Aaron Strauss: You're listening to The Dealmakers’ Edge with A.Y. Strauss, diving deep into stories behind commercial real estate leaders. Hello, everyone. Welcome to The Dealmakers’ Edge. Today, I'm really excited to be joined by Ran Eliasaf. Ran founded the Northwind Group in 2008 and oversees all the company investment activities. Throughout his career, Ran has executed over 300 real estate transactions, totaling over $5.5 billion, investing in commercial real estate properties in New York City and healthcare and senior living properties across the U.S.

In 2017, Ran spearheaded the creation of Northwind's credit platform, including the formation of Northwind's discretionary closed-end debt funds with over $2 billion in AUM. Under Ran's leadership, Northwind has evolved into an institutional-grade private equity firm, consistently improving its capabilities, expanding operations, know-how, and industry recognition. In this excellent episode, Ran's going to talk about the strict core values, the operating principles of honesty, integrity, transparency, and how he thinks about risk, how he tries to see what's around the corner, and obviously how he sticks to his core in the lending industry. So hope you enjoy this episode. I thought it was fantastic.

Hello, everyone, and welcome to The Dealmakers’ Edge. Today, we've got Ran Eliasaf with us, who I've really gotten to know a little bit, not as well as I would like, but very impressed with all the amazing work he's doing. He's really grown his business, Northwind Group, into a real industry titan, and he'll talk to us about that. But in the meantime, maybe we'll go back a little bit to the beginning.

I know you grew up in Israel, and from what I understand, your father was in the military and you had an interesting background, ultimately finding your way into the Navy at a pretty senior level. Maybe we'll talk about your upbringing a little bit and how it shaped you. Then we'll transition more to the real estate part of your career, if that’s okay.

Ran Eliasaf: My father was a fighter pilot in the Israeli Air Force for almost 30 years. I grew up in airport bases, moved around. When I came 18, I enlisted in the Navy, went to the Naval Academy, became an officer and a commander of a ship, and served for slightly over six years. I think it shaped me a lot. It gave me a lot of tools from leadership to how to extend pressures, how to focus on what's important, and really gave me a lot of core values that go with me to this day.

Aaron Strauss: 100%. I know you didn’t just start launching major funds right away. There was a process, a building process. Maybe you could talk about some of your early years in real estate. I know you got started in Israel to some degree. You had some other business interests prior to Northwind. Maybe you could talk about some of those bridges till the present day.

Ran Eliasaf: After the naval service, I took a year off and opened a surfing school in the Dominican Republic, and almost never made it back. Eventually, I made it back to law school. Once I started law school, I realized I'm going to finish this when I'll be 29 and I have zero business experience. So during law school, end of year one, I became initially the driver/secretary, eventually becoming the right hand of a local businessman. They did a lot of real estate. He taught me the ropes. Fortunately, he passed away.

Then life happened. Some of his clients asked me to help them up with a few things, which I did. Eventually, one of them introduced me to their family office. I ended up joining that family office, leading their real estate investments. Started flying back and forth to the U.S. in ’07, just before the financial crisis. Luckily, we didn’t do anything before. Then when the world collapsed, we had a fund that I managed. I should say Northwind managed. I actually launched Northwind at that time and started buying distressed debt.

Initially, on grocery-anchored shopping centers in the southeast, a lot of Publix-anchored. We later did a big portfolio in Texas. That was my forehand to investing in real estate in the U.S. So it was deal by deal, small scale initially, and grew over time. We had very good timing and were able to capitalize on the fact that we had liquidity in a time where there was a huge liquidity crunch in the market. We were able to buy. In hindsight, we should have bought much more. Every deal we were doing at the time, our hands were shaking. We were like thinking, “Are we the only idiots buying?”

Aaron Strauss: Yeah, well, I think timing is a critical factor. A disciplined approach—and you definitely have a great amount of discipline in your life, as I know. But I guess the benefit, looking back, is you really didn’t have any legacy issues to unravel and work through. So you could start with a fresh balance sheet and fresh capital. I think, I know the number keeps expanding, but I believe it’s over $5 billion of transaction volume you’ve done. Probably now it’s considerably higher from when your bio was last done. Because I know every week I read—

Ran Eliasaf: We’re $5.6 now.

Aaron Strauss: Right. Every week I can’t catch up. I think just last week you closed another major transaction. So under leadership, you really grew an institution. You know, I think a lot of people listening to this are maybe making their first loan or buying their first deal, and you started doing one-off. But maybe you can start thinking about what led you to think more in that disciplined fashion—to raise a fund, to partner with institutions, to run an institutional-style organization versus a lot of real estate companies, and they can have with billions of assets, and there's oftentimes just a few people sitting around in a room. So what led you to that style approach with more of that structure than, say, the other path?

Ran Eliasaf: First of all, it took a lot of time, I would say. I mean, we’re talking about deals I’ve done in ’08, ’09, 2010. We really only launched our first credit fund in July 2020. So you’re talking almost 14 years after I launched the business—really our first formal institutionally backed fund. Up until then, it was all 10, 12 years of deal-by-deal capitalization. Every deal was different—capital source, family offices, some institutions, but not in a large scale.

The years between 2017 to 2020, I think, is where it really happened when we started doing more precise, direct lending. I recognized, one, that I like it and I like the risk-adjusted returns. I think it makes sense versus what I was seeing on equity opportunities. Obviously, I did not anticipate COVID or anything like that. Two, I did feel it’s scalable. I felt that the credit side is more scalable for me than the one-off equity deals.

The opportunity came to us because of everything we’ve done until then. An institution that I met told me, “Listen, we want to create a fund that will fit our criteria and needs. We can’t find one in the market. Maybe you build it and we’ll invest.” We were able to find an anchor investor, which was quite unique. They seeded fund number one with a large commitment. They were not partners in the GP, no GP economics, just anchor investor terms. That was great.

That really enabled us. I’m talking about, we started working on the fund in February 2020. COVID—we ended up closing the first closing of the fund in July 2020. So really in the early stages of COVID still, we had a first closing. Again, we were liquid and able to transact, which was a big advantage.

Aaron Strauss: Also, you’ve carved out this niche—there’s a lot of lenders doing small loans, those bite-sized loans, maybe $2 million, $5 million, $7 million, $10 million, and there’s some doing nine-figure deals regularly. You’ve really straddled both sides of that. I know you’ll do deals sometimes $10, $15 million, but you’ve also done $300 million-plus loans at 125 Greenwich, which is huge. You converted the former Pfizer headquarters with that loan to 1,600 residential units. I think that was about $135 million. So you’ve really straddled that line, and that’s unique. So I’m wondering, how do you balance that—the deal flow and size, and scope?

Ran Eliasaf: For us, we were always focused on more middle-market or upper-middle-market transactions. We never did the two-to-five-million-dollar loans. The reason was because we started our credit business after we’ve done about two and a half billion of equity transactions. Our last equity transaction in the city was Seven Hanover Square, which was a $300 million acquisition and ended up being an $800 million sale.

We were already playing in that upper-middle market space. So our first loan was a $15 million loan. Our second loan in 2018, I think, was a $69 million loan. So from the get-go, we were already in kind of slightly larger loan transactions. That’s just how we carved the niche for ourselves.

On the smaller side loans, there are a lot of players. On the very large loans as well, and everything is competitive, don’t get me wrong. But we felt back then, I’m talking about eight years ago, that the, we called it the $20 million to $100 million, was slightly a little bit more roomy at the time, slightly big for some of the smaller banks, and slightly small for the mega funds. That was the niche we were focused on, and it worked well. Also, we were doing short-term loans, acquisition, bridge, condo inventory, stuff that banks were not really doing.

Again, didn’t see COVID coming, didn’t see the fact that banks would really taper back their lending with balance issues. But it was really, in hindsight, a great timing to enter the credit market, build a platform, and then be in a position where really there was lack of, again, liquidity from the banks to be able to build a business around it.

Aaron Strauss: For sure. Not to jump around too much, but I mean, it seems like we’ve talked about this beautiful runway of private credit, right? As the banks retracted from COVID all the way through till present day. Are you seeing, I mean, you’ll always have a business, you’re disciplined, you have the capital, you have the reputation, there’ll always be a need for your product. But are you seeing that market narrow a little bit with new players coming in and maybe more CMBS or other lenders trying to come to the market where the gap is starting to get filled a little bit more? Or are you still seeing plenty of room runway there on the private credit side?

Ran Eliasaf: It was always a highly competitive business, and it always will be. The CMBS is less relevant for us. We don’t really play in that space, but we definitely see more banks come back and lend. I think it’s a good thing. It’s a healthy thing for the economy. It’s how it should be. I mean, what happened in the last three, four years was not normal, where most transactions were taken by private lenders. That’s not the norm. So I think we’re seeing and we’re seeing the numbers. Banks are gradually coming back. Spreads are gradually tightening a bit, which is again a good thing.

And as you said, there will always be a need for private flexible capital. So I’m not worried about our business at all. I think it’s a great time to be lending, but there’s definitely more capital out there and more, mostly bank capital. And listen, anybody that can secure a cheap loan, cheaper, they should, right? And they will. That’s how it should work.

But private credit has been around for a while. I mean, it’s pretty amazing to see how fast it’s grown the last four years and how much more new capital, new sources from even hedge funds to all sorts of shops coming in and are dabbling. But some players are in and out, right? You see an opportunity to come in. We’re building a long-term business in this space.

Aaron Strauss: No, absolutely. I know you’re always thinking about recession-proofing and hedging. I guess obviously, banks coming in is wonderful. It means takeout time, which is healthy for your business. You don’t want to have no one to take you out. That’d be horrible.

But I know also healthcare is something you focused on. I know you’ve really built a nice niche and brand in that to complement your core real estate lending side. Maybe you could talk about the type of deal flow you’ve seen, would like to see more of, have had success within the healthcare industry.

Ran Eliasaf: That’s a business we’ve been carefully growing also for the last, since 2016. We started the same thing, started on the equity side in healthcare, and transitioned to the credit side. We’ve been focusing on providing bridge-to-HUD loans on existing income-producing portfolios of skilled nursing and senior housing in about 25 states across the country, where we like the demographic and regulation trends.

It’s a highly operational business, highly regulated as well. It’s a much more niche, smaller market, right? We really like it. We have very consistent performance there. We don’t have a single loan that missed a single monthly interest payment in that space, which is very unique. We like it a lot, but it requires a lot of knowledge and know-how.

We built a lot of in-house technology that helps us with underwriting and understanding the trends. It’s complex. It’s not a real estate financing. It’s a hybrid between corporate finance and infrastructure finance.

Aaron Strauss: Speaking of infrastructure, you really have grown your team. I’ve been to your office. It seems like there are always more people there, and it’s always expanding to keep up with the pipeline and portfolio. Maybe you could talk a little bit about operating principles. You learned discipline growing up. You certainly learned it in the Navy.

You talked about never getting too high or too low, having that good mental health and resilience. I think a lot of people, they can get very anxious, very jittery, very fast in the deal-making world. So maybe you could talk about operating principles for your team internally, guiding principles. Then maybe we’ll talk a little bit about the headspace you have to be in to successfully navigate through all these deals.

Ran Eliasaf: I’ll try to give a short answer. It’s a very long topic that we spend a lot of time on. Our core principles, first of all, are honesty, integrity, transparency. Those are going with us in the firm from the day I founded it. It means every team member, no matter what your seniority is, you have to follow it. It means also that we’re transparent with our investors, our borrowing partners, and I’m very proud of it. It’s nice to make a living and build a business, but it’s more important to me to be proud of what we do and walk every day into the office and feel that we built something of value that has the right structure and values.

Listen, the expectations are very high. We work very intense. I tell team members, “Listen, you’re in the front lines. You’re going to see things that I don’t. My expectation, even if you just finished college and it’s your first day, we hired you because you’re a smart, capable person. I want to hear what you have to say. You’re going to see things. You’re going to hear things. I expect you to develop an opinion and say it.” I speak a lot of times with great conviction and maybe in a strong voice. Doesn’t make me correct or right. I expect that the people on the team will have enough character and confidence to be able to speak up and say what they think.

If they think we’re missing something or we shouldn’t do a deal or there’s something we need to look at, then to say it and not to just nod in a meeting and say, “Whatever you say.” That’s the wrong approach. Nobody holds the truth. Nobody knows the exact answer. We’re in a risk-taking business. So there’s never a definite answer. It's never, it’s always okay. Especially as a lender, because you know we don’t have upside. We’re not going to make 2x, right? We’re only going to get our interest on the best-case scenario. So our job and my job is just to make sure we don’t make a mistake and we don’t have that one bad loan that will kill the return of 10 good loans.

Aaron Strauss: 100%. And what about dealing with your own mental space? There’s always go time. You know, we do loan closings as the lawyers, but we’re not actually, you know, pulling the trigger as it were. And at a certain point, someone in your position has to say, “We’re good to go.” You’ve got a lot of money on the line. You’ve got a reputation. You’ve got a lot of moving pieces, and there’s always that element of risk. So how do you quiet the mind to get through those tough decisions, or how do you navigate through those tough decisions? I know every day there are things on your plate.

Ran Eliasaf: First of all, I got to tell you, it’s go time all the time. High-intensity environment. But yeah, we don’t close five loans every day, right? But it’s the entire process of getting—you know, I’m not sure how much people realize how much work it takes to get a loan closed and to get a transaction closed. There are a lot of moving parts, a lot of people involved. There’s always something last-minute. It takes 30, 45, or sometimes 60 days to close a transaction. The team is working hard always until the last minute.

Aaron Strauss: A hundred percent.

Ran Eliasaf: To calm myself down, I try to surf. I kite surf, I wing foil, I surf. That’s always been a passion of mine. The reason the firm name is Northwind, it’s because it’s the best wind to surf in Israel—windsurf and kitesurf. It will always be an important part of my personal life, as long as I can do it.

Aaron Strauss: It’s great, great, great mentality. I think there’s a theme of you always going back to the ocean, Ran. I think there’s something about the ocean that’s very important to you.

What about what’s next? Is it more of the same? Are you thinking differently over the next several years? Obviously, you’ll react to the market itself, the deal flow, and the firm’s built to last. You’ve built a great organization, great reputation. Your investors are happy. I know you’re happy as far as how things are happening. But do you sometimes sit back and say, “Three to five years, if I can do this, that would be an interesting—not pivot—but that would be a nice either add-on or augmentation, or perhaps slightly different path?”

Ran Eliasaf: We’re always looking at new asset classes. Right now, the focus is to expand our credit business. I think we’ve built a very good engine. To expand our real estate lending and our healthcare lending, that’s the main focus. I think over time, we’ll probably look to diversify into additional asset classes. I mean, we’ve looked at a bunch and couldn’t make sense. We’ve looked at data centers, and pricing wasn’t really interesting. We’re looking at infrastructure—a bit more complex. Logistic centers also, where we think pricing got a bit overheated.

So right now, we’re very happy with our current focus and expanding it maybe to new geographies, especially on the real estate side. I mean, we’re working on a loan in LA and working on another loan in another new state, which hopefully we can expand the capabilities we’ve built in New York and mostly the East Coast, and expand them to other markets. So I think there’s a lot of room to grow there. We can expand, be ten times bigger, just at the strategy we’re doing right now. But eventually, over time, I mean, historically as a firm, we’ve evolved every five to six years into a new strategy or an asset class or a product. So it will happen.

But the question I always ask myself, very simple one, does it make sense? Anything we’re doing—and the world is moving so fast that things that made sense a while ago might change. You know, New York right now is a question mark, right? We believe in New York long-term, definitely. The supply constraints, which is our main theme, are still there. It’s one of the most supply-constrained markets, especially for resi, which is what we focus on. But the political risk is high right now, and we need to evaluate and understand it and see what happens after November. It’s not trivial.

Aaron Strauss: No, these are very important questions for sure. Yeah, I mean, the firm name is Northwind, which implies a lot of optimism, taking it in the right direction. But I guess you have to balance with headwinds too—whatever the opposite is. South winds, if you were. But besides political issues in New York or other markets where you lend, what are some other potential headwinds you can see the business coming into, or just perhaps the market, if there are things that concern you broadly? I mean, as we’re recording, there’s a government shutdown, there’s constantly new black swans every short while.

Ran Eliasaf: I can’t emphasize enough how much in the last two years and going forward, political risk—from state to federal to global—is the main risk that firms have to take into account. The days of quiet peace are unfortunately in the rear-view mirror. There’s so much volatility happening and shifts of power, and it will determine economic results. Sometimes it’s easy to forget. We all wake up, the sun is shining, but the world is not in a good place right now. There are going to be economic effects to it.

I think the U.S. is still the number one place you want to invest in. Taking all of this into consideration, it has the best regime and stability and is still the most predictable. We believe in the U.S., and we believe specifically in major urban markets like New York. But we’re taking all this political risk into account when we’re evaluating.

Other risks, as a lender, we see some deals that we’re getting priced out of and somebody is being too aggressive on the proceeds or too aggressive on the rate. We think it’s a short-lived strategy. Some firms we’re seeing are trying to buy market share by undercutting. I don’t believe in that strategy. Eventually, it catches up. As a lender, the statistics just eventually catch up. So it’s still deal by deal, evaluating and ensuring every dollar that goes out will come back, is the most important decision you have to make when you’re running a credit fund like ours.

That’s where I spend most of my time. We’re very proud we’ve never taken back a property. We have zero principal losses, including loans pre-COVID, pre-interest rate hikes. That’s, I think, as a credit fund manager, something to be proud of.

Aaron Strauss: No, definitely, Ran. You have a lot to be proud of. You’re very humble, very modest about the way you go about your business. I guess it’s because it’s informed by real-life circumstances. There’s always something happening. Never want to get in a headspace that doesn’t position you to navigate those winds, as we described.

Anything else I could have asked you that I didn’t, that you’d like to address? I’m sure people ping you all the time. “Hey, I want to get into private credit. I want to maybe work at your firm. I want to talk about deals.” The proverbial cup of coffee—what lessons are you imparting to people when they’re squeezing into your calendar? Or maybe any other topic we didn’t talk about that you’d like to address here. No pressure.

Ran Eliasaf: People approach all the time, and it’s great. I actually answer when people reach out on LinkedIn, and I actually respond personally. Sometimes it takes me a while to get there. I would meet up with young guys entering the business, and happy to share thoughts and ideas. I would tell them, “Listen, I have some bad news. There are no shortcuts.” It’s all about hard, hard work and then making the right investment decisions.

Especially when you’re starting, the first few deals are so critical because if they don’t go as well, then it’s very hard to continue that. We are in a risk-taking business, which means the risk will materialize over time. If it materializes in your first few deals, it’s not great.

Aaron Strauss: Definitely.

Ran Eliasaf: General stuff, I must say that I’m also very proud of what my wife and I are doing with NATAL, which is the organization that supports people suffering from PTSD and trauma inflicted by war and terror. It’s an amazing organization. We’re going to have our gala on November 10th and hope you are there. It’s a very important cause.

Aaron Strauss: No, now more than ever. Yeah, we touched on some great topics, themes. I could talk to you all day. I know you’re very busy, so I’m going to let you get back to your crazy day. But it’s remarkable to see what you’ve done.

Ran Eliasaf: I have to cook Shabbat dinner.

Aaron Strauss: Yeah, I know you’ve always got to prepare for that as well. But yeah, the 10th—hopefully it’s in 30 days. We’d love to be there, and I appreciate that. I think just, you know, the real estate community and the community at large is lucky to have you as part of it. You set a great benchmark. You run a great team. You have a great mindset. So I’ll let you run, but I appreciate you. I think everyone listening to this will have definitely taken away a lot. Until next time, my friend. We’ll talk real soon.

Ran Eliasaf: All right, great. Thank you so much.

Aaron Strauss: Thank you for joining The Dealmakers’ Edge. Don’t forget to follow us on your favorite podcast platform. Please give us a five-star rating so more people can follow the conversation.