens? Oil prices fall off a cliff. A lot of those positions went to zero. The world can change so quickly. That's something that we're constantly looking

• 35:31Speaker 00

  at our portfolio and saying, is there something that our thesis has changed? Or is there something that both impacts our existing portfolio, but also impacts how we invest going forward?

• 35:42Ted Seides?

  How do you think about liquidity when some of these investments you're making are some type of hybrid or structure?

• 35:52Speaker 00

  A lot of it is, we want to try to focus as much as we possibly can investing in situations with durable and predictable cash flows. Even when we look at development deals, we look at making a land loan, we're always trying to figure out, is there some other source of collateral that can give us both the downside protection that's important to us, but also providing us current income where you're constantly pulling chips off the table? You're thinking about, okay, how do I make sure that I'm de-risking early and often that makes me less susceptible to macro events, to credit markets, to commercial real estate markets?

• 36:27Ted Seides?

  As you mentioned, there is a lot of capital coming into AI-related space, data centers, power. How have you looked at that opportunity to either find some niche that makes sense for you or pass because the capital's there?

• 36:41Speaker 00

  We've not found any niche that makes sense for us. So we pass on almost every data center and infrastructure opportunity that we've seen. It's really interesting when you look at what's happening with AI and then all the AI infrastructure is, you do see how manias and crazes start to get developed because you can't have a conversation that someone is not talking about that and always constantly is power is like gold. But where was all this discussion two or three years ago? Very few groups were talking about it, but it was not in the mainstream. Now, every single business, every single investor, that is what they talk about. And a lot of that is people raise capital, not necessarily when and where it makes sense, but because they can. And right now, if you

• 37:25Speaker 00

  have a flavor to something that sounds like it's AI or infrastructure, it sounds really great. But if you look at technological transformations like we're having right now, and the internet is a good example of this, everyone is really banking on the fact that demand and utilization will grow. With the internet, that was a big bet that everyone made. And if anything, a lot of the demand and utilization even outperformed what a lot of the expectations were. And that's probably going to happen very similar in AI. But the reality is that you don't exactly know what the medium and long-term value for a lot of these data centers and the infrastructure is going to be. Also, there's a high probability that the technology itself is going to become so much more efficient. If you look at during the internet age, it

• 38:09Speaker 00

  was the same discussion with fiber. And then what happened with fiber? A lot of these companies that have all these wacky capital structures and then black fiber was sold for pennies on the dollar. I'm not saying that's exactly what's going to happen right now, but as a value investor, you have to be okay missing out on certain trends and you have to be okay sitting on the sidelines. You could be wrong, but you have to be okay with the fact that you're not going to be caught up in every single craze. There's a reason why we've not done a single deal in a data center or AI infrastructure because it's very difficult for us to say with high confidence that what the long-term fundamental value is going to be. And do we feel like we're investing in situations that our capital is well protected?

• 38:51Ted Seides?

  When you look at a whole bunch of different potential opportunities, how do you think about bringing it together as a portfolio?

• 38:58Speaker 00

  It's been one of the toughest things for me from an experience perspective. When you start as a investment professional, looking at things on one specific deal, then you graduate from that to be more of a portfolio manager, then you graduate from that to be more of a CIO and CEO. There's all these different factors that you have to be looking at. And it's not just, okay, I like this deal on a bottoms-up basis, but then you're looking at it on a portfolio basis, too. It's an area that I spend a lot of my time thinking about. Where are the risks in our portfolio? What happens if something doesn't go as we plan? What's the potential contagion effect? Now, our investment philosophy is based on the fact that we're looking at everything in a bottoms-up basis. And so we don't take

• 39:40Speaker 00

  this top-down view, we're going to go invest in this specific area. But as a portfolio manager and a CIO, you have to be able to do both.

• 39:49Ted Seides?

  If you identify a pocket of opportunity that seems great from risk war perspective, you underwrite, you find a bunch of different deals, how concentrated are you willing to get in a deal type that might have a similar basket of risk factors?

• 40:06Speaker 00

  It depends. If you have high conviction, you've built in the right buffer, the right collateral, the right downside protection, you feel you have the right long-term fundamental value, you're generating strong current income, in those situations, we're willing to move forward. But you also have to be thinking about what happens if you're wrong. If we go too big on something, then what's the impact of that on our entire fund? We don't maintain these hard guidelines of we can only invest a certain percentage in one specific security or one specific market. It's always evolving and changing to let the opportunity and best relative value shape both the investments that we're focused on, but also then shape the overall portfolio.

• 40:48Ted Seides?

  What are some of the different ways that you've managed through a situation when something has gone wrong?

• 40:53Speaker 00

  We've had situations that we've had to step in and course correct. It could be in a real estate situation, we had to finish a development project. My background is a developer and operator that experience has been incredibly helpful. There's other situations that don't necessarily lead to that, but they're more restructurings. Our core differentiation is that our strategy is a very active strategy. You have to be willing to roll up your sleeves. You have to be willing to get in the mud and do whatever is needed to make sure that you can course correct if things don't go as planned. Sometimes that means something that could be deal-specific, but sometimes it could also be something that's more macro and something that's happening more in the economy or credit markets. So that's why

• 41:35Speaker 00

  having an active strategy in-house asset management servicing is a big competitive edge for us and allows us to get in front of what those issues are and try to work them out early.

• 41:46Ted Seides?

  What have you learned about building and running investment organization over these years you've been doing it?

• 41:52Speaker 00

  It's very hard. And so you realize that these are businesses that have a lot of infrastructure. That's why they have a big moat around them. And it's difficult to be new to the market because it's not like I have an idea and then bingo, you could create a firm and you can raise institutional capital. It takes a long time. You have to be incredibly patient, very disciplined. You have to prove yourself over a long period of time to get to support from your investors, especially with our type of philosophy that's so agile and flexible. And we have such a wide mandate. You have to be open minded. If you asked me when I had first started, all the things I thought, some of those are core foundational principles are definitely still true today. And there's a lot of other things that have

• 42:37Speaker 00

  evolved and changed. And I've changed. Part of it is you're re-questioning, okay, how do I evolve and grow as a leader? How do I evolve and grow the organization? How do I evolve and grow the team in a way that sets us up both for where we are today, but also the future?

• 42:52Ted Seides?

  What are some of the things that have changed?

• 42:54Speaker 00

  If we look over the last six years, the type of deals that we're doing is change and evolve depending on the environment. Now, going through a period of time, we've had huge technology transformation. That's something that I didn't expect probably five or six years ago, especially to this magnitude. And you're re-questioning the organization, what's the right roles for people? How do you work in a way that's efficient, that maximizes productivity? There's a lot of things from an internal process perspective, things that you have to be mindful of.

• 43:23Ted Seides?

  Where are you hoping to take the business from here?

• 43:25Speaker 00

  I would say over the short and medium term, what's not changed is the core mission, which is to be able to outperform over the long term. It's a balance of how do we continue to raise capital? But how do we make sure that we don't get too big, where then we become like everyone else? Over the long term, that's one of the biggest challenges of how do you make sure that you're growing in the right type of way? You're doing it at the right time, but also you don't get to a point where you now become like everyone else and you start having a factory model and you're making widgets, rinse and repeat, and everything you're doing is more commoditized.

• 43:59Ted Seides?

  What does growth in the right type of way mean to you now?

• 44:04Speaker 00

  Raising capital when and where it makes sense. It's less about getting involved in things that make the headlines and they feel like they're sexy and interesting. And you could go to a cocktail party and I did this type of deal, or I had this big of a fund versus actually making the right decisions. You have to be willing to depart from the consensus. You have to be willing to stay away from things that sound really good versus finding those places that you can find value. And sometimes that means doing boring, unsexy stuff that other people don't want to do. And you have to be willing to sift through a lot of things like a garbage collector and you have to find that diamond in the rough. Every single day, what we do is difficult. The team has to have the right mindset. And

• 44:48Speaker 00

  that's why having the right culture internally is so critical. How do we make sure that we create an environment where it's not like a pressure cooker, where people feel like they can be open with their thinking, they can constantly be challenging their own assumptions, challenging each other. There's a tremendous amount of focus on both physical as mental health. So making sure we have an organization, a culture that also allows people to be able to do that.

• 45:15Ted Seides?

  Vic, I want to make sure I get a chance to ask you a couple of closing questions. What is your favorite hobby or activity outside of work and family?

• 45:22Speaker 00

  My favorite activity, especially over the last one year, has been in endurance sports. And I've always been interested in marathon running. There's a lot of intersection between endurance sports and investing over the long run of being able to handle volatility, uncertainty, be able to adapt in changing conditions. I'm doing the New York Marathon this year. And I'm also signed up in February to do the first triathlon in Antarctica. It's the first sanctioned race where it's designed for 50 of the world's greatest endurance athletes. And I'm obviously not one of those. For me at Mount Kelly, where I'm starting

• 46:02Speaker 00

  as an intern all over again, I'm thinking about how do I adapt and evolve and grow? And how do I prepare myself in a way to handle that? But it's a 0.6 mile swim. It's a 40 mile bike, and then it's a 20 mile run, which the distances themselves don't seem like they're that difficult. But when you combine them with the fact that you're doing it in Antarctica, and you're swimming in 32 degree water, you're dealing with what could be brutal conditions. I think the intersection of that type of event versus what we do at Mavic and the level of discipline that it takes consistently to prepare for that type of event is something that is incredibly exciting and I'm really looking forward to it.

• 46:46Ted Seides?

  Which two people have had the biggest impact on your professional life?

• 46:49Speaker 00

  My parents, I'd put as one. Both my mom and my dad have had a tremendous impact on me personally and professionally as immigrants to the United States. And they have the American dream of what they were able to do as people coming to this country, not having any money and building such a great life for not only themselves, but for their kids and for my extended family is so incredible. And the opportunities that provided to me, what I learned from my parents around hard work, dedication, consistency, staying the course, that's something that impacts me every part of my life. The second, I would say is Mark McGoldrick. He changed the entire trajectory of my career. I came into an industry where

• 47:34Speaker 00

  I knew nothing. I had no experience. And he gave me an opportunity as an intern. It was a true testimony to running a meritocracy where you saw somebody that had raw talent and believed in them. I'm going to give them an opportunity.

• 47:49Ted Seides?

  How has your life turned out differently from how you expected it to?

• 47:52Speaker 00

  Early on in my life, I expected things to be much more linear. You expect I move this way and I work hard and maybe you'll face some setbacks, but continues to move in one direction. If you look in my career, luckily, it's all continued to keep on going in the right direction, but it's filled with a lot of ups and downs. I've learned a tremendous amount from the ups and remaining humble and being aware that things can change and maintaining a level head. And the downs, that things can be really difficult. And while there's a lot of things that I've been through, both personally and professionally, that I never like to relive, but I also don't want to erase those moments because they've taught me so much about myself. And it's the same thing that I learn in some of the endurance

• 48:35Speaker 00

  sports. Like when you're really in those tough moments, you find strength in yourself that you don't even know you have. And you learn that and continue to keep moving forward one step at a time, one step at a time, one step at a time, focus on what's in front of you. And if you continue to do that, it compounds over time and things will get better. Now, looking back at it, I'm incredibly blessed for all the positive as well as some of the challenges. And I definitely would not have it any other way.

• 49:01Ted Seides?

  Vic, thanks so much for sharing your story.

• 49:03Speaker 00

  Thank you.

• 49:04Ted Seides?

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• 49:30Speaker 03

  All opinions expressed by Ted and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests may maintain positions in securities discussed on this podcast.