#339 - Simon Wagner - Founder @ Granite Oak - Compounding $1M to $250M in 10 years

Chris Powers: So I met Simon at reconvene in L.A., and I remember Moses like, Hey, you got to meet Simon. And when I first saw you, I was like, I liked the logo on your shirt. And we talked about that, and you told me what you did. And I was like, Oh, that's cool. But you are significantly under the radar.

And what are you doing later today? And you're like, I'm speaking on stage. I was like, okay, then you talked on stage, and I was like, holy shit. So as soon as I saw you after that talk, I was like, you, you didn't say 95 per cent of the story. So we're going to get through some of that story again today.

Growing up in Germany and making your way to America is an excellent place to start.

Simon Wagner: Sure, and thanks for the intro. That's a mighty kind. So I was born in a small town to the East of Munich in what then was West Germany, not far from the Iron Curtain, which at that time was a little bit sort of the end of the known world, as I've called it too many times at this point, but it was, right.

That's where the train tracks ended, and the road ended because you couldn't go to the other side. It was a tiny place, 800 people, you know, elementary school where you knew everyone; you knew every person's dog's name kind of place where to this day, sometimes when I walk into a shop or something, they know who I am and I've never met them, but I look like my father.

So they're like, ah, you're Simon. I'm like? You know, that small of a place, right? I lived there until I was 16 years old. About two weeks after my 16th birthday, I moved to the U.S. It was one of those high school exchange programs where you come, live with a family for one year, and attend a local high school. It's just the complete luck of the draw where you end up.

It could be anywhere in 50 states; those people must be paid. So it's a volunteer-based thing. And most people do it because they either don't have kids, the kids have moved out, or they've been doing it many times. My luck was that I got placed with a wonderful family in Virginia Beach, Virginia, who've been doing this for years; year after year, they took in a kid from somewhere, usually Europe.

And I lived with them. I was a junior in high school there. And after that year, which was a perfect time, I returned to Germany and went to school for a day. I returned home and called my host mom, foster mom, or whatever you want to call it, Sylvia. And I said, Hey, Sylvia, you mentioned I could come back, and we'd work something out.

Is that still on the table? Like, cause this sucks. I don't want to return to this, not one more day. All right. And she said, yeah, sure. It took a little while for us to find a solution because the visas are such that you can only have a student exchange visa for each level of education for one year.

So that was more complicated, but we eventually decided they would adopt me. So Sylvia and her husband, Bernie, embraced me, and that's how I managed to finish high school in Virginia Beach. And because they adopted me, I was legally, at that point, then their child; I was able to go to the University of Virginia on an in-state tuition basis, which is what I then did after.

Chris Powers: How common is it that somebody would foster parent somebody abroad? Is that a common thing, or was that a unique situation for you? 

Simon Wagner: So it's relatively uncommon. I mean, again, the. You know, taking a kid in from overseas and having them live with you for years. That's already uncommon. Most people don't do that.

Again, they don't get paid or anything for it. They do it because they're good people, but they remain to be adopted within that group. I've never met anyone else who's done that. It's unbelievable. So, yeah, that's how I ended up staying in the United States.

Chris Powers: Okay. So you went to UVA, and then what happened? 

Simon Wagner: So UVA, aside from being the only university that accepted me, is also an excellent school, and they have an outstanding undergraduate business program. I did many things there, but amongst others, I went through that undergraduate business program, which has good relationships with several Wall Street institutions.

They have a career centre, do all these interviews, all this prep stuff, you know, all this jazz, you go through it. Ultimately, I got a job with Morgan Stanley in New York. Well, at first, you just get placed in a general pool of people they hire into their sales and trading program.

Within that, I managed to network myself in what was then considered the scorching and calm area of the financial markets; in 2006 or up to 2006, I started structured products, mortgage, mortgage, mortgage, mortgage, and mortgage bond trading. That was my next step, then.

Chris Powers: And that wasn't your first foray into finance cause you did; you were buying bonds when you were eight years old. 

Simon Wagner: Yeah, that's right, so, as I said, I grew up in a tiny town where there just wasn't much to do. We didn't have cable television or anything else. You could take a ball and kick it around a soccer field, or you could go to, you know, the gas station, buy some chewing gum, or you could go to the bank.

And so I went to the bank quite a lot. I would hang out there. Read whatever materials they have lying around and occasionally buy some investment product, which, at that point, I couldn't legally do, but they. Again, being a small place, they just had my dad's signature on file, and they would just let me do whatever I wanted them to do.

Chris Powers: All right. So fast forward back. So you get to Morgan Stanley. Describe the department that you landed in one more time.

Simon Wagner: So the department was, at that time, most of the big Wall Street banks had what they called a client-facing side, which is essentially trading. With customers and facilitating the financial market's lubrication, a separate department was selling on the bank's balance sheet and taking risks for the bank.

Not that the guys who did the customer-facing trading did not do that either, because everyone at that time took whatever risk they could because that's how you got paid. But we didn't serve customers in the department that I was in. You were a customer of Morgan Stanley and other Wall Street banks, similar to if you were a hedge fund that was entirely outside of a financial institution.

The main difference between that and a hedge fund was that you had the bank's balance sheet to fund you at a beautiful cost.

Chris Powers: And we quickly described what is lubricating the financials. 

Simon Wagner: So, what banks historically did and what they do now, again, is if I have a position in some financial instrument.

In this case, bonds, I need to sell them to someone. Someone needs to buy it from me. All of that is still to stay down on an over-the-counter basis, which means you pick up the phone, call around, and find someone to buy them from you, and the banks would. Buy that position from you if you want to get rid of it and then find someone else to sell it to, but for some time, they hold it.

So, in that sense, they're different from a broker. They're called market makers. So that's what the lubricating the financial system is. And because you hold them for some time, you take risks. But then again, the group that I was in was only taking risks. So, there was no attempt to make a margin or a spread as he would on the market maker side.

Chris Powers: Okay. So it's 2006. You joined the hot team, and were they doing commercial mortgage-backed securities? What was the buzzword?

Simon Wagner: Every type of they called it structure product, but the biggest was commercial mortgage-backed securities, residential mortgage-backed securities, often subprime, CDO, CLOs, aircraft leasing securitizations, credit card securities, you name it, like everything was securitized at that time, right?

And the more Layers of securitizing you could do. And the more complex it would be, the more you got paid. And the more risk you put in, the more you get paid, right? 

Chris Powers: As a young person, when you were watching it, was it dawning on you that was the case? Or is it only in hindsight that you were like, the more complex, the more risk you took?

Simon Wagner: Look, when you start in a seed, and I don't know if that's still the case today, I suspect it is. You begin in a seed like that. It's like you get only a little training before. And yes, you have two weeks of training, which was, you know, how you turn on a computer. Here's how you get your badge.

Excel works like this. Add these two cells together, and don't say these things in email, right? That's your training. Then you get sat down on a trading desk next to some guys who've been doing this for 20 years, and they give you a clipboard at that time. You've got a clipboard and say, Hey, record.

My traits, you're like, what shut up, record my traits, right? And I'm just going to get going here. And it takes you quite a while to understand what is happening around you. It's like all these hand gestures, and not that it works in the pit, but still, a lot is going on the trading floor.

You hear things as you develop a sense of that, and sometimes they don't make sense. And sometimes, you need help to work them out. And it's only later that you can pinpoint the ones that never made sense. Or you didn't get them at the time, but there were moments where you look back now, and you're like, wow, someone told me about this, and it seemed like such a dumb thing to do at the time that didn't say a word, right?

I mean, you're the new kid, and like, you know, here are the people who have been doing this all their lives. They know what they're doing. You sit there and listen, trying to figure it out. And then, ten years later, you still need to figure it out. And you're like, okay, it was a dumb thing.

Chris Powers: All right. I'll preface it by saying it wasn't you that caused this, but if you go to Wikipedia, the team that you sat on has a world record there. You're in second place for the most significant loss ever taken on a trade. It was nearly 10 billion, now teeing up what's about to become an incredible story.

So you're still young. You're fresh. You're green blood on the team. When did you start seeing that something was massively wrong?

Simon Wagner: this was about a year into it, right? So in 07, the subprime side of the business started taking real big hits and exciting elements about that 10 billion losses.

There was a guy on the team who made six. It is the net number. So it would have been 15 otherwise, or almost 16. He made six. You know, and that started earlier. So, at first, those direct subprime shorts that this small team or the sub-team within the bigger team had started making money.

And you noticed that something was changing because not that you couldn't see everything everyone was doing, but you would hear what the daily P and L and. All of a sudden, the numbers became much, much more significant and this at first positive numbers right. Then, they suddenly stopped being positive, and then they became hostile.

And then, you know, John Mack was on your trading floor. Suddenly, you're like, okay, this is not a good sign. This guy I've never seen except on T.V. was the CEO at the time, the very famous guy on Wall Street. I haven't interacted with him, but I just saw him. You know, a few feet away from you, you knew this wasn't going the right way. It is well before Lehman, right? It is all a year before Lehman at this point.

Chris Powers: So, were the markets being alarmed, or were they just? Was it just alarming at Morgan Stanley? 

Simon Wagner: No, this was in the subprime market, right? And because the subprime market was the juiciest piece of the market, it was the one that had the most second-generation securitizations attached to it.

So, for most of the CDOs, the absolute carnage came from the second-level securitizations attached to the stuff that was initially the juiciest, right? Because if you have the most spread to work with, you can structure more. Distribute more money around the structure. And that happened well, well before, as I said, at least a year before Lehman, that was already carnage in that world in the overall financial market.

And even in the U.S. housing and mortgage market, it was a relatively small percentage. I am trying to remember the exact number, but it is about 15% of the mortgage market. Maybe it was 20. I am trying to figure out what's up. So, the overall market was still utterly healthy at this point. And everyone outside of this small, relatively small world, even though the losses are starting to come in a big way outside of the small world, you know, Those guy's problem, that's not going to affect me with my high-quality bars, my high quality, whatever I have for it.

Chris Powers: And real quick, the dumb question wasn't one of the issues they were, ranking subprime mortgages and finding a way to treat them like class triple a.

Simon Wagner: That's right. That's the straightforward answer. It may not be so simple if you haven't lived this, but you would tranche it in these structures, right?

And you would have a hundred dollars of mortgages in them and the top bid so that the best bid would be 60 cents or 60 out of the hundred. And then the bottom would be different tranches. And when losses were allocated in the structures, they would come from the bottom up, as they said. So the first five would be wiped first and the next.

Ten would be wiped, and so on. Now, somewhere at the bottom of these slimmer tranches is what the triple B or double B tranche was. So that was not the very bottom, but it was up slightly. Now, if you assume they took a hundred of these structures and would take all of the triple B tranches from them.

There is a low correlation between these triple B tranches taking a loss because the different structures have different mortgages, right? Some whatever underlying bores, right? They're always different. Then, all hundred of these triple B tranches are unlikely to get hit simultaneously.

If you again have this kind of structure where the loss is allocated from the bottom up, some portions of these would be highly high-quality credit. And that's how they created essentially triple A's out of these triple B's. And it worked for a long time, right? It did not work.

And what essentially wasn't factored into any of these models is that the entire housing market in the United States would drop simultaneously because that had never happened before. There'd be a savings and loan crisis. Texas was very severely affected, but. New York was in San Francisco was no, you know, whatever, whereas in the great financial crisis, the entirety of the us housing market was affected.

And so the correlation between these different deals, instead of 0.1 or 0.2, whatever the rating agencies. We're convinced by people who had my job, to convince them off, it was more like 0.8 or 0.9. And that meant instead of having diversification between these deals, there wasn't any.

Chris Powers: All right. So John Mac's on the floor. PNL is starting to get negative, but you said there was a year between that and Lehman. So, what did that year look like for you? Were you just still on the trading floor, or did your job start to evolve?

Simon Wagner: So during that time in my specific world, what then slowly started happening is right, people were losing money, people were getting fired.

Teams started to shrink. Equity markets were still getting to all-time highs, and people, by and large, hadn't factored it into this dramatic situation that it later became. The two exciting elements for me were that they stopped hiring new juniors. So, the top ranks started to thin out.

So automatically, there were a lot fewer people available to do the work, and the work still had to be done. So you got more, I got more responsibility much quicker than in the more traditional way of progressing through your career. Cause there would always be, you know, a V.P. ahead of you or so on, all of a sudden, there might not be a V.P. or an associate ahead.

And then you, as the analyst, have to fill that gap. So that was one. The other was it started being the first time you could be, where I saw the mass of market participants—got it wrong. It was, you know, if you had my seat, it is evident that nasty stuff was coming.

I didn't know if Lehman would go bust, but I knew that Lehman had boatloads of this stuff, and they weren't marking it correctly because they had precisely the same balance sheet that Morgan Stanley had. If we're losing this much money, they should be losing the, you know, equal, equal volumes of cash.

Or at least equal direction, Barclays, or any of the banks, right? They all had this, but it differed from the general perception, right? There was a perception that this was a problem for countrywide mortgages, Morgan Stanley, and others. And that was a real eye-opening experience for me. The vast majority of professionals, we're not talking about the guys on CNBC or some that watch it after they have their whatever job done.

And they come home at night. These people do all-day-long investments or markets-related stuff and still need to see this. It was an exciting experience to see that that can happen to make big money. That's the situation. I didn't realize it then, but that was the first time I saw it when most people said nothing.

Chris Powers: What'd your day look like when Lehman went under?

Simon Wagner: Around that period, every day blended into one, but it was some version of you'd come in, you'd have your book.

Of bonds that you're supposed to tend to, there's an incredible news flow. All the stocks start dropping. Most of the senior guys, all they do is sit there and refresh the stock price all day long because 20 years of life savings are in whatever stock, in this case, Morgan Stanley stock that they were working at, didn't have this, right?

Because you're brand new, you have no real risk involved in any of this; you're just looking around like everyone is losing their head, and you don't have much to do because there's. No one is trading, right? Nothing is going on. The market is frozen. The bid-ask spreads are enormous. So you sit there, and at the end of every day, you mark down your book, and it's another 10 million lost, another 15 million.

At some point, it's just numbers with zeros. So it was an exciting experience, but you were primarily a spectator. Even though you were in the middle of it, you still watch other people's reactions. 

Chris Powers: Okay. I will spoil the story's ending because we will discuss how we get to the end.

But one of the things that captivated me the most is that you have compounded capital from about that period, a million dollars, into a portfolio today of about 250 million. That's right. And it started here. So, I spoiled the ending. Sorry, but now we're going to tell an incredible story.

So the world's falling apart. You don't have anything to lose. So you're just in the middle of it. Your team was 80 when you joined it. And then, basically, by the end, it was just you.

Simon Wagner: Yeah. In between, I started in New York but quickly moved to London; by the end, it was just me. And then there was another guy. 

Chris Powers: When it was just you, what was your day-to-day, and what thesis did you start forming?

Simon Wagner: So at that point, we'd gotten rid of the vast majority of the risk within this group, and other groups had passed on to us because we got pretty good at getting rid of risk and what you could see then.

So this was in 2012, and I was there for six years. I was there for a long time. Again, there wasn't such a great opportunity outside, partly because it was interesting, and I got tremendous responsibility early on.

And I worked with, in the end, a core team that was extremely nice, good, and intelligent people. Some of the best people I've ever worked with. And I'm still very close to some of them. And you could see that from 2010 to 2012, the job became much more accessible, stuff stopped falling, and some things started recovering.

It was clear that for the institutional size I was living in at that point, the floor had been breached; that was amply clear to anyone, right? I left in 2012 and took the minimal amount of capital I had, which is different from what other people did then.

And have you bought the extremely uninstitutional end of this market, like bonds worth a few thousand dollars here or there at that time? So, those had not nearly recovered as much as the institutional size of the market. 

Chris Powers: Why was nobody else buying them? 

Simon Wagner: Who on Wall Street buys anything for a thousand dollars?

Chris Powers: But even individuals or smaller players didn't see it? Was it so complicated?

Simon Wagner: Well, I mean, Not so much complicated, but ultimately that. The structured product world was relatively small. There were few people in the first place; the risk-takers and the brilliant people in that world had done what I didn't, which was way more intelligent.

What they did was move into seats where they were able to use institutional capital to play. In this market, we use the knowledge on a vastly larger scale. And again, if you know what you're doing and can deploy capital in the tens or hundreds of millions, you will save time buying something for a thousand.

Right? That doesn't make sense. So, several people knew what they were doing and who. We were stupid enough then to play in such a small size, which was very limited. On the other hand, the number of people who held this kind of risk and had absolutely no idea what they were doing was relatively large, correct?

A small French bank or an insurance company in Germany had hundreds of these bonds on their balance sheet that were worth. You know, a few hundred, a few thousand, tens of thousands at most dollars. Sometimes, where do you go with that? Right. They would give it to some small regional broker, usually a shop like this studio, two guys in a Bloomberg.

And those guys would then try to sling it around. Right. And there were few people interested in buying any of this stuff. There were some, but only a few. 

Chris Powers: We're a daily podcast studio and a clearing house by night here. See all of our notes on the wall. And the thesis was, I can buy this stuff for pennies on the dollar.

Simon Wagner: Not only can I buy this for pennies on the dollar, but I can buy it for a significant discount to where the same bond or risk would trade if it were an institutional size. Bond, right? 

Chris Powers: Okay, explain that. So, what was the gap at that point?

Simon Wagner: So let's say, one of those subordinated bonds, the, the entire, as they call it, a tranche of that would be a 25 million tranche, right?

And an institutional size would be trading 5 million notional at one time. That might sell at this point around 20 cents. So it'd be a million dollars deployed. But if you had a 30,000 notional clip of this and that, then that becomes so small, but it not only became small because of that, but the price was also less.

So the 30,000 clip might trade at 5 cents, whereas the 5 million clip would trade at 20 cents, right? So, there is a massive gap in the same risk. Now, you had hope of ever selling that to someone if you were a broker-dealer. At that exact moment, they had precisely this bomb, and then they would buy it. If I already have 5 million of it, sure.

I might buy another 50,000 of it, but if I don't have it, I won't bother figuring out what to pay for it. And so then that's why that part of the market just had not recovered.

Chris Powers: So you made good friends with some brokers and said, show me what I'll call the cheapest bottom tranche. 

Simon Wagner: Show me whatever no one else is buying, whatever you've held, whatever, you know, that has yet to sell in the last month and has been sitting there because, you know, you're not going to sell it to anyone else.

Chris Powers: And at the time, did you like, was it one of those moments where you're like, I cannot believe I have this opportunity? Or is it, again, a hindsight thing where you realize how good it was? Or was it one of those moments where you're like, this is literally like free money?

Simon Wagner: No. It was so obvious. Ultimately, I needed help to do this while at Morgan Stanley.

But in the end, I even left a lot of money on the table, leaving Morgan Stanley, because I couldn't wait to get out and be able to buy this stuff. And how long did that window last for you? So, I only did this for a few months because I got smart enough. I was like, hang on, I should be doing what all the other intelligent guys are doing and try to get a seed to do this, and with institutional capital, I can get that leverage, right?

Because I only had a very, very small amount of money on myself at that time. 

Chris Powers: So, did you end up doing that? 

Simon Wagner: So I did that. What is the effect of that? So I did that. Yes, that's number one. I did that. And I joined a New York-based hedge fund that wanted to set up this kind of business in London. So, I joined them to be their London mortgage-backed securities trader.

And she built a business. It was when the financial crisis in Europe, the sovereign financial crisis in Greece, and so on. So, there was a lot of volatility in the market and the ability to buy these bonds for some time. But what then happened very quickly was that the bank regulations, mostly Fossils Three, as they call it, made it almost impossible for banks to buy and hold.

Any of these structured products. So, the European market quickly shrunk because no new bonds were created, and the old bonds paid off or were bought mainly by USP money, which would hold them to maturity. So, the investable universe between. From 2012, when I joined, to 2014, when this more or less ended, probably by a factor of 10 X, it became almost impossible to do this as a trading job.

So, that was the end of my mortgage-backed securities trading days. 

Chris Powers: How did you fare out on what you did buy?

Simon Wagner: So in terms of my work, those that, well, the risk appetite that I had versus the more senior partners was, uh, was, was different as many Americans do they view anything outside of us is inherently way more risky than.

They are, in reality, and that's not what they get anyone. I get it. It is the most significant financial market in the world. By, by miles and has a lot of advantages, but that doesn't mean everything outside is crap. But yeah, it couldn't put on that much risk. So that was fine, but.

It could have been a better success. The tiny stuff I held personally at that point was what I generally bought as long-term bets. So, there was yet to be a happening there. But then later on, those bonds returned, on average, ten times more of the money that I invested.

That later formed my seat capital for going into the real estate business two stages later in my career.

Chris Powers: Okay. We'll get there, and one more question: The thesis, though, was my downside, which protected the odds of it going to zero. 

Simon Wagner: Tiny. Some of these bonds were paying a quarterly coupon of one point. You can buy them for five points, which means unless the whole thing blows up in the next four or five quarters, you're making your money back, and then it's all free upside. And the one thing that I was highly confident in is that nothing in Europe happens that fast.

So it's not going to. It might blow up, but it won't blow up in the next year. And so that meant your downside was not always, not in any of these structures, but you know, you do enough of these bets. And if you put ten on, and you're going to be correct, most of the time, you will make your money back and have this tremendous free upside.

As I progressed through my investment career, the secret to great returns is having an excellent free upside built into whatever you're doing. 

Chris Powers: All right. I'm dumb, and I'm from Texas. Why does one year matter? So you said you bought it. Why? What is one year? 

Simon Wagner: Very simple. So, let's say a bond with a par value of a hundred. You're buying it at. I'm picking numbers here: five per cent, so you're paying 5 for that hundred, and it produces a coupon, let's say a 5%, but it pays that coupon on the hundred, right? After one year, you've made all your money back because you bought it cheaply. The five points you get make no difference if you pay a hundred. But if you spend five, that's a hundred per cent of your money, right? So, you can do that only sometimes before you make your money back. And then everything else is free upside.

Chris Powers: So basically, buy so low. In this case, there are no downsides and only sunny skies ahead. 

Simon Wagner: And spread it around a bit, right? If you do it once, you might still get hosed, but if you do it ten times, the odds that all pins go against you are low.

Chris Powers: So you go to the hedge fund that lasts for a few years, and what happened? 

Simon Wagner: So because the trading world essentially disappeared in Europe, not exactly, but it did what I then convinced my partners, in this case, still was that we need to go into the real asset world, right?

In this world, the endpoint started somewhere: someone made a loan to someone somewhere. Then, repackage it and sell it as a bond. Now, if the bonds don't exist anymore, and that's why we don't have our job. That also means the loan down the line doesn't exist anymore.

And within Europe, especially, not only did you have this financing channel for the economy and the real estate business especially go away, but you also had banks that used to have 50 times leverage on the equity capital had to reign that into ten times leverage. They couldn't lend as much as they wanted anymore.

And within Europe, that meant especially to the European periphery. And let's say non-favourite sectors of the economy from a political perspective were extremely credit-starved, meaning that if a bank still has the lending capacity, they'll lend it to consumers and small and medium businesses before they lend it to a real estate developer because that's not a politically, no one's going to blow their political capital on saying, Hey, banks must lend to developers, right?

Or professionals in any way, which meant there were—pockets of Europe where people couldn't buy. And I thought, well, this is different from what I've been doing, but it's about as close as I'm going to find anything and then must be an opportunity and, uh, lo and behold, there was, yes.

So then, after trying a few things, I set up a commercial mortgage lending operation in Ireland, which was the next step. 

Chris Powers: And how long was that window of time you were seeking and looking for that opportunity? A year? 

Simon Wagner: Yeah, probably at least a year, right? Because you, I mean, again, it's something that you've never done before.

So I need to figure it out. How do you do it? I don't have a clue about that. There should be an opportunity, but I've never made a loan. So I don't even know what that means, to be honest. I'd never even borrowed at this point in my life. I've never bought anything with a loan. It was very far in a way, but not a million miles.

And then you go, and you check out, you know, Fly to Greece, talk to a lot of people, like, must be opportunity around here. And you do the same: go to Italy, Spain, and Germany. And anyway, it takes a while to gather the facts and start understanding what matters to be a lender.

For example, the legal environment and the enforcement process in the courts are hugely important, which, again, nowadays, you look back and think, yeah, what else would matter? Of course, that's one of the top five things for a lender, but if you still need to deal with it. The actual enforcement side of a loan ever.

It takes you a while to figure that out. Take me at least a year to go through that process. 

Chris Powers: Okay. So you set up a commercial lending for Ireland. 

Simon Wagner: Well, at first it was a little bit, it was supposed to be a bit more pan-European, but very quickly I realized, well, A, it's just me by myself here. So, the language barrier in Europe is always an issue.

Do you speak English? I speak German, that's it. So trying to do loans in Spain without speaking Spanish already challenged number one, but also generating the deal flow and dealing with some of the backends of the lending business, Ireland was the obvious choice for two things: it was empty.

There was no one lending at all. And the legal environment from a lender's perspective is for European countries, lender friendly for professional lending. If you lend to consumers, it is a different story. Still, if you lend to professional investors, you can enforce without having to go to court or deal with the lengthy process, not always, but generally. 

Chris Powers: Okay. How much did you raise? 

Simon Wagner: So it started with a hundred million that the firm supplied that I was still with at that time, even though I wasn't doing that much of the mortgage trading; they provided that and then raised, I'd say, another 200, maybe 250 on top from various financial institutions.

So overall, 300, 400 million that we deployed over several years from; they start small. Wait to begin day one; then all the money is out; you make a loan here, and you make a loan there. But from 2014, for roughly two years, we deployed that. And then it went afterwards for a little while, but my active involvement scaled down massively at that point because I set up the team.

And, at some point, people on the ground will do the job better than you flying in from London and, you know, running around town or the country, trying to do it for them, but yeah, so roughly. 

Chris Powers: So you started 2014, like you said, but you didn't. I know a whole lot about lending.

Simon Wagner: It was probably actually 13. It's like all these things are fluid processes, but yeah. 

Chris Powers: But the question's really like, what are the critical takeaways by 2016 that you're like, okay, I understand, like, here's something I learned in the lending business that you can only learn by being in the lending business.

Simon Wagner: I mean, there's a lot. Every time I went through a career change, there was a lot and every time I did it. I thought I knew much more than I did when I entered it. It starts with simple things that are directly related to lending. How do you like what a loan document looks like?

A professional loan document in Europe is an LMA London market association, or I don't know, but it's called the LMA, which is what the London big banks, the London market, use. That's the standard template. That's a hundred to 300-page document, right? You've got to learn how that works.

Then, you have to learn how enforcement works. You have to know what a borrower cares about, what you care about, and what your back leverage cares about, right? Because you originated the loan and then you have to give it. To another bank to provide you with leverage on that. So you have to make sure you understand their docs and that they're happy with the docs you do.

So, that takes a while to learn, but in parallel, and this is what was extremely valuable for me; you also understand the actual asset. That you're looking at, right? At first, my approach was very much: this is a spreadsheet and, you know, the rent coming in, and this is the square footage of the building.

And yeah, it's done at this point. But then you learn, well, rent per square foot in this location. It's different from one that might be only a hundred meters or a hundred yards down the road. You learn that ceiling height matters. You understand that sometimes people don't pay the rent, even though it says, you know, on the contract that they do.

And many, many little and big things like that. You also learn that it matters whom you lend money to and make a loan. Work from a lender's perspective requires a borrower who can pay and wants to pay. That's sometimes different. It was, for me, a combo of learning about the real estate business, the mechanics of lending, and people. So far, my interaction with people has been to pick up the phone and say, Hey, make me a market on this.

And the guy said, whatever, 25, 26. And I said. Yeah, bought, sold, whatever, that was the extent of the interaction, right? There was not a substantial human element involved, but when doing business in the real world, there's a massive human element. So yeah, it was a crazy good lending experience. 

Chris Powers: Okay. So, I'm going to take a stab and guess that you started lending in Ireland, which gave you the wisdom to think that maybe I should begin buying property in Ireland.

Simon Wagner: Essentially, that was the transition. There were twofold. One is because the lending business started when I was a partner of another firm; my economics could have been better relative to the success of the company I'd built. It took a little while to figure that out. But once I had figured out that I would not make nearly as much money as I should in this situation, that was one element of my motivational change.

But the other was. I realized that people were paying a considerable amount to borrow from this business that I set up called Origin Capital to borrow from Origin Capital for relatively low-risk loans that, you know, someone in Ireland was paying, let's say, 8 per cent when the same, not identical, but a very, very similar setup.

A similar situation in Germany would have paid 2%. And I thought, well, these people aren't all idiots, right? So, I looked at what they were doing. And in many cases, they didn't care that they paid 8%. They would have paid 15% because it didn't matter. They were making so much money on owning and being able to buy the real estate that, of course, they would have preferred it to be cheaper.

But buying it was all the game that mattered at this point, at this point for them. And I'm going to exit this situation where I'm capped on the upside, and I'll join the Bora side of this world and start doing real estate deals myself. 

Chris Powers: So you leave origin, and did you know where you would buy an island? Did you have to spend time sorting that part out?

Simon Wagner: Yeah, it retook a while. Have I been on the other side of the table here for a while? I know how this is supposed to work. And then you start, you know, trying to get a deal done. You discover, well, there's a thousand ways a deal can die.

And I've learned another one today. And you know, that happens over and over and over again. Again, there's a fluid transition. Anyhow, right? I remained a consultant for a while, ensuring the original world worked. I wasn't actively involved in it, just providing everything was going all right.

And I was still, in many ways, a deal flow generation for them. Cause I'd been doing it for so long, but you know, on the deal side, it took me at least a year of running around and, you know, as they say, kissing lots of frogs and just trying to figure it out before something then came about. So it was, again, a protracted period of trying things that didn't work.

Chris Powers: Okay. Take me through a series of deals you've done because, as I understand it now, you're one of Ireland's largest commercial property owners.

Simon Wagner: We are one of the largest potential developers. 

Chris Powers: Okay. Correct. Yeah. What was the first deal that we finally said? Okay, I found something.

Simon Wagner: So there was a whole bunch at the beginning that happened relatively quickly, but I'll pick one that was an excellent example of what we did, why it worked and how it ended up.

Chris Powers: Is this the one with the meth lab in it? 

Simon Wagner: That's the one that we can tell with the meth lab in it; that's the more entertaining but not that important part of the story. And I'm wearing a college shirt here today. And I said this is the more severe version. So, essentially, there is a lot of this in and around Dublin, which is a beautiful place.

If you still need to visit, definitely put it. It is home to Conor McGregor, Guinness, leprechauns, and the whole thing, but it's a nice place to stay. And Dublin has some things that make it different from an American city. It's not a million miles distant from other European cities, but for you guys, it's interesting.

So, the centre of Dublin is the largest, if not one of the largest, area of Georgian architecture, a period of the British Empire where the Georges were the kings. And so that's all historic preservation. So you can only build in small swaths of centrality. At the same time, you do have a growing population.

On all fronts, if the domestic birth rate was above the replacement rate, which is unusual in Europe, and you have immigration and those trends have been going on for a while, there was pressure already, even though the market was still very subdued. Still, there was pressure for accommodation and building space of all sorts.

One of the first areas to experience it was the financial crisis. For student housing, because it wasn't directly connected to the domestic economy. If you're foreign, in this case, almost all were international students living in student housing; it didn't matter much what the wage level or so on was in Ireland because you got paid by your parents, right?

And they were making money wherever else they were. Still, there was no, or very little, student accommodation at the time available, especially not the purpose-built, which is, you know, any average dorm you think about didn't exist, at least not in large numbers. But get a significant inflow of students.

Now, there are parts of Dublin that have historic industrial or commercial. Uses that don't apply today or are becoming increasingly important. One part of Dublin is what Dublin has done, like many cities, by postcodes. So Dublin eight is where the Guinness brewery is historically. It still is there, by the way, and a bunch of industrial adjacent things where we found this.

This property and by us, at this point, that was just. I got a call because during this period, and really to this day, when you have a reputation for doing what you say you're going to do for closing deals on time and performing, people call you when they hear about things that might, where that element might be essential.

So this was one summer. I got a call from someone. I forget what it was, but it was at the end of July, right? And I get a call from someone met by a previous deal. Who said, Hey, I know this guy, he has exchanged in a building he has. Ten days or 14 days left to close. And as I mentioned to you before, the market structure there is your exchange on a contract, and you put 10 per cent of a deposit down; that's hard money.

That's gone If you don't close. And then, when the closing date comes closer, you lose that money. And so this guy was past the period where he had already put the hard cash down the exchange but had yet to close it. And he had 14 days to go. Maybe it was 18. Forget exactly. And that's an extremely short period left.

So, I never met this gentleman before, and I've worked with him for many years. I had never met him before up until this point, but I was in Dublin. I said, I have one fine. I'll meet him for coffee, meet him for coffee, and show me the property then later on. And it was a rundown furniture factory. So, industrial building, but properly run down, but in a part of town that was up and coming at that point, or in Dublin.

Because of that concise timeline, I got a good deal on it. This guy had already gotten a good deal. I got a slightly better deal from him. We had an agreement that worked for him as well. It wasn't one-sided, but I got a good deal because of the short timeline. It was a land play because the building was in bad shape and could have been fixed up, and something could have been done with it.

Of course, it could have been, but the real value was as a land play in this piece. The zoning, like everywhere, is slightly nightmarish, but you have zoning that is concentrated on generating employment. It was one of those, meaning whatever happens on this land should employ people.

Historically, it meant manufacturing of some types, right? These kinds of locations. Now, we figured there's this giant—pressure on student housing. The first international student housing groups are moving in, looking for, you know, things to buy and student housing; you need many people to run student housing.

It's not too dissimilar from a hotel. It's less hassle, but it's in that direction. So we made the argument during the planning process, which is what they call the entitlement process, to allow us to put student housing onto the successful site. The overall play ended up unsuccessful because there was a land aggregation play within this planning play, and we failed in the land aggregation. It was one of my many learning experiences where I didn't realize how to pull off land aggregation and, in any case.

Because we bought it right and we managed to get the deep planning through, we may have made a, like a, about four X return on this in nearly two years, while that value is being created through the planning system, about halfway through, we managed to take our money out of the deal and buy the next deal already.

Slightly bigger, about twice as big in terms of investment volume, but a similar kind of idea. And so what we then did over several years is buy properties. And add value either by changing the zoning or the planning on them or leasing them off, refurbing them, or whatever. I mean, to some extent, what you guys do with class B industrial, but we did because it's a smaller market, less focused.

You can't just do one type of asset, or you'll go for long periods without doing anything. 

Chris Powers: And you, I want to take advantage of that one part. You said we pulled out some money to buy the next one. What happened there?

Simon Wagner: So we found a lender similar to a type of organization that I had previously built.

So I knew a little bit about how they work. We paid them an extortion of interest, but we got more money on that loan and the recourse loan against this asset than we paid for the asset. So, we've got all our capital out and a little bit of profit that became a free option at this point on, and we took that capital to buy the next property.

To do the same thing, but that next property was unencumbered, right? Because the. Debt was on the previous property. So, property number one meant we could do the same thing on property number two. You can't do it right away because it's a bit too blatant, but you add value, and then you can do it again.

And so we did that, and you do that 20 times, and the numbers become bigger and bigger. And here we are, right? 

Chris Powers: What did adding a bit of value look like? Was that painting a building? 

Simon Wagner: No, usually, you have to transform the value in a way where it's not like you can buy it.

So damn cheap, partially it is, of course, you have to buy it, but the other element is it's during this period, the vast majority of bad real estate was owned by people who either didn't care because they were so far on the water on their loan. I am still determining the exact numbers for the following property we bought.

We bought it from a seller who essentially got pressure from one of the P houses, who purchased the underlying loan to get rid of it. And my guess, my best guess, would be that. He owed the lender three or four times the value of the property. It meant that this owner didn't care what happened to the property for a long time because what difference did it make?

You're not going to recover any money from it anyhow. So many of these owners focus more on putting, for example, really, really bad tenants in, but then getting those tenants to pay the rent in cash and the pocketing the cash, and you know, that's how they got money out now. I'm not accusing anyone of anything; I don't know anything, but that was a strategy, right?

Which then meant, after several years, suitable? So this is 2016, 17, 18, and you're closing in on ten years of this behaviour. You have crappy tenants in some properties. That has not paid rent in years, and everything is going badly. So sometimes it's as simple as.

It was showing up, getting rid of those tenants. Now, it's a process. Ireland is a relatively tenant-friendly jurisdiction, but you can, over time, get rid of them and then put tenants in that pay the bills. So that sometimes it's that simple, and at other times it would be shoddy construction that had fire regulation issues and the hints you weren't allowed to rent a unit.

Many units or apartments, right? Fixing that sometimes that's easy. It's putting fire alarms in or stuff like that. Sometimes, it means you have to strip back a building and fix underlying fire separation issues, and sometimes, a combination of all that. It's not rocket science to do, but if you're a bank foreclosed on a property or you're the property owner, that's so far underwater. Again, you're going to do something other than that. Why bother with it? So again, it does add real value, but it's not rocket science. And so we would do this, whatever the relevant strategy was, and then overlay it often with getting and planning permission to do more with the property that was already there.

Chris Powers: Okay. And real quick, do loans in Ireland usually mimic the type of loan you get in America? It's reached a set term limit. Are they fixed? Were they floating? 

Simon Wagner: So usually, it depends a little bit on the size as you're playing that the smaller it becomes, the more retail it is, that's up to like maybe a million or two, but once you're past that, it's very similar to the U. S. Not similar to all parts of the U. S., but it's a five years standard term. You can borrow somewhere between, depending on who you're dealing with and what you're doing, 30 to 70 or 80 per cent with some mezzanine kind of stuff on top, and it's a floating loan back in the day all over, no, actually in Ireland, still all Uriber based.

So Uriber exists, basically, like the library used to be, except for Euros.

Chris Powers: Uriber. Okay. All right. Well, fast forward, how much have you assembled today? You can give me the total size, but then what can you do with all of it?

Simon Wagner: So what we focused on is for then the tail end of our portfolio growth period, which lasted roughly until about COVID hit, and then we took a bit of the foot off the gas pedal, the bulk of the portfolio then was assembled in the few years leading up to that. In Ireland, we have roughly about 200 million euros worth of properties. It's split evenly into standing stock so that we can build investment and development properties. It is in various stages; we can build process some, and we have full entitlement to make for about a thousand apartments.

And then we have various. Sort of future phases that are further down for another, say, 3000 apartments and homes so that we can build about 4000 housing units on our estate, and we have. There are about 800,000 industrial standing stock, and we currently have 150 apartments, roughly standing stock.

Chris Powers: Okay. And then let's go back for just a second. Part of the thesis, as we talked about today at lunch. From Ireland from 2009 to 2019, how much development happened? 

Simon Wagner: Very little, I mean, very, very, very little, very little, was built while the population was growing throughout this period to the point where, just to put it in context, the entire island of Ireland is split into two jurisdictions.

The North is still part of the United Kingdom. The South is an independent country, but if you add it together, it's population-wise about the size of Dallas and Fort Worth. The Metro area, a small place in the Republic, is about five more than 5 million people. There are two million households and a housing shortage, the numbers of which depend on who you ask and so on, somewhere between 200 and 250 000, which is staggering in the context of only 2 million households.

And so, that is a result of one population growing. The economy is doing exceptionally well, but you have a ten-year window. And it's persisting, although it's getting better, for a 10-year window, more needs to be built. 

Chris Powers: And layer in, what does the tax regime look like? Why is it a hotbed for big pharmaceuticals and tech companies?

Simon Wagner: So there's three elements to it. One is the tax rates. So, if you're an operating business in Ireland, you pay. In the future, the global minimum tax, but, historically, 12 and a half per cent two is it is English speaking and is a relatively similar business environment to the United States in the sense that it's common law and England, by the way, would be the same, but England is not in the European Union anymore.

So it makes life a lot more complicated if you're manufacturing or exporting anything, and then the last is it's an exceptionally welcoming place for foreigners. Almost all Irish people, especially those my age and older, have lived abroad, have a brother abroad, have a period spent abroad, have a wife, cousin, or whatever.

It was an emigration-focused country for a long time, and thus, it is really. Especially in European countries, in the U.S., people are so polite and generally lovely to strangers that you might not appreciate that. Still, in Europe, that's only sometimes the case. And Ireland is a welcoming place, especially for Americans and for people from all over the world, to be honest.

It makes a huge difference when you decide where I will put my headquarters, right? Can I go where they speak English, but the tax site is accurate, and the people are friendly? And it's pretty close. 

Chris Powers: You have a growing population, an excellent tax setup, and are friendly to foreigners.

Zero development over ten years. So then 2019 comes along. What was the domino that got things going, or was there a change in law, or was it just time?

Simon Wagner: So, you have pressure and pressure build-up. It's only marginally changed. In 2019 and 2020, you saw a lot more influx of foreign capital; German pension funds started buying stuff.

And so that's died again, by the way, now, because interest rates are much, much, much higher than they were even three, four years ago, right? As everyone knows, so that bit is gone. It's just the market had started correcting itself, and now that's dampened again because the availability of financing has shrunk.

The government has stepped in over the last six months. Twelve months later, they've started doing many projects for financial assistance and making the development and entitlement processes more efficient because that has gotten to the point where it's tough to navigate.

We're good at it, but even though our timelines have extended massively, it is still, by far, the number one issue in the country, which is the shortage of housing and space, both natural and For industrial users, but obviously, more people are affected by the housing shortage, which is, by far, the number one political issue.

Chris Powers: I've missed a little, but why must it still be done?

Simon Wagner: Well, so you have two effects, and to be honest, I'm always surprised by how long-lasting they are as well. But when you think about it, you have those two effects. It makes sense. It's still surprising that it's so long.

During the financial crisis, the banking system collapsed, and you went from 16 or 17 banks that provided lending to development and investors in the real estate field to all of those banks. And I mean, they either left the market or went bankrupt. Then, you were left with two government-controlled banks because they were nationalized.

They're slowly being, you know, denationalized. The stocks are being listed and sold off, but those two banks are very cautious. They are the big players in the domestic market, and their focus until very recently, at least, had not been to provide financing to developers because that's inherently risky.

It's mainly in a country of risk where the villain and the, the reason in the popular mind for the financial crisis was developers who had overextended themselves, sort of what, the Occupy Wall Street, they didn't have it. But if they had an Occupy Wall Street, they would have been an Occupy developer.

That's a good way of putting it. That situation is persisting for two reasons. The more adventurous capital often is, and on the lending side, right, PE-backed. So there's a certain return level that, no matter who, it ultimately is deploying it. They all receive the backend capital from someone who either is a P.A. house or has returning expectations of a P.E. house. So that means you have to charge a certain level. So that's the flexible capital that is there but has high return expectations, and the cheap capital that you have available in other places in Europe, France, Germany, and Italy is bank capital. And when you think about it from a, it's sort of an institutional failure of the European market structure, that if I'm sitting at a Deutsche bank in Frankfurt, for example, and I want to make a career, I want to push something new.

I have the choice of starting a business in Japan, picking it, correct, colossal country, a massive opportunity. If it works, I might become CEO one day. Or we'll do Ireland. If it works, it doesn't move the needle. Yeah, okay. I'm the guy who developed something in a not-so-big place, right?

It's not going to make me CEO, for sure. If it doesn't work, I get fired. So, I need to be incentivized to do that. And that's, to a greater or lesser extent, the case all over the place. So that's one issue. So, financing is still significantly more complex and expensive in Ireland than elsewhere in Europe.

That's the part that the government is addressing at the moment. It takes time, and it's a challenging fix. The other element is that because of the depth of the financial crisis, it was a country that was hit harder than Las Vegas, right? But the whole country, right? You had a lot of people who knew or knew how to do this business leave the industry, right?

They moved to the U.S. and moved to Australia. They just called it quits and retired. A lot of businesses went out, and they have yet to come back. So you had a loss of, I guess, Ben Bernanke wrote a famous paper about these non-monetary factors with the great depression; precisely, this happened in Ireland.

You had the talent disappear, and you had the financing disappear. And both things take a lot longer to come back than you would expect. There are only so many people. We're like me, where the opportunity is big enough to spend our time and a considerable chunk of our life trying to bring money and develop things right from abroad.

Irish people are passionate about their own country, but it's hard to do when you don't have the capital. 

Chris Powers: I'm so rooting for Conor McGregor, all right. You've bootstrapped. 

Simon Wagner: We owned the gym where he trained for that Floyd Mayweather fight for a long time. The mural of him knocking Mayweather out is still on the wall. It didn't happen, but that's what he was training on. 

Chris Powers: Oh, that's awesome. Have you ever seen him in person around Dublin?

Simon Wagner: I've never met him in person. I've met many people he worked with, his trainer, etc. 

Chris Powers: Okay. So we've bootstrapped to today. And why are you deciding to go and raise money? What's the plan? Why is now the time, and what's the plan for the money you're trying to raise? 

Simon Wagner: Well, there are two parts to it. One is the historic way of how I built the business. It's something that is much, much harder to do when the market is not on fire because if you keep leveraging up and something goes wrong, then you're going to have a problem. If the market is on fire, you can do that because even if you do something wrong, you'll probably get bailed out by the market.

That's fine as long as you're very confident in that. Now, the market will eventually come back, and it is, you know, an attractive demand-supply imbalance, and it's wild from a product provider, right? But that's not something that we want to keep doing. And much more significantly.

Because we have this relatively larger state, we need to focus on developing that out, and we can, I mean, not probably, we can spend more than a billion dollars just developing that out that significantly exceeds our current financial means, but at the same time, we've. Put together a team and, like a lot of this stuff in detail, is done by my team at this point, an excellent team that can find deals, take things through the planning process and build stuff. And we cannot fund that now because we're done with what we have. So, the next ten years or so. 

Chris Powers: And if you build it, the stuff you're making, will it be market rate or is the government put out something that gives you confidence or security if you build it?

Simon Wagner: So there are a lot of different elements to it.

So it depends on the asset, but because of the supply-demand imbalance, the. The government is and has been putting programs that put a backstop into the market. So if you're building housing, especially if you ran into a situation where you can't find a private takeout, you would only start building with a private takeout lined up because you couldn't even finance it.

Then you will find, you know, either a social housing project, affordable housing project, or government agency that wants to rent or buy it. That is the central part of the business at this point, and then while that is going on over the next few years, at some point, the actual, let's call it, a private market will come back, which in certain pockets, obviously it's persisting, but as a whole, it's challenging.

What is working is individual houses. The apartment market is where the government is the leading player at the moment. 

Chris Powers: Is there any private development going on right now? 

Simon Wagner: In apartments? There's very, very little, very, very little, even though there's a massive shortage, and within the city of Dublin, you know, the only efficient way to provide housing is apartments, just because of the space. 

Chris Powers: The dumb question, is the city of Dublin the size of the F.W. or all of Ireland? 

Simon Wagner: No, all of Ireland. The entire island. 

Chris Powers: So I'm such an idiot. If you had asked me, is Ireland an island or not? It's not.

Simon Wagner: Well, it's. It's a fascinating history.

I'm a history buff, but it has a fascinating history. For example, it is the only country in Western Europe where the population today is smaller than in 1800 compared to all other countries. The population today is vastly large. 

Chris Powers: Why? Because they drink so much Guinness. 

They had a vast famine, maybe the Irish famine.

Chris Powers: I didn't even know it was an Island. So when was the massive famine?

Simon Wagner: In the 1800s, early 1800s, and they had vast waves of immigration, that's why Boston, Chicago, and so on is full of Irish because they left post, I mean, not just during that, but there was massive immigration out of Ireland then for well, from that point until probably the 1990s and now it's growing and it's now there's net immigration and has been for a long time now. 

Chris Powers: But I know Apple has a campus there, I think Google, so when they bring thousands of employees in, where do they go?

Simon Wagner: Well, at the moment, they're struggling and struggling for a while, I mean. 

Chris Powers: You couldn't go to Apple and say, Hey, I need a loan. I'm going to build you 2000 units of housing.

Simon Wagner: You know what? I had not thought of that. People have done that now with energy. There was a massive boom in data centres, like everywhere else. But in Ireland, even more because of the big tech industry. For example, Microsoft and so on have started doing deals directly. People have developed solar farms and sold them power now because the power grid for the whole country was tapped out.

They couldn't accommodate any more data centres on the housing front. I have to admit, I hadn't thought of that. It's different from how this works. The biggest challenge is that in Europe, if you, as a corporation, take on responsibility for something, then you own it for the rest of eternity.

Right. So if you start housing people now, I suspect you'll have to accommodate them for the next hundred years, which maybe Apple, so profitable, doesn't care. But usually companies want to avoid taking on, you know, liability. They've been shedding liability, generally speaking, whenever they can. 

Chris Powers: Well, Tim Cook, if you're listening to this and want to find a couple thousand housing units. 

Simon Wagner: We'd be happy to work with you.

Chris Powers: So you would raise the money, and then is it reasonable that the funding, the actual debt financing, would be available to you, or is that a challenge?

Simon Wagner: No, that's something we can do at least, that's fine.

Chris Powers: And that's because the lending markets are recovering.

Simon Wagner: Things change once you're a specific size. So if you're borrowing large enough money, you can borrow from the Frankfurt or London markets. It's tough to do. Below a threshold, like if it's less than 50 million, maybe 25, then it doesn't work.

It's not worth those people's time. So once you're through, then funding becomes a lot. 

Chris Powers: Okay. If you raise the money, you can pull the financing in. From my little knowledge of Europe and in some of our discussions, a big part of this is, can you get stuff entitled? Can you plan?

Getting some of this done is more complicated in Europe than in America. Perhaps it is, but you all have built expertise around this. So if I'm giving you dollars, one thing I want to know is everybody wants to know in development, like, can you get this stuff approved? What do you think about that?

Simon Wagner: Yeah. So I have to say, I'm not an expert by any means on how it works in the assets; hard for me to compare what for sure is, is a challenge in Ireland is that the planning system has become much more belligerent over the last few years, it's much more contentious. as I said, the entire topic of housing is much more aggressive and much more political.

Hot potato is one of its beautiful elements, and it is somewhat wild when you're not used to this; anyone can object to anything. So you want to build a house on one side of the country. I live 300 miles away. I can object to it. So, even if it's in an area designated for housing, I can object.

I don't even need a reason. And so that's the first starting point. Now, that only sometimes happens, but it happens often enough. And then, there are several layers to go through the process where you can object and object and object, and eventually, you can sue to prevent the development. Some people have turned that into a business, right?

So, there are crafty people who object to extract appeal then. But that entire process is quite lengthy. It's costly; taking a large, let's say 500-unit development through planning can easily cost you half a million, which, if you then don't get it, it's just gone. So it's challenging, expensive, time-consuming, and tedious.

Things that are often not the most pleasant experience in life, but that's also why we, you know, why we do it. And that's why it makes money, right? I always tell my team if it is easy, everyone will be doing it, and we won't make any money doing it. Now, we have a hundred per cent success rate on quite a large number of projects.

If you are willing to engage with the process and follow all the steps to engage with the stakeholders, you can reduce, you know, the number of people who object. You can then work with the municipalities and the city often because of the city of Dublin. Still, many layers of local government interact with these things to get their support.

Which also helps. Last but not least, you need an excellent legal team so that when someone comes and tries to wreck your plans, you can fight back, right? And so, over quite a long period and with lots of scar tissue, we've successfully managed to do that. And then, once you have that, you can go and get the financing, and, you know, it's challenging afterwards, too, but you can then make it out from there. 

Chris Powers: People have asked, they've said, Chris, you've gotten grey at an early age, what happened? And I'm like, I used to do entitlements and development. The main reason why people in America hate it is traffic.

And blocking a good view or something is subjective because people's idea of a good view could be, you know, I used to be able to see over my fence, but now I can't. Is there any other reason in Ireland people will tend to do it besides the people doing it for fraud? Are there any other reasons why people usually push back?

Simon Wagner: Oh, there's a, you know, they might not like the colour of the walls you suggested. You must engage with the people who run the cell phone network for more significant projects. Cause you might interfere with their cell phone signal. You must deal with the traffic, people, water, electricity, etc.

All the neighbours, people object because there's a school down the street, and they think that, you know, if people move in here, then the school gets overloaded is, I mean, the 10,000 different environmental elements that you could mess up. You have to do, we recently had to do a bat study for an industrial building where.

There are no bats, you know, it's not like an old bell tower with bats in it or anything. Still, I was curious to know precisely why you have to do a deal with someone who might not like the amount of light that falls into the kitchen in your proposed development, and you say, well, but you don't have to live in it.

Why do you care? But that's all irrelevant. You have to justify all of these points: the noise that you might be generating, the noise that the wind might be generating howling around your structure, traffic that you affect in another country, potentially again, Ireland split into two jurisdictions, it's hushed.

It's fascinating, even though sometimes it's the most frustrating thing you must deal with. 

Chris Powers: Yeah, if anybody's listening, it's not development. I'm botching the story, but there's a 400 million, 4 billion development in America that's like not getting through because of it.

Endangers are like a species of frogs or lizards. I am trying to remember. And it's this one loud environmental group, and it's crushing this whole development to save like a frog.

Simon Wagner: Yeah, that exists. Then, you sometimes have to get specialists who count a specific type of bee flying around you.

Another element you don't have as much in the U.S., but that is big in Ireland, is archaeology, right? So you have to dig. And if you find by. In this case, good luck or bad luck, depending on which side of the equation you're on, a Viking helmet. Well, then, maybe everything is on hold for the next three years because you have to excavate the entirety of the site and see what else might be there.

Right. Well, you find a human bone, and then who knows what happens? It has to get the police involved and contact the archaeology people involved. It might take three months to analyze that bone. It's the amount of stuff that, that can. Going wrong or delayed is fascinating in many ways, but it's all man. 

Chris Powers: It is all man. It's as much an art and a gift of how you get these things through. I genuinely believe there. You could have the same piece of land, and multiple groups go about it in their strategy, and one's going to get it approved, and one's not.

Simon Wagner: And your team matters a considerable amount. That's your internal team, your external team, your architects, your planning consultants and so on.

The forms and the filled-out material you submit for big planning applications might be a thousand pages. Is that suitable? So, I need to figure out what's happening with this stuff, but having a good team around you is essential. Fortunately, over the years, I've managed to do that.

Chris Powers: So if you get a deal done or raise money, will you contribute property into a fund, or is it open-ended right now? What will it look like? 

Simon Wagner: That's entirely open-ended. I'd say it's; it's, it's driven by what, what people expect contributing property, I guess, has a transfer pricing issue attached to it, which historically I would have just said, look, I'd probably not go through that brain damage with someone because someone is going to complain later on, right.

It's just always the way it is. Even if they're happy on day one, it's relatively easy to segregate projects, so from this day on forward, new and old projects are old. That's quite all right. 

Chris Powers: All right, man. I'm bullish on Ireland.

Simon Wagner: It's a beautiful place. I highly recommend it. 

Chris Powers: I need to visit someday. Thank you for joining me today. 

Simon Wagner: Well, thanks for having us. Well, having pleasure. Thank you very much.