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 we are having a terrific conversation with Sebastian Post, who's the managing partner and co-head of investments for Lionheart Strategic Management. He's responsible for sourcing new investments, capital raising, and managing operations. He's a member of their investment committee and he has been with Fisher Brothers since 2011 and he was involved in the creation of Lionheart Strategic Management and in the origination and execution of real estate equity and credit throughout the US. And in this conversation, we're going to cover a lot. We're going to talk about deal flow, how it's created, how he manages day-to-day operations, what he's seeing in the market, where he thinks we are in the cycle and also just advice that he would give to people up and coming in their career. So it's a great conversation with a wonderful person, super talented and I hope you enjoy it.

It's exciting to have you on. I heard great things about you. I've heard about your firm. I know you've been very active. Maybe we can go back to the beginning. I know you've been with the company for a long time, pre Lionheart, Fisher Brothers, but maybe we can go back to your upbringing, where you grew up and how you sort of got to where you are on a macro level first.

Sebastian Post: Thanks for having me on. I've been with the Fisher family since 2011, so I started right out of college at NYU, between my first and second year of grad school. Been with the firm, obviously independent operation ourselves, been with the Fisher family for about 15 years now. First starting off on the development side of the business, seeing the growth of the residential portfolio. And then spinning out, under the Lionheart name, in 2017, when we formed the fund manager business here, to raise third-party capital. It's been a fun ride. It's been fun to watch everyone in this company grow from effectively two people to what it is today. We're currently over a billion dollars of AUM deploying across closed and fund business, separate account business. People wise, we're about 15 people today. I'd like to say it's been an interesting ride and it's been fun to watch everyone kind of join this firm and scale up and kind of where it is today.

Aaron Strauss: That's fabulous. And you're a rare breed of somebody who joins one company, one firm, one family office and stays. So it's a testament to both, the family and yourself. I know it's a weird time in the market. There's a lot of things happening. Maybe you can give us kind of a snapshot of the types of deals you're seeing. I know you're doing a lot of really creative structuring. You're doing craft, you're doing Mezz, you're doing a lot of kinds of variations, but maybe you can give us a flavor of what kind of deal flow you're seeing without naming, you know, specific projects that can't be named, et cetera.

Sebastian Post: I'll take it back, because we've, we're now in our third vintage vehicle, flagship vehicle series. So it's interesting to kind of see throughout different cycles of kind of where our deal activity has been historically. So, you know, vintage, the first vintage was 17, you know, we saw a lot of growth and both New York, Nashville, Miami, you kind of flip it to the post COVID world. We started doing a lot more of the gateway Southern markets, so the Miami's, Nashville's of the world. And that kind of led until, you know, rates started rising and oversupply issues started happening. We kind of, you know, took a macro approach that the gateway core markets that were not getting oversupplied, were the right approach. So we started focusing more slowly on New York, Chicago's, Boston's, California's, due to the supply issues that affected the other markets. So over our last 12 months, I would say we've seen the most activity in the New York's, the Chicago's, the California's. And that's kind of been our approach. I would say from a deal structuring perspective, it's gotten slightly more competitive. I think the world's switched a little bit, because there's a decent amount of capital in the credit space, obviously not so much in the equity space. We've seen structuring, I wouldn't say it's like 2019 or like the 2019 structuring of you got 10 lenders competing on it. It's still not quite like that, but it's forced us to originate on a whole loan execution more as opposed to the senior Mezz execution that existed, you know, right after COVID. But we've been active, we've been deploying, we do a lot of, you know, land construction, transitional lending on our end. That's kind of our specialty, right? We're an owner operator background, so we have that in-house skill set on our end. And we work with a lot of senior banking relationships that want to have that operator expertise in-house. So we pride ourselves on lending on the most creative construction projects there are, kind of across the United States. And that's kind of where I think our special sauce lies.

Aaron Strauss: Absolutely. And deal size, I know you've done deals several hundred million and you've also done smaller. Every deal is different and opportunistic and needs to match the flow of funds for that borrower, but do you have a sort of like target deal size within a range? Obviously, there's a lot of buckets of capital you can draw upon and you're always fundraising, et cetera, but any sweet spots, as far as sizes go?

Sebastian Post: Yeah, size-wise, I would say we generally deploy, call it 15 to 50 of kind of our own equity per transaction, right? So think of deals, I would say 50 to 250 in size range. We really don't want to be much larger than that, because then you start competing and the rule of numbers get so much larger that it's kind of hard to cure any kind of issues that exist. So that's kind of where our sweet spot's been. We've been partnering, I want to say, probably at like 20 different senior banking relationships and we get a decent amount of our business from senior banking relationships that quite frankly can't get to the last dollar, due to either regulatory issues, or in-house issues, or whatever, on their end and they need just a little bit more leverage to kind of get to 70, 75. But we're not high leverage guys. We don't try to stretch the last dollar. We try to stay prudent and kind of less our exposure. And we'd rather take the more complicated transactions that need kind of work to get to the final finish line on our end.

Aaron Strauss: That's a great way of approaching it. And I know you've always been involved in fundraising. And we won't get too deep into it, because there's a lot of regulatory issues, of course. You know, underwriting, originating, closing, fundraising, it's like the four major food groups, I guess servicing, you know, maybe the fifth. I'm curious in a real feel, you're always on the road, you're always pitching investors and obviously you're fortunate to have a wonderful balance sheet behind you as well. What's kind of the temperature, if you will, in the market for raising money for these types of loans at this stage? I'm talking to a lot of different people and it seems like we're in this almost middle point of the market, where there's an appetite for a lot of more equity deals, because again, it seems like it's getting more competitive on some of these transactions. I'm curious if any interest, confidence, or excitement has waned at all, or is it as hot as ever for people to get into these different opportunistic types of deals?

Sebastian Post: Great question. I think the credit space, there's still abundant appetite for it, because it's safer, it's easier, it's an easier story to tell your investment committee. I rarely see true third-party equity being raised. It's like a needle in a haystack on even a good deal, largely because of rates. You know, we see a thousand deals a year on average, right? And we probably hit on one and a half percent of that. So call it 15 deals, 20 deals a year. The amount of deals I've seen actually get through third party equity, at least on the development side, is like two deals a year, right? In the last two years, it's been a tough struggle. It's tough to kind of deploy capital on a macro level, right? Each deal is kind of unique in itself, but holistically, I don't see the equity markets there at all.

Aaron Strauss: Right.

Sebastian Post: Mostly institutional deals. They're structured PREF, they're structured in some kind of capacity, some downside protection, but raising capital in equity space is like, that seems like a big challenge, compared to the credit space, where it's like, deal flow is more the challenge than actually trying to raise the capital. If you can get the right deal flow, you'll raise capital very easily. Equity side is just challenging, especially with the 10 year and the 30 year. I mean, that's the trade-off that most people make, right? Like, do I invest it in fixed income or equities or somewhere else? Or do I go to real estate? And the risk return trade-off is not there the way it used to be, when the paradigm shifted in 22 and 23 with rates rising.

Aaron Strauss: Absolutely, and that's a really good overview of kind of where we are right now. A lot of activity, but that equity side, extremely hard to raise capital for. Obviously, depending on asset class, development is worlds different, of course, than cash flowing, multifamily, et cetera. Maybe we could talk about origination, because you are a small shop. You've grown. I met some of your colleagues, all fabulous. You've built a really great team around you and I think it's a fabulous culture. Origination's tough, I mean, it's a slog. So people listening to this, you know, maybe they're up and coming broker, an early stage investor. I'm curious from a deal flow perspective, you've been at this now for 15 years, building out Lionheart. So at this point you've seen literal cycles and you've been through it and you've built great borrower relationships, but always maintaining kind of that competitive edge to originate new deals. Are you finding it mostly through the brokerage community is a lot of one-off relationships built through family dynamics, your own relationships you developed, a mix of everything above. Cause finding good deal flow is the heartbeat really of any organization. And to find those 15 to 25 deals you do a year, you really have to hunt, you know, you scour the earth. So I'm curious if you could share on that.

Sebastian Post: So, I would say on our end, we get deal flow from basically three channels. It's the brokerage community, it's direct relationships and it's the banking community, who often enough, you know, doesn't get to our leverage requests, because they just can't. So, we have strong banking relationships across the board. I would say our best deal flow usually comes from banks and direct relationships. Obviously, the brokerage community is huge and we do participate in it very often. But the better transactions or the deals that have a higher likelihood of chance, are the ones that are either direct, or through a banking relationship. And deal flow, even on a hit rate basis, is pretty much a third, a third, a third. So I wouldn't say one is more than another. But again, our team today, we have 10 people on our investments team, we get more deals than I could like focus on, right? It's an incredible amount of deals that kind of get logged into our system every single week. And we hold daily pipeline meetings. So we go through which ones work, which one don't, which one we should spend time on. And we don't quote every deal, right? I think when I look through the deal funnel of the thousand deals that we get, maybe 40% of them, we spend 10 seconds doing like a quick underwrite on. And we probably only really quote one in 10.

Aaron Strauss: That's pretty good.

Sebastian Post: And we try not to do stuff that we're not comfortable with, that doesn't match our thesis, in terms of what we tell investors. So we try to be prudent that way. And if we need to spend another month or two originating more deals, fine. No one's that mad at us. But we'd rather not have to lend into a bad situation, because at the end of the day, as many people want to take back assets, if there's an issue, like it's really just a lot of work and not something we want to really do.

Aaron Strauss: Absolutely. It's not a fun process for anybody, that's for sure. And I've seen a lot of…

Sebastian Post: Even the lawyers.

Aaron Strauss: Even the lawyers. We want to work on closings where everyone's high fiving each other. That's a better vibe for us to believe it or not, although we have to deal with workouts all the time. Maybe we can talk about mindset a little bit. You know, we call this podcast The Dealmakers’ Edge, because ultimately it's really hard to deal make and you need some sort of personal attributes of whether resilience, or mental health, or the ability to see beyond the curves, or frankly ride the bumps. I mean, so you're a positive guy, I can tell. I've spoken to some of your colleagues. It seems like it's a great kind of forward thinking culture of… pretty youthful too. You're a young guy too. And, and just, you know, we can get this done. We're going to lock arms and ride through whatever is coming at us. You know, you build process, you keep a good equilibrium, but there are bad days too. I mean, there's, there's craziness on closings. We see it all the time. There's a lot of borrowers who can make life extremely difficult and investors want to have all sorts of data points. So you have to be in the middle of a lot of parties all seeking information, results, feedback, and you have to juggle so much. So people listening to this, would like to think they're in a growth mode of their career. So maybe you could talk about some of the ways you've managed to overcome the hurdles. Because everyone wants to talk about the closed deals, but to get one deal closed, it's extremely hard and you have to take a lot of hits basically, on your psyche, as you power through all of these transactions. Maybe talk about the mental side, the mental edge you've developed, to just juggle all of the things you have to juggle and keep a positive approach to keep moving forward.

Sebastian Post: Great question again. So I've been married for a while now, so it's not like I've been dating, but a lot of it sounds like it was dating, you know, 15 years ago to me at this point. So you look at a lot of deals, you kiss a lot of frogs, hoping that one of them works and you try to make it work with the relationship. Obviously cycles move, days move. Sometimes it's easier to be a lender, sometimes it's harder to be a lender. The market goes down 5%, public markets freeze up and the CMBS guys aren't as competitive as they used to be, or the guys that have I have line leverage that is somewhat market dependent. We don't really have those issues on our end, just the way we're kind of structured through our business. But I think just transparency with your borrowers and everybody on the deal team is probably the most important thing you could do, right? Just tell people bad news fast. Don't try to string them along. Don't feel bad if you can't do something, right? There's other market participants out there. You're not the only lender. You're not the only borrower. So just be as transparent and forthright as possible. And if there's an issue and you need to get in front of it, sometimes it's just helpful to go grab a coffee, or a beer with somebody and just hammer it out outside of the office, but this is business. No one takes offense to anything, right? You could do what you can do. We all have bosses, whether we have real bosses or investors that we have to report to. So just being transparent and trying to mitigate as many risks as possible up front, is the best thing that you do. And if it doesn't work out, you just don't feel bad about it. It just, it's a, this is like the big leagues, right? Like decisions have consequences and sometimes you have to do things that you don't want to do. And sometimes you have to just deliver bad news fast.

Aaron Strauss: I think that's great advice. I think people tend to sit on the bad news and fester with it. I've done that plenty of times. No one wants to do the hard things and they delay it. But the longer you delay the hard things, the harder they become. That's great. Just life advice in general. I appreciate that. I'm sure people listening do as well. Any interest in sharing on some specific deals? I know you've done some really cool deals. I've been reading up on them, like you did that 601 West companies deal in Chicago, right? You've done some other deals with some other more local groups. Any interest in sharing some specific creative deals you've done and closed recently?

Sebastian Post: It's funny how you look back in hindsight. We've been doing this for a while. I found some of the best deals are the deals you do with your closest friends and helping them develop their businesses, right? So lending to good friends is always, you know, it's nice to see them be successful on that side. It's fun to participate in their journey on their development transactions. You know, I think one of my favorite deals that we did was for the Gotham organization at 550 10th Avenue, a big multi-project with them and Goldman Sachs. We did it with the big Wells Fargo and US Bank at the time. So big, big transaction. I want to say 22, 23. Obviously not anything noteworthy just by itself, you know, ground up multi-tower and Hell's Kitchen slash Hudson Yards neighborhood. But what was notable about it is, you know, we went through some hard times too. There was, you know, the crane fell down, right? That never is a good thing. I remember when that happened. You know, you kind of trust the development team. On our end, we had full faith that Gotham was going to be able to, you know, jump in front of it, fix it. You know, it's scary seeing a crane fall down, but they were luckily ahead of time, ahead of budget and had no issues that way. They rectified the issue fairly quickly with the fire department and thankfully no one got hurt even, which was even the best part of the story. Basically finished the job on time and on budget, which was a, you know, kudos to them for being able to take a bad situation and make it great. Stuff like that happens, right? And you kind of just need to be mitigated and there you have pretty institutional sponsorship, both at the Gotham and Goldman Sachs level. The deal turned out to be a home run for everybody involved. It was fun closing with a good friend, former colleague. And it was fun, when they paid us off and now we're on to getting the highest rents probably in the sub market. So great overall project and it was fun to participate in it.

Aaron Strauss: That's great. And honestly, a crane falling down in New York City, that is actually a miracle. That's like a legit miracle. No one got hurt. That's a blessing. That's a real blessing. And that's a great story right there and I appreciate you sharing that. We hit on the cycle a little bit. We talked about, you know, the challenges of equity. Obviously, the credit market is moving. You're constantly raising money. You're constantly seeing deal flow in a really nice space. You're busy as hell, from what I understand. You're constantly kind of mapping out strategy, whether it's probably current underwriting, looking out over a couple years term. It's really hard, I mean, obviously, because there's so many things at play, whether they're geopolitical rates, like who knows, really. But when you look into your crystal ball, you know, kind of a new underwrite, you know, next year or two or three? Or you think we're just kind of higher for longer and we're just slogging this out and this is the market that's going to look this way for the next couple of years? Or do you see things changing in either direction, from what you see from your vantage point?

Sebastian Post: In hindsight, realize how spoiled we were for so long from like 2010 to 2020, right?

Aaron Strauss: Yeah.

Sebastian Post: That time period was just absolutely insane for such a long period of time. We should have done every development deal, we should have done every long term fixed rate deal we could have found. Unfortunately, I don't see rates coming down anytime soon, as much as the government tries to make rates, both on the long end and on the curve go down. Macro-wise, it just seems tough. Inflation's obviously still very sticky and it's not kind of going below the 2% target. Fortunately, unemployment is kind of fine, but spending is a real problem. And rates, the markets are reacting, right? This is August 20th of 26, so 30 years at 5.3 and as much as the treasury wants, it seems like it's going the opposite direction. And there's just a lot of repercussions that go through the entire ecosystem that affect all that. So barring some kind of major event, restarting the system again from a recession point of view, I just don't see how rates can move in any one direction outside of staying stagnant, or going potentially up a little more. Hopefully it doesn't happen, because real estate's obviously very dependent on where the rate market is today, but I just don't see how rates could go down. And I don't think the buyers are quite there. There's too much volatility happening, both on the currency markets and interest rate markets and other world, other countries. It's just very intertwined and it's a very big ecosystem and like one lever here pulls something else somewhere else. And it's really hard to predict where that's going to go. If I had a crystal ball, maybe I'd be an interest rate trader or currency, but...

Aaron Strauss: Totally, totally.

Sebastian Post: From a real estate point of view, obviously decisions we make are months if not years in planning. I mean, I remember doing development deals and, you know, back when I was at Fisher Brothers in 2013, 2014, you know, you buy a project, you spend a year or two designing it, then you spend two or three years developing it. By the time you're done, you know, you lose all your hair and it's like another decade of your life gone, right? It's kind of crazy how long the development cycle takes, but you can't really plan for that in the short term, right? You kind of just have to make sure that you're on the right basis and there's enough wiggle room to kind of go. But I can also tell you most numbers don't really pencil day one, right? You know, something will go right for something to work, because otherwise you probably are not going to be the winner on a deal, right? So you try to mitigate as much as you possibly can, but it's never as easy as a yes, no, or there's a lot of gray areas all over the place.

Aaron Strauss: Absolutely. And I guess the fun part of development is after you go through all those years, the cycle upon which you went to contract or originally looked, a bad deal is often completely inverted by the time there's supposedly some sort of liquidity event. So by definition, you're arbitrage, you're underwriting into cycle economics too, which is kind of wild. So it's an absolute, you know, insane world and so much respect to people who live that daily and who survive and thrive. So, so congrats on being part of an amazing team.

Sebastian Post: It's amazing how vintage plays a big part in what returns are, right? You could have the best deal in 2020 or the best deal in 2019, like a two or 21. It's a very different deal.

Aaron Strauss: Fascinating.

Sebastian Post: Just by, right? Like you can't control some things you just can't control.

Aaron Strauss: No, a thousand percent. Anything else you're, I mean, you're executing at a very high level. You're seeing great deal flow. You're getting deals closed. The team, the company, the firm is doing well. Anything you're particularly excited about? Other than kind of more of the same, are you seeing pockets of activity in any different markets you'd like to pursue further, or strategies that you're seeing borrowers implement to try to find value, or just pockets of creativity out there that you find interesting that maybe somebody else wouldn't see in the market that you're able to share?

Sebastian Post: Yeah. And I think we're finally like peaked through some of the supply issues you had in the South. You know, I think now is probably a good time to start revisiting some of those markets, especially from a development perspective, or even from a pure acquisition perspective. I think we're through the issues with Austin, the issues with Nashville, right. The issues in the Southeast that have happened, I think we're probably within 12 months from just the peak and hopefully kind of run scaring back again. I also find fascinating everything that's going on in San Francisco. It seems like that market was dead for such a long time and then with the AI global kind of going where it is today, that market is some of the best rent growth in the entire country. So it's nice to see that place kind of coming back to where it used to be. I remember in 2019, that was like the best market in the country. So it's kind of finally nice to kind of see that happening. We are pretty bullish, given the supply issues in California, on that state from just a development perspective. Same thing with Chicago to an extent. I think some of these markets were overlooked. Obviously regulatory issues aside, you know, regulation kind of also mitigates the supply issues there. So you start seeing good rent growth in some of these markets. Obviously kind of inverse to what you want to see, but you know, it makes it a better investing place sometimes.

Aaron Strauss: Makes a lot of sense. Last question. Well, first of all, maybe it's two-sided. Anything else I should have asked you, but didn't, that you'd like to address? Or also, if you're sitting with somebody who, you know, interned with you for the summer, or a junior analyst, or somebody starting to get into business and they're just trying to get in your calendar for coffee, you're a busy guy, you know, anything you're going to share with them, as far as just broader success strategies for their career? You know, things, principles you've tried to live by, or any kind of macro thoughts as to how to sustain the difficult process of growing your career through ups and downs and twists and turns.

Sebastian Post: What I would say is you try to make friends with your peers. I think that is, obviously it's hard to break in, right? It always is, no matter what industry you go into. But I'll fast track it to someone that's already in the industry. Becoming friends with your counterparts is probably the single and the most important thing that you could possibly do. And that's going out, grabbing coffee, grabbing lunches, dinners, drinks, whatever it is, make those relationships outside of the office, because you'll be surprised in 10 years where all those people sit. You know, my friends that I grew up in the industry now run companies and it's fun to see that, because you could text them and you know, someone that's running a division or a company gets back to you in 10 seconds, because you've been friends for 15 years. And you treat it like that. You truly make them your friends. Don't even worry about the deal. Don't worry about anything else. Just go to hang out. This is such a relationship business more than anything else. You could be the smartest person and that is very helpful sometimes. But the relationship part of the business helps you get the deal done at the very end. Or helps you, a transaction steer your way, or it helps you get a leg up on the strategy that someone else is thinking of and, you know, working with them. But that single, like, that single handedly is the most important thing you can probably do is developing your Rolodex relationships, because I know it's 2026, so probably most people don't know what Rolodex is.

Aaron Strauss: Yeah.

Sebastian Post: Developing relationships is by far the most important thing.

Aaron Strauss: I agree with that fully. It's very funny how when you're younger, it's all about the technical knowledge stress, you know, underwrite the deal, understand the market. Does this make sense? But as you get older and becoming more advanced in your career and you're really in a sweet spot, where you're young and mature and doing so many things at the same time and growing. But the compounding effects of having built those relationships in your up and coming years and maintaining them and growing them and introducing new people to that relationship matrix, et cetera, that has a much, much greater outsized return than, you know, having the best technical knowledge. And it's just something that gets inverted on people. Sometimes they wake up too late and they realize they should have been building these relationships and sometimes they've been doing it throughout like you and it comes back. But that's really critical advice for people listening to just get out there. I call it kind of catch a rising star, you know, working in the office next to a superstar, you know, they're going to do something super cool down the road and they're very smart and talented. Become friends now while you're both in the same train and then cool things happen later. And it's just people at the end of the day. So really, really perfect advice for somebody listening. And Sebastian, I appreciate you taking the time, I know how busy you are. Congrats on running such a successful organization, on having just a great mindset, great thought process, leadership skills and being fun to hang out with. So I appreciate you being on the show and the podcast and I'm hopeful we'll continue to read about some amazing deal flow in the upcoming months and years.

Sebastian Post: Thanks, Aaron.

Aaron Strauss: And success.

Sebastian Post: Really appreciate it. It was a fun time.

Aaron Strauss: Of course, of course.

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