In this interview with Sean Kelly-Rand, Managing Partner of RD Advisors, we learn how the firm started and why the sponsor has chosen to focus on real estate private credit in the greater Boston market. Sean outlines the range of real estate projects they tend to lend on, from small, single-family homes to larger projects like construction loans. He also discusses a bridge loan and why they provide it as a financing solution. Sean also gives us his outlook on the current real estate market, if it’s affecting the firm and how they lend, and more.
RD Advisors was founded in 2017 by Mikhail Gurevich (of Dominion Capital, a NY-based family office) and Sean Kelly-Rand (a Boston-based developer and real estate professional). After years of investing in real estate equity and debt deals, the Principals set out to create a Fund with what they believe is a defensive strategy as a preemptive response to the next market downturn. 6+ years later, RD has financed the acquisition, renovation, and refinance of over 280 properties as of October 2024, most of which have been in the Greater Boston area.
Sean Kelly-Rand:
I am Sean Kelly-Rand, managing partner at RD Advisors. A bit a background at the firm. We're a real estate private credit firm. We're focused on the Boston area. We lend to Boston area real estate developers and investors, sometimes bridge loans to long-term holders. I grew up in the greater Boston area. I know the market well. We set the firm up seven years ago, kind of looking at the environment then and saying where are we in the risk spectrum? How many years out are we from the last financial crisis and how do we need to position ourselves? We're 10 years out from the last financial crisis. We need to start positioning ourselves a little bit more defensively. And really private credit was the way to do that. So what is private credit? Well, in our case, it's senior loans on real estate projects predominantly in the greater Boston area today.
It started because we needed a defensive investment mechanism for our own personal capital. So if you go back to 2017, we were an environment with very low yields. The markets were kind of back up 10 years out and we said, "Hey, where do we get our higher yield from?" This is for our own personal portfolio. This is myself and my partner, and we said we want to be senior in the capital stack, so that's senior debt. We want some yield. So that's kind of shorter term lending that has a higher yield. And then what structure do we want it? Well, deal by deal is complicated, difficult, and it's hard. And if you want say diversification, then it's better in a fund structure. So we kind of came up with this organically by thinking about what did we want with ourselves first?
And then later on, as we kind of grew the firm around 2017 and kind of really into 2019 and 2020, when we started first working with Proud Street, we were looking at it and saying, oh, let's bring other investors on that would the same thing that we would like, which is kind of some sort of capital protection and yield. And so that's how we got started. It's all real estate today. It's a hundred percent senior loans. And so what are they? And you just go, there's kind of a spectrum, right? Today, we're probably anywhere from 500,000, maybe a little bit smaller on the small end to up near seven million on the larger end. On the smaller end, it tends to be individual, single family, what we call fix and flip renovation. So buying a single family home, fixing it up and then selling it. And then maybe even some small commercial projects on there.
Or some multifamily, small balanced multifamily that somebody's flipping into a larger term, longer term loans on the upper end, some of the larger projects, it's anywhere from construction loans, existing buildings, a renovation on it, or to something that's a true bridge loan. And what do we mean by a bridge loan? Well, it's a bridge to something. And what is that a bridge to?
Typically it's a bridge to a refinance. So recently we've done quite a few bridge loans, a multifamily acquisition. So somebody's bought multifamily, typically a scattered site, multifamily. So lots of smaller properties, and they're aggregating them, they're selling off a few, and then they're refinancing it with a bank. But why would they use a bridge loan? Why would they pay? Well, typically what happens is they'd look at it and say, "Hey, I'm going to refinance this into a longer-term loan, but really I want to get in a couple quick cleanups. I want to sell off the properties I'm not going to hold long term. And by the way, I need to close within 30 days," and the bank's just not going to get it. And all these moving pieces, the bank's not going to be involved. Well, why don't we bring in RD Advisors? They get it. They're investors as well. They're going to understand this. We'll bring them in and then we'll refinance them out within six months to a year or 18 months once we've done that first turn of it, and it's very cleaned up for a bank.
So I'm from the greater Boston area. My business partner went to school in the greater Boston area. A lot of our team has ties to the greater Boston area. So it's a market that we know incredibly well. A sector factor that we look at with any market as a lender and anyone investing in the lending space to really look at, is it a judicial or nonjudicial market? Massachusetts and number of the markets around Massachusetts tend to be nonjudicial. So that means that you don't need to go through the court system the same way you would in a judicial foreclosure. So it tends to be quite faster. And so we want to be in a market as a faster foreclosure process because that's bringing the power to the lender. It's not that every project we do has a foreclosure, but when it does, it means that we can move faster.
And then the other thing is to look at the greater Boston economy. So what makes the greater Boston economy so interesting? Well, it's a very diversified economy. You have tech here, biotech, a lot of the education, you have a lot of the hospitals and a lot of the spins off of the universities that kind of feed into this ecosystem of tech, med, ed. And that also provide for a lot of higher income affluent home buyers. And so that means that your average house price is so large. Well, what else about the market? Well, we love in some sense that while it's hard for our builders and our developer clients, they don't necessarily love that it's hard to get permitting and hard to build. It does keep a tap on supply or a cap on supply, and that means that you don't get as many price swings. Or if you look at the data today, you're going to see that there isn't as much supply here. Right? There's an inventory is quite far down.
We haven't been able to overbuild in the greater Boston area like you could in some of the Southwest and suburban markets. Really Boston's relatively contained and it's very restrictive building environment. What I say my target borrower is I want a professional bankable client with a nonbankable situation. Nonbankable is because of speed, so it has to close in 10 days or under 30 days. Complexity. It could be something where the bank simply are saying, "Hey, at this moment in time we don't really want to look at it." But a lot of it's simply just speed, speed, customer service, our ability to understand a little bit better, single focused. A bank does a lot of things. We do one thing and we do it really, really well. We lend to real estate developers and builders and we do it fast. That's what we're here for. I would say that 50% of our clients plus are repeat clients. And I would say the vast majority of our clients are repeat or referrals. Very few of our clients are coming in cold.
Somebody knows us somewhere along the line and has referred us, and we have a great brand name in the market. So we're well known. We actually differentiate ourselves from a lot of lenders in the market. We don't really have any originators on our team. Rather than have the resources on the imagination side, we have the resources on the underwriting side where we believe it belongs for a private credit fund. We really want to have the in-bounds come in through clients we already know, they're already vetted, and then really spend our resources in-house vetting each of those transactions and making sure that they're the right fit for us rather than chasing around and trying to find transactions that maybe we don't want.
And now today we're receiving... Just given where the banks are and how difficult it is to get financing, we're seeing more in-bounds than ever. And also just there's kind of time in the market. So we've been around for seven years. We've been a consistent provider for capital. And our big break actually was during the pandemic when a lot of other groups that were financing, including the banks, pulled back. It was after the pandemic and coming out of there where we had capital and a lot of other people didn't have capital. And so we were seen as kind of a, "Hey, we didn't know you before. Who are these new guys?" And that's how we kind of marked for ourselves. And that was right after we did our first round with CrowdStreet. So tied in well that we had fresh capital. We were just going out there and it was just when developers had that need.
So it kind of tied in well. The current market, I mean, I think it's a little bit more difficult than it has been in the past for developers. I think it's probably a better environment for us when there's less capital out there, then the capital that you have becomes more valuable. So we've been able to increase our loan rates. I think we've also been able to pick up... Part of it is how long we've been around and then the size of our group, but we're picking up more sophisticated clients and larger clients that typically only would've worked with banks are now starting to work with us. They would've said, "Hey, bridge lending, I'm not sure that's really for us." And I think today they say, "Oh, I understand where that tool fits in within my toolkit." I'm not going to call you for every transaction, but if I need to buy something and close it very quickly and then refinance it, now I know where to go. And so this environment has been good for us in that way.
We've had the same view from the beginning. We're setting up to be a little bit more defensive than your average real estate investor. And that's kind of how we set ourselves up from the beginning was looking and preparing for the next kind of real estate downturn. And I think if you look across the US from where we are today and say, "Hey, Boston still seems relatively solid, the average prices were up from last year, Boston is up because there's not much inventory, but still a lot of demand. But even though that's there, we start to see that the market is a little bit more difficult." So we don't think it's as easy to sell every single product. And I think we've shifted how we're lending. So I think we think that the larger groups are going to do a little bit better. We're increasing our average loan balance, and you'll see us slowly increase that average loan balance dealing with more sophisticated clients. And that's where we want to be.
We first came on and part of our mission as we're going at it is we're kind of bringing Wall Street to Main Street. Right? So we're doing that book for the borrower. We're bringing very sophisticated private lending to kind of a main street borrower and now kind of getting a little bit more sophisticated borrower as well. But the same thing to the investor. So if you look at alternatives, even 10 years ago, if you spoke to your average investor that you say your average credit investor that has the savings, they didn't really have alternatives available. They couldn't make individual real estate investments. They could invest with their neighbor, they could invest with their friend, they can invest with a developer, but they couldn't necessarily put their funds with an institutional scale developer. When we saw CrowdStreet doing that very early on. I watched CrowdStreet, even before we started at RD advisors, we had had conversations, and what I liked was that they were bringing investments in real estate to individual investors that wouldn't necessarily have access to it before. We saw that that was the way that the industry was going.
And I think you're reading about it all over the news as all these major private equity firms are tapping into what they call the RAA channel, the retail channels, all these different channels to really access the individual investor. And that's what we liked about CrowdStreet. We said, "Hey, well that's what we want to do." We want to go straight to the individual investor because what's happening, and the Blackstones of the world have seen it. They've written about it, they've studied this, they've seen this coming for 10 years down the line is people don't necessarily have the same pensions they did 20 years ago, 30 years ago. And so if pension balances are going to decline, well individual investors are going to have to start investing in their retirement funds directly. If that's the way the industry is going, then we want to be on it early. And that's kind of how we got onto it and why we stuck with it.
Nothing's really changed from what we expected to see. So I think that is still the same. I think it's very similar in that looking out and going, the interest rate decreases, is the fed going to decrease? Is that going to impact us a lot? I think the answer is twofold. So one, how does it affect us directly? So does it change the rate I'm going to be able to lend at? And what I tend to find is because we're lending to people not based on the rate, they're based on the performance. How quickly can you close, can you lend on this project? The cost of the financing is less particular in our case because it's short-term financing. They're asking about the cost of the financing on the refi when they're getting it from the banks, but that's because it's a five, ten-year financing. In our case, we don't think our rates are going to be impacted that much.
I mean, that's my own personal opinion, and I kind of think that's the firm view as well. And then our own cost of financing, well, that might fall down as well if we don't use tons of leverage. If there's an impact, it's going to be marginal. And then I think the other impact is, hey, on our clients and on the overall market, what does it mean? Well, if rates are falling, I think you'll start seeing maybe it's slightly easier to sell the product. It's slightly easier if you're doing a multifamily bridge, you're getting a refinance at a lower rate. Well, I think that's good for our developer clients. If it's great for our clients, typically it's pretty good for us too. Well, this is our fourth rodeo with CrowdStreet, so I think it's gotten progressively better every time we've gone on to it. I mean, this one was incredibly easy, but I think that's the benefit of being a repeat sponsor.
So it was great for us to be able to work with the same team again because we're launching the same product. And it was very efficient, very quick, very efficient. Didn't take a lot of heavy lift from our team, I think, and that's great. And we loved it.