By Meghan Hall
The commercial real estate and lending sectors have historically been reliant on granular data, and this information was often only accessible or given to those closely involved in specific financing deals. However, increased access to information and the emergence of platforms such as StackSource are making it easier for the wider industry to gain perspective on CRE financing deals, and prompting investors to look beyond their traditional markets. The Registry connected with StackSource’s CEO, Tim Milazzo, on how the CRE industry is changing due to tech-based financial and commercial real estate endeavors.
Please tell The Registry a little bit about StackSource. What inspired the founding of a tech-enabled commercial financing provider?
I grew up in the suburbs of New York City, where my dad was a commercial real estate broker. While the real estate industry was interesting, I’ve always been fascinated at how software is fundamentally changing the world. So I went to work in Advertising Technology for Google right out of college, and later for Facebook, before returning to real estate with a fresh perspective of how software could help evolve this country’s largest, most tangible asset class.
StackSource is a tech-enabled commercial real estate loan platform. We connect investors who are developing or acquiring commercial properties with financing options like banks, insurance companies, and debt funds through a transparent online process. It’s a new breed of commercial financing tool – combining the expertise of seasoned financing brokers with the convenience of an accessible and easy-to-use online platform.
From your perspective, what does it mean to shake up the financing industry through the use of technology?
A space like ours (the commercial mortgage industry) is information heavy. There is so much data that was, once upon a time, only privy to local brokers who negotiated local real estate transactions. What we’re seeing now is a gradual flip where the information most relevant to investing or lending on a property is democratized. On top of that, there will come a point in time where it will potentially be impossible for a human being to underwrite properties efficiently without the use of big data. Without it, they’ll be at a huge disadvantage – something we’ve already started to see, and what StackSource is helping to solve for. To gain an edge in today’s market, you need technology for speed, efficiency, and accuracy in virtually any segment of the real estate investment lifecycle, from sizing up acquisition deals, to asset management, to disposition.
Can you talk a little bit about how StackSource works?
The surge in available data about properties and locations online is giving many real estate investors confidence to invest beyond their own backyard, or in a select few markets deemed to be a safe bet. Investors are looking to deploy capital in the best possible deals across the country. But their local bank relationship can’t follow them there, and they don’t know the reputation or lending appetite of the dozens of capital sources – banks, credit unions, debt funds, etc. – that would be interested in the deal. StackSource is a platform designed to give investors at any price point easy access to capital in any market so they can find the right leverage to maximize their investments.
What is your favorite feature of the online platform? Why?
We’ve heard again and again from lenders that they hate having to pick up disparate pieces of information just to understand a deal, let alone provide a loan quote. Whenever a lender goes out of their way to prioritize a deal, it’s because that borrower or capital markets advisor has made their life simple by aggregating all the information in one digestible form. Traditional loan brokers work extremely hard to provide that type of deal package to lenders. We automated it.
StackSource recently netted $2.6 million for company growth and development. Who have been StackSource’s largest investors?
Our latest fund raise was fortunately led by a number of our real estate investment clients. Most of our outside capital has come from industry insiders who feel the pain of an unreliable financing process outside of this capital markets ecosystem we’re building.
It’s important to understand that there’s little to no accountability in commercial mortgage lending. A bank promised you a loan and then withdrew two weeks before closing? You have to deal with it. There’s no consumer protection act here, no published ratings revealing the good guys from the bad guys, and no requirement for traditional loan brokers to even act in their clients’ best interests. It’s the wild west in many pockets of commercial real estate finance.
Someone is going to read this and shudder thinking about their worst commercial mortgage experience. Those are the people who are rallying for StackSource to bring transparency and accountability to this industry.
How does StackSource intend to use these funds for growth?
We’re doubling down on designing a more efficient and reliable user experience from lender matching all the way through loan closing. That will mean more seamless access to the data that shows how lenders make their decisions. It will also include ratings for lenders everywhere based on feedback from borrowers. In many cases, it will also mean automated loan quotes. The automated quote engine is exciting because, given the right data sources fueling it, I’d estimate that between 35-45 percent of commercial mortgage deals today could have instant, accurate soft loan quotes; fewer than 1 percent benefit from this workflow today.
StackSource is on track to double its originations year-over-year. What aspects of the platform do you believe have made StackSource successful?
We’ve already surpassed last year’s originations activity, and we haven’t even seen the fruit of anything new we’re working on this year. This is just continued momentum from giving real estate investors a reliable, transparent financing process that they were already craving.
While we hope lenders and borrowers continue to love our new features, if StackSource’s core platform for CRE financing is the only one that they just trust, then we’re already doing what we were meant to do.
We’re not just a technology platform. We have capital advisors on staff with decades of experience in commercial finance putting together creative solutions for deals, and helping investors iron out the best capitalization strategies. We recently hired an EVP and Head of Originations, Richard Caldwell, out in Sacramento. We’re currently hiring for capital advisors across the country. Now is the time to move away from traditional brokerages and toward tech-enabled commercial real estate investing.
Are StackSource’s originations attributable to one specific geography, asset class or investor type?
It’s so spread out. We’ve closed loans in 35 or 36 states so far, and hope to hit all 50 by next year. We’ve closed loans across multifamily, retail, office, industrial, land, and more. The loan requests that come from outside big cities are more likely to be found by an investor searching online who discovers StackSource; but we’ve also arranged loans in Los Angeles and New York City. It’s very different from starting a local brokerage where you can grow by word of mouth. I guess we’ve grown by word of thumb – borrowers have a great experience and then share that online, over email, or on social media with their community.
How do you think the lending industry will continue to evolve as it adopts more technology? Why?
I’m personally really excited about the coming second revolution in real estate data. Real estate is the largest asset class in the world, providing wealth to people in countless ways. But the industry burns through so many resources by holding onto the past and resisting innovation and change. The pandemic catapulted the industry 5, maybe even 10 years beyond where I ever could have dreamed of being at the beginning of 2020 in terms of data literacy and technology adoption. Technology has demonstrated its value – now it’s time to kick it into the highest gear.
Is there anything you would like to add, or anything that we should be asking?
We just added a really seasoned real estate finance executive in Sacramento, Richard Caldwell. Richard has built and led originations teams for a few different lenders and capital advisory firms. When we showed him StackSource’s platform, it immediately ignited a discussion about how this platform can help capital advisors support and grow their book of business by generating more leads – while drastically reducing the manual effort required to put together commercial financing transactions. So he’s now our EVP and Head of Originations and will be focused on leading and growing our Capital Advisory team across the country, which we’re extremely excited about.