Mike Dury

This is VERSED, powered by VIUM Capital, the podcast that brings you conversations with the leaders driving change in seniors housing and healthcare. I’m your host, Steve Kennedy, and together we’ll explore the insights, challenges, and solutions shaping our industry.

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Steve 00:23

Welcome to the most recent edition of the VERSED podcast. I'm your host, Steve Kennedy, and I'm excited to have a business colleague as well as a friend, Mike Dury, as our guest today. Mike. Thanks for being here.

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Mike 00:37

Steve, thanks for having me. I don't do many of these, but you're a hard guy to say no to. So, happy to be here.

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Steve 00:44

Thank you for saying yes. So Mike is the president and CEO of Merchants Capital. As some of our listeners may know, Merchants is our joint venture partner at VIUM Capital and has been instrumental in our launch and our growth and, what we're going to do is delve into a few topics from our origin story with Merchants, getting Mike's perspective on sort of the broader multifamily commercial capital markets and where senior housing healthcare plays in that space. And then talk about some other things, from current events and other observations that should resonate with our listenership.

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Just so we can level set with the audience, what is Merchants Capital and what is the relationship Merchants Capital has with VIUM capital?

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Mike 01:35

We are to multifamily what VIUM Capital is to health care. So we are an agency lender, FHA. We do Fannie Freddie as well. And we are wholly owned by Merchants Bank, a $20 billion bank. And, as we go forward, we made the decision back in 2020, which I know we'll talk about here, maybe in some detail, to partner with VIUM on the health care origination side. It is obviously a unique space. You need to know the right players and have the right relationships like we do in multifamily. The partners of VIUM Capital and the producers of VIUM Capital had those relationships on health care. And so that's why the partnership for other reasons as well, made a lot of sense for us. And so we're not the biggest lender. But we leverage our bank balance sheet with bridge construction, other creative solutions to ultimately place loans with the agencies.

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Steve 02:28

Thank you for that overview. And before we talk a little bit more about the relationship with VIUM, for listeners that aren't familiar with your story, if you don't mind, talk a little bit about your journey. How did you become president and CEO of Merchants Capital?

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Mike 02:44

Gosh, 18 years I've been with Merchants for 18 years. It wasn't called Merchants when I joined. I joined right out of school. We were very small. We were really just doing RD, small RD affordable loans. We did some FHA loans. We did have a Fannie Freddie license at the time. And I learned the agency business and really, being a small company, when I say small, meaning 15 people or so, as you can appreciate, at that company of that size. And I know you experienced just launching VIUM. You're doing everything from originating, you're putting together underwriting summaries, you're closing deals, you're running down asset management issues. You're, at the time being a HUD lender, you'll laugh at this. Folks now don't appreciate this, but I go copy the seven packages that I'd have to go deliver to HUD. And I put them in my car and I'd go deliver them to HUD. And that's how I met the people at HUD and turned into some great relationships. So, I started in the business learning it that way. And obviously Merchants has experienced tremendous success, most notably, acquiring a small Bank and then growing that bank to what is now Merchants Bank. Went public in 2017. And at the same time acquired an agency lender out of the northeast. And that's when we acquired the Fannie Freddie licenses. Again, still focused on the same thing we were doing since the company started: multifamily, affordable. We had done some health care. And when I say health care, Steve, I mean maybe 1 or 2 HUD lean deals a year. We were not prolific at all by any means as you know, that was your former shop. We continued to just grow bridge to HUD and what are our capabilities in the affordable space.

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And so it wasn't until 2020, and I know we'll get into this where we wanted to get into health care, and we didn't have the originations to do that. We knew how niche was, how operator-focused and how important that was. And of course, the owners as well. And we did not have those relationships, which is why, really, our relationship started, Steve. We're so happy with where it's gone since that time.

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People ask all the time, gosh, did you join wanting to be the president CEO? And the answer is no. I think I saw an opportunity where the owner, who is still one of the owners, the two owners, Mike Petrie and Randy Rogers, hired me to learn the business. They paid for my MBA. I wanted to go back and further my education, especially concentrated in finance. So really, finance real estate was always appealing to me. And then as I got in, I think, the opportunity to lead people; as I've grown in my career, that is what really excites me. It used to be closing deals. Believe me, I still love when deals close, but now it's leading an organization and seeing others have success. And being able to think strategically, work with our leadership team, work with your leadership team, to make the right decisions, to move us forward. That's what I get excited about. And, so, yeah, it's been a fun journey. I'm very appreciative of that journey, and it's not over, obviously. We view this as we're kind of just getting going.

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Steve 05:46

That's great. It's so neat to listen to that and reflect. And you talk about delivering hard copy HUD applications to the HUD office. And I'm going back in my mind to our previous shop, Lancaster Pollard, being an analyst and making hard copies and going to the HUD offices. And it was different, but it really allowed me also and a lot of my colleagues here at VIUM to learn the business. And then you mentioned having two mentors in Mike and Randy, and I was fortunate to have the same thing with Tom Green and Brian Pollard and being in a growing company with leaders that you respect and you learn from, but also give you the opportunity to lead. So thanks for thanks for sharing that.

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And before we get into some of your perspective, sort of on the general markets, from multifamily commercial down into senior housing and health care, maybe take a step back. We met before 2020 obviously, when VIUM was launched. What's your recollection of sort of that origin story and taking it to 2020 and taking it to now where we're off and running, but we still want to do a lot bigger things.

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Mike 07:01

Yeah. You know, it's funny, I don't remember the exact date or the exact event. I remember running into you at the HUD roundtables. And we'd strike up good conversations. We've talked about this before, but we had a common bond where we were both familiar with this high school here called Providence Cristo Rey, which has a very cool model, where the students, high school students are from tough, economic backgrounds, and they're given opportunities to come work at companies and the companies help pay for their tuition in private schools in Columbus. And there's one in Indianapolis. And I remember vividly, I tell this story. I've been very involved with the school here in Indy. I've been on their board for five years. And I never would have probably done it without meeting you. And I'll never forget I was talking about well, I don't know where I'm going to put the kids, and it could be a burden on our people. And you just said, Mike, just do it. Trust me. Do it. You will figure it out and you'll thank me for it. I tell people who are contemplating whether or not to do it, I say the same thing. I tell them that story, which I love that story.

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So I developed a respect for you as a person and as a human being, and I guess I can kind of summarize it by: we could clean your clock in multifamily around the Midwest. You could clean our clock and health care. There is a mutual respect for that. Whereas we were able to both, obviously, grow our business and grow relationships, respectfully compete. Love competition. I think competition is great. You could be friends, but be competitors. We have a lot of competitors that we're friends with.

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And obviously things change. You had some change going on at Lancaster Pollard and obviously we were looking to grow and, I remember the one round table you said, hey, let's meet and talk about what's going on. That was the first time we sat down and talked about what could be. And then I remember flying or driving over to Columbus and had some more conversations about it. I tried to get you to come to Merchants, which I think you wanted to kind of recreate what the folks did at LP. And so we created this joint venture, and it's worked out fantastically.

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Steve 09:13

That's great. It's a great summary, and listeners are probably picking up on you got a competitive side and listeners might not know that Mike was prolific pitcher at Notre Dame. And that athletic prowess comes out in the business sense. But also, I love you hitting on that Cristo Rey. I think when I first talked with you about that, I had just joined the Cristo Rey Columbus High School board. And when you can connect with people, obviously business, but when you can connect on a deeper level from a values perspective, you start to see things lining up. And I think both of our firms have similar values and similar cultures and people, so that's fun. It's fun to reminisce.

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Mike 09:56

Thanks, Steve. If prolific means low 80s middle relief, left handed, slow. Yeah, I'll take that. My playing days stopped after college. But you're right on Cristo Rey. It's just it's so cool. And I know you guys have kids. We have kids. We've grown our partnerships since then. I did find out that you all are number one or number two in the network of adding jobs, and we're right behind you. It really upset me, to be honest with you. We were number one, so we got to get back on it, but, I was happy to see it's you, though. No surprise.

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Steve 10:29

No. That's great. Well, that's sort of classic, like health care, senior housing kind of being number one multifamily two, but I digress.

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Let's look to the market. Seniors housing and health care is, as you and I both know and appreciate, especially with our respective roles on the commercial and multifamily board of governors with the MBA, the commercial multi space is a relatively large space. And senior housing health care is only a part of that. And so, as you've kind of come across coming from the multifamily commercial space but gotten to know the seniors housing health care space, what's maybe a misconception people still have about financing senior housing and health care?

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Mike 11:11

I think people, I think this and this is not just in health care, but this is I think in general, I think people think with the evolution of technology and AI and of course, we're on teams that relationships don't matter. And that just couldn't be further from the truth. I think that what I've appreciated the most about VIUM is the deep relationships you have with your clients. You understand their business deeply. You understand, and not just their business, but the broader landscape of what's going on in each state and what the trends are and the reimbursements and where to stay away from but where to get, lean in.

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We pride ourselves on being that strategic thinker and advisor in the multifamily space and health care. Whereas when we go talk to clients, we're not selling them on a loan product. It is listening. It is developing a relationship, it is trusting. That is, it may be advising them away from your organization based on what they need. And I think that, that gets lost, whereas you just think you're being on people call in and, here's what I've got. Here's my rate, my terms. And it's just taking that step back. And really, people see that's authentic, that's genuine. And VIUM Capital does, I think the best, at that. And so then the deals we see and we partner on, work out great. And of course, our bridge book is active, our bridge program is active, and those loans are financing out with FHA, just like we intended. So, yeah, again, I think, more relational versus transactional that's just not changed at all. And I don't quite answer I don't think will

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Steve 12:51

We agree 100%. Those relationships have been forged over time too back from our LP days and continue. And it's neat to see some of our younger bankers growing up and establishing those relationships. And you know those are going to grow into really valuable relationships for the client. But also for our team, over time. But you do have to take sort of that long term perspective to develop that.

And then your comment about AI and that's such a salient comment. And I know Connor Zierden, one of our young managing directors just did a virtual response to sort of that in the senior housing and health care market. And at the end of the day, we're serving not commercial real estate, really. We're serving places that are taking care of grandma and grandpa and rehabbing after a surgery. And that human touch is such an important part of the businesses we're financing. So I appreciate that comment.

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Mike 13:55

Steve, I think as I look at our businesses, you've got obviously CRE, which is a massive space, and you start to distill down the segments within CRE. And so for Merchants and VIUM, it's housing, it's housing, it's affordable housing, workforce housing and then seniors housing, right? Everyone deserves a safe place to live. And that is something we've always believed in and really drives a lot of our. “why” here at Merchants. Yes, we have to run a business and make decisions that help us be profitable and allow us to reinvest in our company and run a successful bank. But at the end of the day, it doesn't get lost on people. Whether it be with VIUM or on the Merchants Capital side of what we do and why we do, why we do what we do. So, yeah, you're you're totally right.

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And I do think that, of course, technology and AI is very, very critical. You better embrace it. It's here and it's changing the way we think, operate. And it's helping us gain efficiencies. And you better embrace it. And obviously, that's something both Merchants and VIUM have taken a close look at. And banks are notoriously slow there. So we've got that going for us, but we've got to be better. So we're looking at constant ways to improve.

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Steve 15:12

Yeah. AI's remarkable. In fact, this isn't even me right now. This is a bot that was generated and it's really impressive. I wish that bot would give me a little bit more hair but that's, you know, AI's evolving.

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From your chair, what trends are you seeing from institutional investors in terms of appetite for health care and seniors housing debt? As you know very well, and as some of our clients know, we have a health care debt fund, and that fund is in partnership with Merchants and provides a bridge alternative, compared to bank bridge with the same thesis of ultimately refinancing those loans permanently through HUD, Fannie or Freddie. But talk about from your chair sort of the evolving appetite from investors about the health care senior housing product.

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Mike 16:01

Great question. And it's interesting, Steve. And we launched, we took I think we launched April Fool's Day 2020, Covid, right? And, a lot going on. And, of course, seniors housing, Covid, why would you start pouring into this space with how awful things were at the time? But we did it. Gosh, I mean, we had some record years in production, and at the time, you're right, there wasn't a lot of demand. We were one of the only bridge lender options out there. And so spreads were wider. The competition just wasn't there. And then on the fund side, we were able to generate great yields for investors as we set up our fund that was outside of Merchants. But Merchants participated. And, we were able to track some friends and family retail money there to go raise this fund that has been fantastic. I think to date we haven't had a default in this fund. It's been been great return, great yields. And so, our investors have been very happy. We've continued to grow that fund.

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But fast forward, I think we've seen, a shift where it is very competitive. Banks are back in the space, spreads are coming in, leverage is higher. I think and you know this, Steve, I'm not I'm not telling you something you don't know. But in multifamily, cap rates got so low. So it really strained cash flow as rates went and cap rates widened, we had some stress in multifamily. Well in health care, what was the lowest the cap rates got in the senior space? I mean, 12 something like that? So that allowed the cash flow and these loans are underwritten, 145 plus DSCR. So there's tons of cash flow. So you didn't have that issue in health care and these loans performed these loans are turning over to the secondary market. So it's a great story.

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And therefore now we're seeing competition pick up. And that's why we're being very strategic work. And of course, working with you and your team, Steve, on how do we better compete? And it's not just spread. It's not just terms. It's not leverage. It's all of that. It's all of the above. So how do we position ourselves, our producers, our team to capture the right business with the right sponsors?

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The last thing I'll say, Steve, is if we've learned anything from what's happened over the last couple of years with interest rates rising like they had, sponsors matter a whole lot. And so those sponsors that are well-heeled transacting today, I think, obviously took care of their lenders, paid on time, maybe didn't work out exactly like they thought, but they communicated and ultimately, fed deals when they needed to, to get them to the secondary market. Well, those clients now are who are leaning in with and who a lot of other lenders are leaning in with. If you're out buying now and your REO looks clean now, well, you've done a heck of a job. Because it's been so hard for all these borrowers, right? Trying to deal with what happened with the rise in SOFR, and even the long end too. So again, those are things that, a lot's happened in four years. But fast forward to today, it's really created a very competitive landscape.

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Steve 19:16

That focus on quality sponsors has just been heightened everywhere. But I know at Merchants, at VIUM you learn who you want to do business with and some folks you don't want to do business with. And that's something institutionally we're learning, even though we're still a relatively young company, and appreciate Merchant’s support in that effort. 

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Let's shift just for a question or two on sort of the leadership strategy front, no matter who's watching this, whether you're a senior housing owner or administrator or somebody serving the senior housing health care space. Takeaways from a leadership perspective can be valuable. As you've seen Merchants and been a key part of Merchants’ growth and scale, talk about maintaining culture. And I know that's something important to us. It's important to to Merchants. What's been able to keep sort of culture strong at Merchants over the past few years?

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Mike 20:17

I love our culture. Obviously, I believe in it. I think we have the best. That's why I think we're so aligned with VIUM. I feel very strong about where VIUM is going, where Merchants is going and where we're going together because of our cultures. And we've been very intentional around that. I think, for us, Steve, as I mentioned before, 2017, you're talking about one location, right here altogether in the office five days a week. And now fast forward, we've got New York, Washington, DC, obviously you guys in Columbus, we have Chicago, we have Minneapolis, Saint Paul, we have other bank branches that we've opened. We have warehouse operations in South Florida, out in Pennsylvania.

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So now you've got expanded locations and really, for us, it wasn't even a Covid thing or post-Covid, we have different work, in-office expectations that really didn't change during Covid. We were at home for a little bit, but then we got right back to where we were pre-COVID. So those office expectations have been consistent since everyone started working for Merchants. And I just bring that up because I do think it's important context to kind of who the company we are today and how that can make culture more difficult to not just maintain, but to grow. To me, I don't ever believe in just maintaining culture. You've got to be growing.

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And so, we really work on our leadership team and I tell folks, yes, production has been good, financial performance, we grow headcount, things we're very, very proud of. But number one has been our leadership. If you can recruit, empower and put good leaders together like every office I mentioned to you, I can tell you, the leader who's leading that office, who is fantastic, who drives our culture. Maybe we're different, right in New York. And that joke with our team in New York, maybe people think of New York and or Midwestern differently, but no those key thing, that are not our non-negotiables. We are right on the same page with.

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And so that culture rings true with the whole organization. So having the key leaders in these offices, we do have our folks that are remote as well. And so really we have a management team of around 20 people, key senior leaders and above. We're constantly talking to them about what it means to work here. We have the no jerk policy at Merchants that we do talk about and we do enforce. If you're a jerk to people, you stand out like a sore thumb here. It doesn't work out for you. For better or for worse, that's who we are. And we're not changing. And so those are things that I think people appreciate. Sort of having humility, and not looking over your shoulder all the time, letting you go. We talk all the time, like we're hiring you for it for a reason, to do a job and go. We don't want to tell you what to do. We hired you so you can show us what we should do. Challenge us, right? Those are things we constantly reinforce with our team. And, again, it's never done, right? But I'm very proud of our culture, and it's hard to maintain that as you grow. But it's just something that we always think about.

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Steve 23:28

Yeah, we align on the no jerk policy. We have the same thing. Humility. That's not just naturally sort of grown out of being headquartered in the Midwest, but the people we hire, you want to lead with humility. And especially in an industry like senior housing health care. We're talking about caring for residents and people's loved ones. So I appreciate all those comments. And as I think about your all's expansion, it's important you guys have some presence in Columbus through us because you could name New York, Indianapolis, Minneapolis. But without Columbus, it really kind of doesn't bring the full package. 

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All right, let's pivot. Rapid fire closing questions. And then I'll end with a question I ask all of our esteemed guests on VERSED podcast. What is one leadership principle you live by?

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Mike 24:22

Humility. And we talked about it earlier, right? It's just no matter what your title is, you're never too high to do the little things. To say hi to the person cleaning up the bathrooms at night, ask who they are, know who they are. Those little things, I think, really do matter. And, being okay with recruiting folks that challenge you, knowing that you may not be the smartest. I'm not, I know that, in different areas and not making people feel threatened by that. That's fine with me. And, again, allowing people to challenge you. Speak up. I think you'll learn a lot, and so I think, listening, having humility, to me is confidence, is really a leader having confidence in himself or herself that I think is very, very important to be able to lead, especially as Merchants has grown, that's something that I continue to do.

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Steve 25:20

If you are not leading Merchants, what would you be doing?

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Mike 25:24

That's actually easy. I would be a baseball coach.

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Steve 25:28

Professional baseball coach?

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Mike 25:29

Absolutely not. No, probably at the high school level. I'm coaching my kids, which I absolutely love. But, if I weren't doing what I'm doing now, which, by the way, I love what I'm doing, but it would be coaching probably at the high school level. I just think that the ability to impact young people is the greatest gift. And, obviously I have a background, but going and being impactful. I remember all those coaches, I learned a lot of life lessons through my coaches as I was playing. I mean, I never forget the story of my college coach who's a Hall of Fame coach. I mean, we had meetings and he would teach us how to pack for road trips. And at the time I'm thinking, how stupid is this? But it was preparation. We talked. Here's what you do the night before. And it was the fundamentals and things I learned. I still do today. How do I prepare for meetings or business trips or my family? How do I be a good father, husband? Those are things I learned in athletics. And I want to give that back. And so that's an easy one. I would definitely go coach.

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Steve 26:31

What a great answer. All right finally, is there a book or podcast besides VERSED, besides VERSED that has inspired you recently that you would maybe recommend to someone? A book or podcast?

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Mike 26:45

Yeah, I was thinking about that. There's a book, our friend Brendan Healy will love this. It's called Raising Men. It's written by a Navy Seal. Actually, I wrote his name down: Eric Davis and I have three boys, and I do. There's some, raising daughters is next for me. I got to read a book on that because my daughter's four. I'm learning on the fly. I thought I had it figured out till I had a daughter. But it really talks about how to be present. And obviously, we're balancing a lot with business and life, but how to be present and what that looks like. And the book is fantastic, and it's through the eyes of the Navy Seal and learn kind of how they, Seal training and how that relates ultimately to raising your son and becoming a man. It was very, it was awesome. I love those type of books. So when I travel, I can throw on Audible and listen to that stuff. And so that was the most recent one. And again, I don't have it figured out, but I've got a daughter now, so I've got to figure that out. So it's a little different. So I'm looking forward to my next book on that.

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Steve 27:51

Yeah. As a dad having a son and a daughter, it is a little different. And Healy will love that recommendation. And I'm glad you clarified that that Eric Davis was a Navy Seal. When you say Eric Davis to me, a Cincinnati boy, I think one of the best baseball guys in the 80s.

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Well, Mike, it's been great catching up. Thank you for saying yes to this. We appreciate the partnership. And hopefully listeners have learned a little about sort of not only VIUM and Merchants, but the perspective of seniors housing and health care, sort of in a broader picture, but also leadership. So thank you

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Mike 28:29

Steve, thanks. It's been a blast.

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Steve 28:32

Well, thank you for joining this latest edition of VERSED. We look forward to putting on another fantastic podcast in the near future. Thank you so much.

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Outro

Thanks for tuning into VERSED, powered by VIUM Capital. The conversation doesn’t stop here. Let us know what topics you want to hear, and let’s make an impact in healthcare and seniors’ housing together. Until next time, I’m your host, Steve Kennedy, and this is VERSED.