Create a plan for an exit strategy or a liquidity event to ensure you’re monetizing your time. For example, maybe you love ice cream and decide to open up an ice cream truck on the beach. You love it, but after 10–20 years of your life, you’ve got nothing saved up. What could you have done? Franchise and open up other stands on the rest of the island. The ice cream truck business could work, but scaling is a vital factor for the long run.
As a part of my series about The 5 Essentials of Smart Investing, I had the pleasure of interviewing Rob Sechrist, co-founding President of Pelorus Equity Group, the leading provider of value-add bridge commercial real estate loans to companies in the multi-billion dollar cannabis sector. With two decades of real estate and finance experience, Rob has raised more than $300 million in secured real estate transactions while developing strategic alliances with both private and institutional investors, forming equity partnerships, and coordinating the company’s growth into new markets.
Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
Thanks for having me. Early on, I founded an action sports company where it took me three years to get to $2.4 million of gross revenue with 10% of pre-tax revenue, or profitability of $240,000. I realized I was doing a lot of work without much profit. That experience showed me that I needed to do three things — larger transactions, shorter sell cycles, and payments closer to deal closing — and the obvious solution was real estate.
I’ve been in the real estate industry for 21 years now. We formed Pelorus in 2010 and we’re doing exactly the things we set forth in our thesis way back then. For transactions, we originate loans for millions of dollars. Our sales cycle is typically two weeks to close the transaction, and we get paid on its closing date. This is a way more efficient way of making money than having to create a product, carry the inventory, and so on.
Can you share with our readers the most interesting or amusing story that occured to you in your career so far? Can you share the lesson or takeaway you took out of that story?
The first company I raised capital for was in the late 80s and I added a stipulation that I could attend board meetings. I was still in college at that time, so I watched and listened in on every meeting even though I was not a participant. This experience served me extremely well when I sold my action sports company and was on the board of a larger company at the young age of 25. The rest of the board members were in their late 60s, and the chairman of the board was Lyle Dunbar, former President of SAIC, one of San Diego’s largest defense contractors.
Before the start of one particular meeting, I asked Lyle, “Which direction will we go around the table to discuss the issue?” When he said right, I immediately made a move to sit on his left. I knew in advance this would give me the competitive advantage of hearing the other board members before responding. Each member discussed their respective divisions and got caught up in cross-talk augments, and I stayed quiet. When it was my turn, I addressed each board member in sequential order with my comments and wrapped up with a fact-based conclusion using their statements, which at that point they could not argue. Afterwards, I successfully pulled resources from all of the other fledgling divisions to support my division, which was the only profitable brand. The lesson here is the power of listening, one of the most important skills you can have in the business world.
Are you working on any exciting new projects now? How do you think that will help people?
Today, Pelorus is providing capital to an asset class that is under-financed, and we’re bringing our expertise as one of the most efficient bridge lenders for value-add lending to cannabis-use properties. This is a segment of real estate that is in its infancy, but it’s actually the largest new asset class of real estate in the country.
Operating a cannabis business requires having specialized commercial real estate — there’s no way around it. As the industry rapidly grows, demand for cannabis-ready real estate and facility build-outs/expansions has exploded. However, federal law prevents most traditional lenders from financing these projects, and even when financing is obtained, it’s a complex process that has multiple stages which can take several months to complete. These financing delays are incredibly common and often cost businesses millions.
Our proprietary data and analytics platform delivers significant advantages for cannabis businesses in terms of deal origination, pricing and risk management. Its flexible acquisition and bridge lending programs are the direct result of Pelorus’ involvement in more than 5,000 transactions of varying size and complexity.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?
Schools today are teaching so kids can pass tests, not apply the knowledge they’re learning. There needs to be a different philosophy in how we teach. Students need to be engaged in a real time project — something that’s interactive. It can even be a simulation. For instance, if a student is learning about investing, they can pretend to invest a silo of capital in real time to gauge a portfolio’s performance. If a student is learning about marketing, they should build a go-to-market campaign. The more real it can be, the better. Students should also be given this experience so they understand you learn just as much or even more from your failures as your successes.
If you had the power to make a change, what 3 things would you recommend to improve these numbers?
- Become skilled at solving word problems. I tell my five-year-old son that life is not binary choices, it’s word problems. As a student, I hated these tasks because it took a while to extrapolate what you needed to solve the problem. As it turns out, word problems are the most important thing to know in real life. Very few things in your career or life are formulaic decisions — there is not a prescribed outcome every single time. Even as an engineer using math, you have to first come up with a hypothesis to figure out what you’re going to test, and then come up with a formula to test that hypothesis. So, understanding word problems tests a person’s comprehension and is a really significant life skill.
- Get people invested in what they’re doing so that there’s accountability. The more we can do this, the more effort people will put into tasks, with more to learn from it as well.
- The skill of communicating is so much more important than anybody ever emphasizes, especially from a written standpoint. Every single time you’re communicating with a person, you’re gaining or losing trust. That means everything you say or write needs to be clear with correct grammar, spelling or syntax. It is such a valuable skill, especially when so much of what we do today is written communication such as email or text.
Ok, thank you! Now to the main question of our interview: You are a “finance insider.” If you had to advise your adult child about 5 non-intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each.
- Create a six-to-12 month reserve to fall back on, which can be used for a rainy day or give you the ability to take a chance and leave a job/start a company.
- Take your additional money and invest it in yourself first.
- Come up with an idea of where you want to go, where you’re in control of your destiny. Generally, if you want to start a company, you’ll need a side hustle that provides the cashflow or safety net needed. It allows you to keep learning from those experiences until you find something that works and you enjoy.
- Whatever you decide to do, you must have a passion for it. If you don’t love what you do, you’re never going to get ahead. If you hate going to work every day, that is a mindset that is hard to get out of.
- Create a plan for an exit strategy or a liquidity event to ensure you’re monetizing your time. For example, maybe you love ice cream and decide to open up an ice cream truck on the beach. You love it, but after 10–20 years of your life, you’ve got nothing saved up. What could you have done? Franchise and open up other stands on the rest of the island. The ice cream truck business could work, but scaling is a vital factor for the long run.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I was fortunate to come from a family of entrepreneurs which helped me tremendously in my growth early on. They taught me that a lot of people can get ahead in life, but they may not do it the right way. Those who burn bridges as they go won’t make it far in the long run. Principles are a very important part of success.
There were a couple other great mentors for me along the way. No mentor wants to waste their time unless you’re a person that is coachable or mentorable. Mentoring doesn’t mean that you can suck out energy from them — you need to also help them where you can and be open to listening and learning.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
“There are no solutions. There are only trade-offs.” — Thomas Sowell
Every transaction is a balance in what you get and what you don’t, so our solutions at Pelorus are balanced to provide more long term benefits than short term costs.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂
It is all about education, especially for young kids who are so malleable. I would love to inspire a movement where all kids have an equal opportunity to have a good education from a very young age, such as a voucher program where kids can access better schools. So many talented and intelligent kids are up against a more difficult path without the best tools at their disposal. Ensuring the educational basics starting at around age five is so crucial.