The Future of Private Lending: Insights from Jon Hornik

Dalton Elliott: Welcome to another episode of The Real Estate of Things podcast. I'm your host, Dalton Elliot. It's bittersweet. This is my last episode of The Real Estate of Things. I could not be happier to have my good friend John Hornik here for the last episode. Thank you so much for carving out time to wrap up this wonderful journey with me.

Jon Hornik: I can't believe it's coming to an end. This portion's coming to an end. There's a more journey that you will be on, I'm sure. It is absolutely my pleasure to be back on the podcast.

Dalton Elliott: For sure. Thank you. Thank you. You and I were catching up beforehand. I can't thank you enough. For the eight years I've been in this space, you've been on the conference circuit with me throughout that time and at our office in Greenville a few times, you and John Beacham, Jeff Tesch. But you have been an incredible part of my professional and personal growth and absolutely a gentleman from the very beginning. It's not lost on me that whenever I was a little nobody at this little Lima One Capital shop, when we were doing a couple million a month back in the day, that you were just nothing but kind and generous with your time. So, I can't tell you how meaningful that's been to me over the years. I so very much appreciate our friendship. And like you said, it's not over yet.

Jon Hornik: It's the end of the beginning, not the beginning of the end. So, just know that. You're going to rock it back. I can't wait to see what you do next. As far as the mentoring, my pleasure. Anytime you need anything, and that goes for a lot of people in this space, that's what we have in the private lending space, that connection, which is awesome. It makes it so much more rewarding than just going to work and competing for deals and execution. That's why this is such a special place. There's a lot of young people in our space. This is your first foray into your career, your eight years you spent at Lima, amazing shop, one of the top lenders in the space. But you don't know how good you had it because you haven't gone anywhere else, where it's not like the glue that we all have with each other. But you'll find out and we will see you again.

Dalton Elliott: For sure. No doubt. No doubt. You and I have a summer dinner after I get done going around the world. Let's jump into it. You have exciting news here. Everybody in this space knows John Hornik, but if we have anybody listening in who's not in the space, give a quick background of you, Private Lender Law. Then we're going to dive into the NPLA, the National Private Lender Association and wrap up with some fun conference news. So, give me the Private Lender Law background.

Jon Hornik: Private Lender Law was launched in 2009. It was launched to tailor the private lending space. What we saw is the asset class mature. With the maturation of the asset class itself, Wall Street discovering it, it needed more corporate lawyering to execute deals. Traditionally, a private lender would go to the guy down the street he's had a relationship with and close deals locally. We saw a need for a total approach to closing deals. So what does that mean? Private Lender Law could provide regulatory advice on each of the states. It could execute loan closings in each of the states. It now does foreclosure, loss mitigation around the country, every state. So, we're the one- stop shop for private lenders to come to, whether they're big or small. And the beauty part about being in the space is, I started working with some of the biggest shops when they had two or three people. Some of the people you mentioned, Jeff Tesch from RCN, John Beacham from Toorak, Eric Abramovich from Roc360, they were tiny companies when we started working together. Now they're these enormous companies. We still work with them every day, day in and day out. It's just been an awesome ride. So what we try to do, we built this national practice specifically tailored for private lenders. That's where we live and we love what we do. Everybody who works with us loves what they do, or you can't be here. You have to have that energy.

Dalton Elliott: Yeah, I love it. The energy comes through in the work that you do. There are no shortage of attorneys and law firms in this world, but you and the crew are a real pleasure to work with.

Jon Hornik: Thank you.

Dalton Elliott: From start to finish, like you said, really a comprehensive suite for folks in this space. Y'all handle everything. So if you're not working with John and the team, you should be. Diving into NPLA, so as you and I were catching up, this is another thing that as I depart the space for, we'll call it a temporary sabbatical, a voluntary sabbatical-

Jon Hornik: That's fine. I like that. That's a good way to call it.

Dalton Elliott: I like it. I'll be back. I guess I'm outgoing chair of the ethics committee. It's been absolutely incredible to be a part of an organization that really effectuates change. Whenever this started a few years ago, there's so many trade organizations, and we've been in the private lending space kind of tangentially tied to trade organizations that really focus on the big owner- occupied space. But being able to get in at the ground level of a group whose sole focus is really the private lending, non- owner- occupied investment lending space has been great. I know you, other folks on the legislative committee have been able to really help push legislation one way or the other and guide legislators. Inform them on impacts that might not be thought of from a high level, but massive impacts to investors and end buyers of these properties and end renters. So, much work going on there. You recently acquired NPLA. So, let me start with the why, and then let's get into the what behind the NPLA.

Jon Hornik: Let's go back to the formation of the NPLA. It was started by Leonard and Kathleen Rosen, and it was to fill a void in the space. There is no shortage of associations, as you said. What there were shortage was organizations that focus on advocacy for the space. They were always tied to conferences. Today, the NPLA is separate from the conference that it's involved with. Now, what it does is focus on education, educating all its members. We started the podcast with a mentorship concept that you thanked me for and other people in the space. I hope you see, from your involvement, that feeling is at the NPLA.

Dalton Elliott: Absolutely.

Jon Hornik: It's about educating, sharing and building relationships. And everybody, although they're competitors, are open and willing to share their advice in this environment. So that was what we wanted to create. The second part goes to the advocacy part. We've been very successful in fighting legislation that would've damaged the private lending space. In my other hat, I'm a mayor, as you know, in New Jersey. I've been doing it for 16 years. What I see is a lot of elected officials, especially on the state level, introduce legislation to appease and get headlines without thinking through the ramifications of what they're doing. The NPLA now monitors this nationwide. We step in where necessary, with astute comments that explains to the legislator from our view, as experts in the area, of what the legislation's going to do. So, we've been successful in modifying and stopping legislation that would've crushed us. The latest example is, Governor Murphy in New Jersey vetoed legislation that would've allowed a defaulted borrower to buy back their debt at 50 cents on the dollar at a foreclosure sale. Now, I had a personal conversation with the governor and his counsel. I said, " Governor Murphy, if you allow this, who is going to lend in New Jersey? Because no one's going to pay their lender back. They're going to buy it back at 50 cents on. It's a great deal for them." This passed the assembly and the Senate. It took us to step in and get it vetoed. We partnered with Auction. com. But just the NPLA is so meaningful and it's going to continue to grow. It's not for everybody. It's not what I'd call a signup organization. You can't just sign up and mail in. You got to get sponsored. You got to get approved. It's not the cheapest one on the block by any means, but once you're in and you contribute, it blows every other organization away.

Dalton Elliott: Yeah, it really does. It's an organization of action. It truly is. You cited one meaningful piece that if it would've been signed into law, I would've leveraged everything to become a massive real estate investor in the state of New Jersey.

Jon Hornik: inaudible. Yeah.

Dalton Elliott: It's absolutely insane.

Jon Hornik: 50 cents on the dollar, it just would've went up. That would've been a great disaster move. You know what it was called? The Community Wealth Preservation Act. When I called the speaker of the assembly and the state senators I know, and I go, " Hey, do you know what you just did?" They go, " What are you talking about? It's called the Community Wealth Preservation Act." I go, " Did you read it before you voted for it?" They're like, " This is the way it worked." By the way, you'd be shocked. This is the way it works. It gets drafted by staff. They come up with a catchy name. Who's not going to sign up for the Community Wealth Preservation Act? Right? Good stuff. No good.

Dalton Elliott: Yeah. To your point, if there is not... I'm not even saying an organization like the NPLA, but if not for the NPLA, high chance this legislation's signed, in place and then a complete nightmare for this space. So, that's a really good example to point to say, hey, this is not a send in your 250 bucks a year and get a newsletter in the mail. This is something that quarterly, there are in- person meetings. It's not hopping on the Zoom. It is come out, get in this room with your peers in the space. Talk about, what are the issues in the space? How do we get better? On the ethics committee it is, how do we make sure that we're leading from the front? That the top folks in the space and folks that are growing and new shops that want to align and have a voice in this space, this is the spot to do it. These are the rooms where the conversations happen, to help guide and lead from the front.

Jon Hornik: You got it. You've been there firsthand to see it. Now we're focusing, since the acquisition of the NPLA, more on education. So, we rolled out six months of intense seminars, the newest one tomorrow. We had our first one with John Burns, expert at John Burns, giving us their view on the economy and what this year's going to look like. Tomorrow, housing market forecast and economic outlook for'23, we have the head of housing research from Morgan Stanley on. We also have Rick Sharga from ATTOM Data on. They're going to be interviewed by Eric Abramovich, one of the leaders in this space, in front of everybody. Now, we like this Zoom format, ask questions, learn, instead of a webinar, where everybody sits there and it's like you're checking in and checking out. Participation's really important, but there is no organization putting that level of education out there. We have two a month for the next six months. Where the NPLA has really shined is during crisis, what's going on in the world and people are nervous. We started doing these Zoom calls during the pandemic. My phone was ringing off the hook from all my clients. They all said the same thing. " What are you hearing? What do you see?" It occurred to me, let's share this information. If it's valuable to you, it's valuable to everybody. With Leonard Rosen's permission at the time, we opened it up and it's taken off. I think the biggest add is those calls and the insiders' information that is being shared amongst the leaders in the space, in this intimate, trusted format, is the key to the NPLA. We had a hundred percent renewal this year, which I was a little nervous about when I did it, and we added. So there was the everybody, which is amazing in this type of recessionary environment.

Dalton Elliott: Yeah, that's incredible. Yeah. The biweekly calls are a great glue. It's not a sit there and peck away at work on one screen. They are highly interactive. It's a real value add. It is a true value add. In a space where there's so much, from a conference standpoint, from a membership standpoint, that you can rack up and foot the bill for, there is value here and in every interaction, everything y'all put on. Getting big ticket names like John Burns and others on, it's incredibly meaningful.

Jon Hornik: We just floated out a new membership. I think you know about this, this affiliate membership.

Dalton Elliott: Yeah.

Jon Hornik: It's an online membership. It's limited to two years. It's at a lower price point. But the idea is for somebody who is not sure they want to fully join or could contribute the time, but they could take a look into our world. They have to join as a full member in two years because it's not open. It's a feeder into the full membership. We hope people see the value and join, but it's not just a linger around. So, we just put that out there, and we're getting a nice response on that too. We have a really good system set up and an amazing team, an amazing team. So, I'm super excited about it. I love doing it. It's my passion project.

Dalton Elliott: I love it. Amy Kame and the team, absolutely spectacular. Peter and, I who are on the ethics committee, Amy has made our lives... and I'll speak for myself, she's made my life absolutely easy. Always making sure to prep me, make sure I have everything squared away, so there's no point of failure. So, she does an incredible job guiding it day to day too.

Jon Hornik: She's great. I mean, she puts stuff in front of me and I'm like, " This is amazing." You really got to screw up after she briefs you and gives you directions. It's nice to be prepared.

Dalton Elliott: This is true. Before we switch gears, how do people learn more about the NPLA? Give me the website and the rundown there.

Jon Hornik: That's a really good question. You could go to the NPLA. com. You could just go to that. Google the National Private Lenders Association NPLA. com. You'll see everything you want to know. You could reach out to me, either on social media or on LinkedIn. I'll speak to you directly about it, or we'll get you in touch with Amy Kame. Matt Rosen's involved with it. So, there's a ton of information out there. It is so worthwhile to be on these calls and get the insider's view about what's going on, especially during these times. There are a lot of companies in our space who are struggling. Some big names have gone out of business or are at least pulling back from the market. You got to make the right decisions for your company during these tough times. How do you do that? You can't do it isolated. You need to do it with having discussions with other leaders of companies, so they could share what they're doing and give their insights on what's happening in the market, to survive. We will all rise again, but you got to be there to rise again. That's what the NPLA is about.

Dalton Elliott: Yeah, no doubt. So the NPLA was not the only big piece of exciting news for the Q4 for you. You had a very busy end of the year, by the way.

Jon Hornik: Yeah, I did. Wasn't planned. It just all fell together at the same time. Bad timing for everything, but it all came together.

Dalton Elliott: Good Christmas for you. Talk to me about the Pitbull. That's a conference that is another mainstay in the space. It happens a couple times a year. The next one is coming up in March. Do you have the exact dates in front of you?

Jon Hornik: Yeah, it's March 24th, 25th and 26th in Key Biscayne, Florida. This is gearing up to be a monster conference, monster. I'll go back. I credit the Pitbull Conference for my ability to speak to the space. I've been the keynote speaker there for over a decade. I went three times a year, even when I was a sole practitioner. Now we got 50 people working here. But I credit it because it builds meaningful relationships that stick. I will tell you that every single relationship of my longstanding clients have come from the Pitbull Conference. Whether it's Jeff Tennyson, your CEO, whether it's Tesch from RCN, whether it's Eric Abramovich from Roc, inaudible every single one... John Beacham, JB, Toorak, I met at a Pitbull Conference somewhere along the way.

Dalton Elliott: Yeah.

Jon Hornik: The funny thing is, it's not like... and I tried to explain this to my son, it's not like you sit down and go, " We're going to do work together. We're going to do business together." You start to do a relationship. You see each other three times a year. Eventually you start asking, why aren't we doing business together? Then you do a ton of business together. It's cool. Leonard approached me. He was turning 70. He said, " Look, I'm thinking of selling." He knows my involvement. We've worked very closely. I said, " I'd like the opportunity to purchase it." But I want to be clear. I didn't want to be in the conference business. But if it was going up for sale, I had to be involved in it. So, it was one of those. I told Leonard, and he'll tell you, I said, " My best case scenario, Leonard, if I could script it, is you keep working another 10 years. We leave things exactly the way they are." He had different plans, which is cool. So, we ended up bidding on it and getting it closed. Difficult deal to close, not an easy deal to close. A lot of personalities, a lot of pride, but the conference is going to be amazing. A lot of changes happening in it, necessary changes to grow it into the asset class with the way the asset class and the space and the interest of Wall Street have discovered it. So, super excited.

Dalton Elliott: No, that's great. I think about just your last couple comments, about growth and trajectory. It reminded me of Lima One and our firm, where John Warren came in, built it from the ground up. And then at a certain point, it was time for him to move on to different things. Enter Jeff Tennyson, who's just been another incredible mentor and at my relatively young age, great to be able to... That's the biggest thing with Pitbull, with NPLA, because you and I met through Pitbull... there's another inaudible, is that being able to have access to the greatest minds in this space and people who have... We'll pick on Jeff. Jeff's twice my age. He's been in this space as long as I've been alive. So, to be able to have access to him at the firm and through the conference and other folks, each of them go down the line, is such a value add. Everybody in this space knows about Pitbull. And if you're not going to this conference, you have to. You really eloquently laid out the general progression of how these relationships develop is, it's just a lot of really good humans who are in this same space and share that tie. Good people want to do business with good people.

Jon Hornik: We like each other. I look forward to seeing you. Remember the last time we were in Vegas? I saw you at the mall. It was a big hug, pictures together. It's like seeing family. Three times a year, we all travel to a city. The Pitbull Conference is going to have... there are going to be a lot of changes, especially this year. We're focused on three pillars. The first is networking. If you come to a Pitbull Conference, you're going to get deals, you're going to do business. It's a priority for me. So, we're focused on bringing the people together to do the deals. The second is education. We have John Burns speaking for an hour, on the economy. And then we're going to announce our celebrity guest, which I'll tell you right now because of the time this adds, Harry Markopolos, who was the investigator who figured out the Madoff fraud in 2000, eight years before the SEC got caught. So, he's coming in to speak about the Madoff case and how he discovered the fraud, the Ponzi scheme, and then 30 minutes on the private lending space and frauds and things we need to look for. That's somebody that I was interested in. We got him because I was watching the new Netflix special. I saw him on it. I'm like, that's the guy I want. That's who we're bringing in. So, he's coming in, tons of networking sessions. We're bringing tons of events. When you leave a Pitbull, you're going to have business friends and you're going to be excited. The last pillar is entertainment. It wouldn't be a Pitbull Conference without being entertained, so we're going to entertain you too. So, super excited about it.

Dalton Elliott: Yeah, that's great. I'm going to be halfway across the world when this conference is going on. I hate it. When you told me the keynote speaker, I've been aware of him for years. Listening to him speak, I mean listening to him lay out how he came across the realization and how brilliant of a human he is, that he was like, oh, it was a no- brainer that this was just a house of cards. Everybody else just blind to it, whether willingly or ignorantly.

Jon Hornik: Listening to him speak, I mean, he explains... You're a baseball fan. You know stats, right? You bat 300 you're in the Hall of Fame in baseball. He's like, " Madoff's returns would be equivalent to batting 950," having your average at 950. Now as a baseball fan, if somebody showed me, yeah, he's bating 950, I'd go, " There's no way he's batting 950." Right?

Dalton Elliott: Yeah.

Jon Hornik: I know enough to know that there's no way a baseball player who's batting 950 for an average. He looked at the stat and said, he cannot be generating these returns. Everybody was like, " He's Bernie Madoff. He controls 10% of the all trades in the New York Stock Exchange. He's president of the NASDAQ." But he had the gumption to stand up and say, " Uh- huh. This is a fraud. This is a Ponzi scheme." He was right. And unfortunately, the SEC didn't listen for a long time. People got hurt. People got wiped out. So, lesson learned. He's going to be speaking right after lunch at the Pitbull Conference. We're going to roll him out. I'm super excited about it, as you can tell.

Dalton Elliott: That will be great. The food's always great at the Pitbull Conference.

Jon Hornik: Oh, yeah.

Dalton Elliott: You travel around to enough conferences. Some conferences are a little dicey with the food, but food's always great as well. So, that's a inaudible.

Jon Hornik: My club service, I'm told. We need our lamb chops. So lobsters for everybody. I don't know. I'm new to the conference business, but well, it's going to be an amazing show. Our next one we already booked. We signed up for the Hard Rock in Atlantic City in June. So, we're going northeast, bringing all the players in New Jersey, New York, down to AC. Summer months, beach, Hard Rock, great entertainment, so I'm super excited for that show. So we got those two planned and we're working on... The last one this year will be in October in Austin, Texas. You got to come. Will you be back for the June show?

Dalton Elliott: I will be back for June. Yeah.

Jon Hornik: You're going to be there.

Dalton Elliott: I will.

Jon Hornik: You're going to be there.

Dalton Elliott: I will. I will. I will. I'll make a note. That's another good thing that you touch on. So many conferences are static in where they're located. Y'all do a great job moving them around. Yes, there's one in Florida and AC, but there's one in Austin. So, keeping them moving geographically, I know is helpful for folks too.

Jon Hornik: Really important because you attract different people from different regions. It may make sense for someone to go to a Texas one but not a Florida one, which is okay. Our goal is going to be to ignite the interest in the local markets. South Florida's always great. Lot of deals to be done. People like going to South Florida. There's no better place than New Jersey. New Jersey, Pennsylvania, New York, nobody does a show around here. They don't do a meaningful show. So, we're going to bring that there. Then, I love Texas. Austin, Texas, that's one of my favorite cities. My daughter goes to UT Austin. I've been there so many times, I'm like, " I got to do a show in that city." So, we're excited for that.

Dalton Elliott: I love it. I love it. Hey, anything else top of mind as we wind down? You're the busiest man in private lending now, between the law firm, NPLA, Pitbull. So, I know you have just an abundance of time to kick around and chill.

Jon Hornik: Yeah, no, it's just, we're watching the markets like everybody else. Today is February 1st. I'll tell you, the last 10 days in activity has ticked up dramatically for closings, which was nice to see because it's been slower and definitely off. Something's happening in the market. I think there's consolidation going on, but I also think there's price acceptance going on. People are like, " Okay. This is going to be the pricing for some time, to do loans." We're going to have to do deals together." You'll make a little less money, but you'll still make money. So, that's what we're seeing in the marketplace. I think we're going to be okay. I don't have 2008 vibes going on right now. I don't have it. Everybody I talk to, they're waiting for us to get through what we're going through in order to get back to business. That'll be halfway through this year. We'll start seeing change. Most people are saying third and fourth quarter will be better than the first and second. On average, it's going to be very similar to last year, but we'll pick up speed in the third and fourth. That's okay.

Dalton Elliott: Yeah, a temporary speed bump. We'll all forget about it by the tail end of this year and big guns blazing. Look, John, I am so happy that this is bittersweet. I hate it's my last episode, but I'm so happy that I got to spend it with you. When I'm done jetting around for a couple months, I'm going to hit you up and-

Jon Hornik: You hit me up. Dalton, I wish you nothing but the best. Enjoy the sabbatical, clear your head and then get back to work.

Dalton Elliott: There we go. I love it. John Hornik, you're the man. Thank you so much for joining.

Jon Hornik: Thank you, Dalton.

Dalton Elliott: Hey, thanks everybody for listening. Take care.