Loading summary
Transcript158 lines
- [00:00]
A
Welcome to Investing Made Simple. Lennar Investor Marketplace is an innovative platform that's transforming the way people buy and invest in new construction. Find rental ready new homes for sale across 90 plus desirable markets nationwide alongside institutional quality rental comps and local area insights. In addition to pre inspected home listings, Lennar Investor Marketplace consolidates all the information you need into one place, real time rental cost comparisons, neighborhood demographics, local school scores, projected expenses and appreciation forecasts. Each listing comes with a pro forma specifically underwritten for single family rental opportunities. Lennar's underwriting tools also include a calculation that gives you an estimated NOI and expected return as well as an automated rent valuation model tailored specifically for new homes, helping you forecast rental income accurately. Lennar is one of the nation's most trusted homebuilders with more than 1.5 million happy homeowners across the country. Lennar builds new homes for every stage of life, including first time home buyers, those looking for a larger or higher
- [01:10]
B
end home, and active adults ages 55
- [01:13]
A
plus, making it possible to find a home for every buyer type and at every price point. Get started today@lennar.com that's L E N N A R.com find the investor marketplace under Shopping Tools Present or future market conditions are not guaranteed. You should consult your own accounting, legal and tax advisors to evaluate the risks, consequences and suitability for any real estate transaction. You've heard me talk about BILT as the loyalty program that lets you earn rewards on rent wherever you live, and they've just leveled up even more. As of 2026, homeowners can also earn up to 1.25x points on their mortgage payments. This is thanks to Bilt's three new credit cards, the Palladium Card, Obsidian Card and Blue Card. All three turn your housing payments, rent or mortgage into flexible rewards so you can choose the card that fits your lifestyle without missing out on points and exclusive benefits. Bilt points can be redeemed at top airlines and hotels, Amazon.com purchases, future rent payments and more. BILT points have also been ranked by top publications as the industry's most valuable point currency. Your housing payment is already your biggest expense. Make it your most rewarding. Find the card that fits your lifestyle and apply today at joinbilt.com radicalwealth that's J-O-I-N-B-I-L-T.com radicalwealth make sure to use our URL so they know we sent you. Terms and limitations apply subject to approval and eligibility. Built cards are issued by column N a member FDIC pursuant to license from MasterCard International Incorporated.
- [03:00]
B
Welcome to the Paul Morris Podcast, hosted by Paul Mark Morris and formerly known as Radical Wealth Plan. Today we have Claire Bauckham and really appreciate you coming in because this is a different subject for us and that is talking about art as an investment, as an investment class, and specifically your work on an art investment fund. So tell me, just for starters, you know, tell me a bit about yourself. Where do you live? What was your entry into the art world? How did you get from there to here?
- [03:37]
C
Yeah, so I started. Actually, I owned a flower store. Yeah, way back when I was 16 years old, I dreamed of owning a flower store and I. I eventually opened one. I became the top designer downtown Toronto. I'm from Toronto or the Toronto area, and I was allergic to flowers, so I had to sell my store, which I did, and I actually went into acting. I had big dreams to come down to Hollywood and I did as well and had an agent that wanted to rep me here and I had my agent in Toronto. But I eventually started a theater company, which went really well, except financially. It's just not there. Right. And so I had to kind of make a decision, do I want to be rich or famous? So I chose rich. So I went off and I worked with my parents, who had a lawn and garden equipment store for years, and I helped run that. And eventually they sold it and I decided to start trading the stock market. So I traded options on the US markets and I had a lot of people who wanted to give me their money to trade. Well, obviously that's illegal unless you have the licensing. So I went and I got my licensing and I thought my husband said to me, why don't you go and become a financial advisor? And I cringed. I was like, oh, financial advisor? I'd rather start a hedge fund. But you need hours in the business. It's probably a lot like a realtor. You need certain hours in the business and then you can get your proper licenses. So, same thing. I went and I became a financial advisor. But. And I thought, you know what? I'll get my licenses and then I'll get the heck out of here. But I started working with one of the top guys in Canada and he started to teach me these really interesting strategies that I had never seen. And my clients were just like floored when they would see them. So I started making a lot of money and I started winning awards and I was becoming number one in Canada as well. So eventually though, I found the industry to be very constricted. And I. I actually changed firms and I started working with a billionaire. And I sat across the table from him, and he's very tall, big hands. I took his big hand in mine in his office overlooking the helipad, which, in Toronto, the external, like, Burlington area. That's a big deal, right? So I'm sitting there with him and I said, so how'd you do it? And he started telling me his story, and I thought, how can I do this for myself and my clients? Because it's. It's all good for him, but how can I benefit and my people benefit? So I basically took his blueprint and kind of at the same time, I was studying mindset at, we call it the Mansion in Bel Air with a coach of mine, and we got to be in the house. And I'll come back to this story later, but I got to be in the house and feel how it would feel to live there, which is very important to be in that environment. The end of the day, we went. We changed. We were going to go for dinner down in Beverly Hills, I think, at Avra, and the owner of the house was there. So I went up to the owner and I wanted to meet him, and I shook his hand, and lo and behold, there's the art dealer right next to him. You know, he's in a hoodie and a ball cap. And I'm like, who's this guy, right? And he shook my hand and he said, hi, I did the art for all the house. I'm the dealer. And I said, great. So what? And he said, well, have you ever thought about art as an asset class? And I said, you know what? I have, but I never got into it because our education, it stops at a certain. It'll go into taxation and things like that, but it'll never go as far as he's taken me. Right. So we kept talking, and the more I went down the rabbit hole, the better it looked and the better it has been. And so Clear Art Reserve was born basically from that. And it's been. Been extremely successful so far. We've had a lot of people come in, and now we're getting into institutional, on the institutional side of the. Of the investment, so in family offices and individual families. So it's been a wild ride from flowers to art. I came back to art.
- [07:40]
B
Yeah. You're not going to develop an allergy to art.
- [07:42]
C
I'm not? No, not so far.
- [07:45]
B
What was just out of curiosity, what was. What were some of the pieces of the blueprint that the billionaire taught you about?
- [07:52]
C
Yeah, that's great. He asked me, or he would. He used to test me. He died. What are the three things I say? Ppp, predict, plan, persevere. He said, you're going to predict a market. So right now he's dealing in a lot of nuclear and alternative cancer care. He says, claire, are more people or less people getting cancer? I said, obviously, more people are getting cancer. He said, okay, so there's your prediction plan. Make a plan. It's so simple, right? Make a plan for how can you solve this problem. The world's billionaires, they're all solving problems, right? Anyone who's extremely affluent has solved a problem of some sort, right? And persevere. He says, it's going to get hard. It's going to be. You're going to have ups and downs. You know, the ocean, the tide comes in and out. It's just like that. He says, but you have to keep persevering, especially if you believe in that project. So that was my number one thing I took from him. There were lots of little gems.
- [08:45]
B
It also, it's interesting that you have a stock market background because one of the things that, one of the things we look at in real estate as an asset class, you know, how. How do you beat the s and P500? Can you beat the S and P500? That's been a debate that I've had with a, with a great financial podcaster, Nicole Lapin. You're familiar with her. Great. Yeah, she' top five in business all the time, and I'm on her network. So we had this conversation live. I think there's some analogies there to what we're talking about as well. When I think about an art fund, I think more like a REIT or a real estate fund or real estate syndication. And what that, and I'll tell you what that means to me, obviously, areit people know what that is. But it's where you have professional institutional grade managers with lots of money behind them, buying institutional grade properties, managing them, taking that cash flow, creating cash flow, creating equity increases and making that available to the public through, through the public stock market. And so therefore an individual could not look, you know, we're on Sunset Boulevard. You know, the buildings are worth hundreds and hundreds of millions of dollars. This might be a great purchase for the average, a great investment for the
- [10:29]
C
average person to participate in where they wouldn't be able to before. Right, Exactly.
- [10:34]
B
So you have, oh, I have $50,000, but I don't want to. I don't want to use that to buy whatever is within my reach. Rather, I want to buy institutional grade. And so that's where a REIT or a fundraiser syndication happens. I do find, however, that with respect to REITs, that as a, as a syndicator, which I do, and then having just launched a fund recently, the Forward One real estate fund, is that I do believe that, that we can outperform the REITs. Because sometimes you get so large that even Warren Buffett, it's hard for people to understand. But Warren Buffett said something like, if you think it's hard to invest a million dollars, try investing a billion dollars. And that doesn't make sense to a lot of people. But what happens is when you're at the institutional level, even with real estate, there's only a certain number of buyers. They' extremely sophisticated. You don't, you don't have these like, you know, at a lower level, which is where the fund and syndications play, we can, we can see opportunities that, that an institutional player cannot, can't afford to buy. Not because they don't have the money, but it's too small of an investment for them.
- [12:04]
C
It's not worth it for them to get into something like that. But you're right, because deploying, what did you say it was, a million versus a billion or something like that, deploying a billion dollars is, it's a great problem to have, but it is a different problem to have for sure. And in the art space we've talked about that, Jimmy and I, is how is he going to start dealing with when we are bringing in. Because we're having these conversations now, 10 and $100 million a month. How's he gonna deal with that? And he being having the network he has and having access to the deals he has, just like you guys with real estate, you, the smaller deals, but also with art, it's, I guess it's not, I was going to say it's a little bit different than real estate. And you can correct me here, but you're building a portfolio. You're going to have your little emerging market, you're going to have your mid career, your mid cap, and you're going to have your blue chip stuff, right? Your blue chip might be. Well, you would know this better than I do. Is massive $100 million building, right? So deploying capital for me, small or large, it's always going to fall into that properly allocated portfolio as well. Right. And I think that you'd find the same with real estate. Correct me if I'm wrong. Of course. Because I don't know real estate like you guys do, obviously, and I don't pretend to.
- [13:27]
B
First of all, how long ago did you start the fund?
- [13:30]
C
So we're a couple years deep now. You know, Mr. Hoodie and Ball cap guy. It was Saturday, so I'll give him that. But he has educated me further than anyone I think could have because he's been on your show before. The passion is just. It's unreal. And I don't think anyone else would have had the patience, but I think we both saw something in each other. So it has been, in a good way, a relentless journey together of figuring each other out, but also figuring out the system that works for us the best. Right.
- [14:10]
B
You mentioned different classes. And then in an art fund, is there a particular investment philosophy you're using or are you using several?
- [14:22]
C
I really am following what I would follow as an asset manager, as a portfolio manager. So I really do that emerging market, a small cap, a mid cap, a large cap. You know, you get into your blue chip as well. And then of course, there's master. So I actually think there's more categories in. If you're looking at a straight stock and mutual fund portfolio versus the families I'm working with now, it's a different level. Right. They are allocating money into art, into large, large pieces of real estate as well, as well as their public portfolio. Right. But your public portfolio, it's great. You need to have it. Because people ask me all the time, well, what do you think of stocks now? Because you don't really do your stocks and mutual fund ETFs, because you don't really do that. I do still do it because I have a private advisory side. Right. So I don't manage money directly anymore. Your portfolio, if you do have anything invested in the public markets, that should be returning your beta. Right. And I think this is probably language you're familiar with, as well as your beta is going to be your. Well, right now some of my clients are getting about 20 to 50% return from their market. But then you need alpha. So how are you adding alpha safely with real estate? With alpha's your, like your piece that's gonna, you know, blow up. You're gonna add 10 or 20% of your portfolio, right. So how are you adding that? So you're gonna get that nice little, like, jack up in the portfolio, right. So with me, I found art is the safest way to do that because, as you know, art has beat the s and P500 for the last 25 years as well.
- [16:00]
B
You know, someone would consider an art fund maybe as their alpha or as. Or at least as diversification.
- [16:08]
C
Yeah.
- [16:09]
B
Because correct me if I'm wrong, the value of art is not going to be directly correlated to the stock market.
- [16:19]
C
Not at all correlated. Okay, so it is your alpha. So when I was on this quest of helping people become even more wealthy, because I work with a lot of aspiring doctors, a lot of entrepreneurs that, you know, they have hundred million dollar companies should be valuated at a billion. So we'll work on that side all the way into the structure of their wealth. A lot of times too, their wealth is very noisy and it needs to be, I do something called quiet wealth. So we set it all up for them so that it's quiet and working nicely in the background. So. But yeah, those people, the alpha. The art is the alpha. Even though art is not, the reason I fell in love with it is. It's not. It's not nasty. It doesn't take a dive. I remember when I was first talking to Jimmy about all of this and I asked him, does art lose its value? He said, no, once it's valued at a certain level, it's not going to drop down. And I asked him, what if someone, you know, he had that whole Harvey Weinstein thing. And he says, yeah. I said, what if they turn into like being a little bit psycho? And he says, no, that's good. And I said, what if they die? He goes, that's even better because that becomes. You can't get them anymore. They're not painting anymore. Anymore. Right.
- [17:29]
B
Scarcity.
- [17:30]
C
Scarcity.
- [17:31]
B
Scarcity created by death.
- [17:32]
C
Exactly.
- [17:37]
B
Even within your art portfolio, which is already a diversified asset class, you're still buying emerging. And so give me, give me a definition of, you know, you gave me six different. You know, basically, obviously, you know, blue chip or the masters are the very highest. Give me some examples of those and give me some examples of emerging and what you look for in each. And what's your.
- [18:07]
C
So this is not my department and I am very. We're very clear in what our roles are. I do not try to pick the artists, and I don't want to be the person to pick the artist. So Jimmy has now stepped into the role of becoming the portfolio manager for Clear Art Reserve. I do all of the capital. It's when you have two people who have strengths the way we do, it's yin and yang. You can't. You don't want to cross over into somebody else's lane when they're an absolute expert. And I would honestly say that he's one of the best in the world. Whether he thinks that or not, I know what I see and I know people. Right. So. And he also has an incredible network of other best in the world. So I do not try to get into his lane. But what we do focus on, it really depends on what kind of capital we're deploying or allocating at the time. So we do look at some emerging. So he has sources for that. He is basically people who make the market, who he knows who's going to go big.
- [19:08]
B
And tell me, because I certainly have an idea because I know what the word emerging means. But give me an idea of what an emerging artist. What would that look like?
- [19:19]
C
You mean like price point?
- [19:21]
B
Price point. But also like I could guess at it and then you can correct me. You know, emerging would be someone that, you know, hasn't had big sales at auctions or hasn't, you know, big museums, haven't bought their work yet. So therefore, you know, you're catching them hopefully on the rise before they've hit
- [19:43]
C
their huge bump up. And they'll probably have several bump ups through their career. So this is someone who's. Yeah, just basically not really starting out but they're starting to get into prominent galleries. So they may have already been in galleries. And again, my partner can correct me and he can, he can probably tell you differently than me, but these are the ones that, that we know are going to hit it big. And I hate to just talk about the return side of it because there is an emotional and a cultural and legacy building side to this as well where we're not just coming in here trying to flip paintings, we're buying things that are of cultural relevance and when we sell them they'll be to homes or maybe at auction, but people who really, really want to get involved with that artist. Right.
- [20:31]
B
And the fund has been around for two years.
- [20:34]
C
So we don't call it fund because we're not. The way we've structured it is we are not registered with in the States sec, the Ontario, like Ontario and Canadian Securities Commissions. We didn't want that structure because it's again, I would go back into that box, that cage that I was in as a licensed stockbroker basically. Right. So we've set up the structure differently. So basically we buy the painting and everyone can buy a share. I got that from a very, very affluent mentor of my husband's who he used to own eight or nine casinos throughout the Caribbean and a ton of he was a real estate developer. Tons of real estate up in Canada states, over in Vietnam, like global. And he. I remember one time I was in bed at night, I didn't even have my son yet, and I was like, hey, how do you do that structure? Because I was going to do that and get into real estate and he told me his structure. And so I basically took what he told me and then what my billionaire boss told me and I married the two. And that's how I came up with how clear our reserve runs.
- [21:41]
B
Basically that makes a lot. There's, there's a great analog for that in real estate too, because a fund has a lot more, as you know, SEC regulations and that sort of thing. Whereas. And then there's different levels of even like syndication where it's just friends and family.
- [21:58]
C
Yeah.
- [21:59]
B
And then that's where you really could go out and buy one. You buy one property. And it's essentially what I did, you know, buy one property and then say, okay, well I've identified this as a great property that. See who among my friends or previous investors want to go in on this particular property. And then, and then, you know, as it started to get larger, then there's sort of groups of properties. And so you can do a syndication that has, you know, like we have a short term rental syndication, we have a new homes syndication, has a different, each one has a different philosophy. Yeah, how, how many, how many of these separate little entities are you putting together?
- [22:40]
C
Again, it depends on. Now that we're getting more into the institutional and family office side, we will probably have even just individual families who want us to put a collection together. They may have it right now, most of the stuff because it's by shares, it sits in storage. But when we have families who come in and they want us to put something together for them, we'll put a collection together for them, we'll manage it for them. We'll let them know this is what we think it's worth at this point. Do you want to get rid of it? What do you want to do? Or if it's a family office, same as that, same kind of structure. So right now that's what we're doing is right now our lots are about six or seven paintings per collection. And then if, or when we have families come in, which we have some money transferring now from some larger families, then we'll either do a collection for them on their own, or if they want to get into just shares, they may want to own a share of 50 different paintings and they have the access to do that. Right. So the best, the best story is, you probably know this one already. Hugh Grant bought a. He had a big regret. He bought a $2.5 million Andy Warhol. And he said, I just, I didn't know what I was doing. I think he felt sick about it. He said in his interview, and. But five years later that Warhol sold for $28 million. That's 1040 or 1020% rate of return over five years. 200% a year. Right. So some of these families may want to allocate, or institutions may want to allocate just shares. Maybe they don't want to control a two and a half. Maybe they put $10 million in and they don't want to control 2.5% of their.25% of their. Right, of their, of their portfolio, their art portfolio into one painting. Right. So maybe they just want to have half of it and then this guy's going to buy the other half or a bunch of people are going to buy the other half. Right.
- [24:38]
B
And then that, that does create flexibility. Right. But it also creates liquidity issues. So do you have, do you have a sunset on these? On these?
- [24:47]
C
So we ask for a three to five year hold at a minimum. If we can go longer, I think it's even better. Again, it depends on the piece. And everyone signs off on that.
- [24:57]
B
They're well aware because, you know, things change. And then if you have, if you have an investor that wants out.
- [25:04]
C
Right, sorry, that's where I was going to go is if we do have someone who wants out, there's typically quite a bit of money in the coffers anyway who would love to buy in. So we'll negotiate. It's very much like private equity, which I played a big part. My husband and I had a company go to unicorn status. I call it double unicorn because it went to 2 billion plus. But private equity is a different animal, as you know, because you're dealing with the CEO who may go awol and you can't control it as well. Right. But yeah, so we will have an exit where somebody else will want to buy those shares, but we'll probably negotiate. They may not get fair market value at the time because they're asking for an early exit. So we haven't had it happen yet because everyone is well aware of the hold. But as you know, if you're allocating a larger amount of capital, you may need it. Right. So you should kind of know that ahead of time. But we'll deal with that one of the.
- [26:02]
B
It was sort of one of the questions too, is that, you know, art is obviously a. You know, the whole idea of art is that it's this visual, emotional thing that, you know, you enjoy that if it's in a museum that many, many people enjoy, if it's at someone's home, they're enjoying it privately. But when you're treating art as an investment, a lot of times it's sitting in storage. Is there a way to allocate that art out among your shareholders to rotate it so that people can.
- [26:39]
C
Probably not among the shareholders, but definitely. I have a lineup of legal corporate offices who would love to rent it from us. Jimmy's got great plans as well for us to tour it. And we also have some plans to very likely open something here in la, where we have a beautiful space for investors to come and have a look at the pieces, basically. So I don't think I'd want it to go into individual homes, just in case. I want to keep it safer than that.
- [27:10]
B
Right. We have beautiful art hanging in our office, care of Jimmy. And one of the things they're worried about. But you can insure it.
- [27:21]
C
Yes, exactly.
- [27:22]
B
And so you have that. So to dig a little deeper, one of the things that. That I love to say about real estate, unlike stocks, is that you. It's legal to. And I'll put lots of caveats out there, right, because it sounds weirder than it is.
- [27:45]
C
It's great. Get into it.
- [27:47]
B
But it's legal to trade on insider information on real estate. And what I mean by that is to be very specific. Cause I'm sure there's. When you buy something as a fiduciary duty, you know, if I'm. If I'm representing a seller and I actually want to buy the property myself, you know, some people do that. I rarely do that. If that were ever to happen, I would say, oh, hey, by the way, I'm interested in this property. Would you consider selling it? To me, that. To me, even that is weird. So I don't remember. I've never done that. It could be done if it were fully disclosed. That's not what I'm talking about. What I'm talking about is almost every time I buy a piece of property, there's some upside in it that the public is either not aware of, but probably could be aware of if they did the hard work to find out. So zoning would be one of them. So you're in a residential area. You've got 500 homes located in this residential area. 90% of them are zoned, you know, single family, 5% of them that say, are zoned multifamily. Even though it's a. Even though it's a house, that information is technically available to everyone. And almost no one knows which of the houses have that different zoning. I can go in and pull that zoning map and go, okay, well, you know, this house is exactly like this house, but this one has different zoning. So therefore it has intrinsic value or untapped value that the other house doesn't have. That's just one example of what I would consider to be insider trading. And also, you know, and I'll give you an. I'll give you an art example because I was with Jimmy. I think it was even at Freeze, because we're going to go to Freeze today. That's pretty cool. And. And we went and we saw some art and it was different. All these different galleries display at Frieze and we saw this art artwork. It was almost all sold out, but not entirely sold out. When Freeze closed, shut down, the art goes back to the galleries. Jimmy and I went to that gallery. He was telling me about this artist. She was still getting her degree in art, but had sold, you know, almost all of the paintings had sold. And, you know, not expensive. So like $30,000 or something like that. And, and then, you know, he points to one and says. Or the. Or the gallery owner points. Points one and said, oh, like, oh, the Museum of Modern Art just bought that. That's the sort of information that it's not illegal then to be like, oh, my gosh, you know, which one. Okay, so there's two left. Museum of Modern Art bought one. There's the other one. You know, that' because the fact that the Museum of Modern Art has purchased this one has not yet affected that price, but that would be a clear indicator that something is going to happen with this artist.
- [30:58]
C
Yeah.
- [30:59]
B
So that is what I would call real insider information. That. That it. That it takes an expert to. To have.
- [31:09]
C
You took the words out of my mouth. I was just going to say, you guys are experts. So I have information on how to make someone extremely wealthy. The information is available. Especially now with AI and Google, your information's available. What Jimmy knows is kind of available. He has. You have to know the right people. But the two of you have this network and that's how you get that information. And that's why your team is as successful as they are. That's why my team, being Jimmy and the others that are on our team, are super successful. Because you guys have access. It's all about that access. Some people say, oh, it's who you know. It's not who you know, it's what you know. And access to people who know. Because you're exactly right. And that's. I love this inside information topic because as a full stock broker, portfolio manager, I could never have inside information. I would be Martha Stewarted into jail. So poor Martha. I love her. I love you, Martha, but you guys can have it. You're exactly right. The zoning, you know, that, you know, such and such is so and so is going to move next door, whatever the situation is. It's so beautiful because that's what makes you guys the experts. That's what puts you at the level. But you've taken time so you can say, oh, well, you know, anyone has the access to this. Yes, but you've taken the time to build your career on having that level of expertise and having that information. So has Jimmy over 20 years. Otherwise, you guys wouldn't be where you are. I'm just the capital. I'm just the money. I come in and I take advantage of it. Right? But money, we were just talking about this on the way here. Money is basically everything. This is why we're all here, is we want to make money. We want to do something we're passionate about, right? So it's this, this. This notion of inside, quote, inside information. It is inside information, but like you said, it's access. Everyone has access to it, Right? So it's nothing illegal. But I think that's the beauty is my life has been around little loopholes. How can we do something better, faster, smarter? How can we make the most amount of money with the least amount of effort? Like, how can I do that for clients? And all of that is all information everyone has. It's just a matter of not going home and watching shows, just streaming. What are they called? Binging shows. I don't binge show. I'd go home and I would learn concepts of how to make people rich. Right? But you do the same. You'd go home and figure out, okay, so what am I gonna buy here? What's good, right? He goes home and he figures out what the next hot artist is and how, right?
- [33:49]
B
I've been binging shows a little bit, but that's okay at this level.
- [33:54]
C
You're allowed.
- [33:55]
B
And you know what? Funny enough, you know, the show I'm binging right now is Drive to survive, which is the formula one behind the scenes. And you can't believe how many Business management and mindset lessons are in that because the performance of the drivers and the, you know, the trading and all that sort of thing. Also, I'll give you one other, one other reference point is that because I was the Department of Justice, I'm a lawyer, by the way, and I was the Department of Justice, and Martha Stewart did not go to jail for insider trading. Oh. In fact, what she did probably never qualified for insider trading. But what happened was she got some inside information, she got nervous about it, and then it was the COVID up that, that really led her down. And then eventually she just sort of got tired of the trials and appeals. And I think she could have won her appeal, by the way, but she did not want to sit on the sidelines for another multiple number of years while they fought the appeal.
- [35:11]
C
She's like, she's a busy woman.
- [35:13]
B
Give me the time in jail. Let's go get it over with next. Which is, which actually is a lesson there.
- [35:19]
C
She exploded even more after, of course.
- [35:22]
B
Right.
- [35:23]
C
What a twisted world.
- [35:24]
B
Yeah, right, right. And then back to a conversation that I had with Nicole. And again, I just feel like this is gonna have a real analogy here. Nicole likes to surprise her guests a little bit. I wasn't aware of that until I got surprised. And she's wonderful. And, and she's got her cards and her research. And she said, paul, the S&P 500 during this period of time has performed at fairly long period of time, 10 years, whatever the 10, 15 year time period was, has returned 10.5%. Just the S&P 500. And real estate during that same period of time has produced 4.5%. So why in the world would I buy real estate? Why wouldn't I just rent my house. House and invest that money? And that's where the average is. This is where I really. And I feel like I did well with the question, but afterwards. Right. I really researched it and I came. One of the things I researched was how often does a managed fund outperform the S&P 500? And do you want to venture a guess? Because I'm guessing at this point too, because I don't have the number exactly in front of me, but venture a guess for me.
- [37:00]
C
Not that often.
- [37:01]
B
Right.
- [37:02]
C
Yeah.
- [37:02]
B
Yeah. So
- [37:05]
C
you have man or woman, whatever, you have human trying to beat basically a machine.
- [37:12]
B
Yeah, well, the S and P is just a, it's just a bunch of stocks that they've taken and smashed together. I wouldn't even say really it's a machine as much as it's a performance indicator of the stock market. And if you're really smart about a particular about managing a fund, you would figure that you certainly could beat it 50% of the time. And, and the percentage was so low because you could throw a dart and you would think you would be 50%, like, did better, didn't do better. And it was like 30% or less. I can't remember exactly what the number was. And part of that was because a managed fund, then you have to pay for the fund manager, so it was the fees and everything. Because you could get an S and P, you go to the least expensive brokerage possible, whatever those would be, the massive brokerages, you go throw your money down on the s and P500. It's going to do what it's going to do. It's very efficiently managed. And then almost as a rebuttal, I had a realtor who buys for developers. He identifies properties, he underwrites them himself, and then he goes to the developer, says, hey, I think this is a great deal. Now they're going to underwrite it also. They're going to say yes or no. But if you just hand them anything, they won't take your phone call. So they know that when this guy Mercier, who was on our podcast, Marseille, they know that when he brings something, it's already underwritten and there's, you know, maybe a 50, 50 chance or close to that that they're going to buy. If they say no, by the way, he goes right to the next investor and they buy. And. And Mercedes clients, where Nicole was saying four and a half percent return. Okay, Mercedes clients would not take a deal, absolutely not, unless they were looking at a projected 50% return. Now, you know, things happen and there's risk involved and that's why, yeah, that's why they're looking for a 50% return. But they do just as often a 60, 70, 80 as they do a, you know, 50, 40, 30. So if they're not looking at, you know, I'm going to buy this piece of property, here's how much it costs, you know, and then there's the arv, which is after renovation value. Here's how long it's going to take to get there. I basically, when I do the underwriting, I say, you know, I do it on the back of an envelope, really, and you get these, you get the prospectus from the professional commercial real estate people, and it's this big, thick, long thing. I'm like, what is this? You know, I can barely read it myself. And so I just take the back of the napkin. How much are we buying it for? What are the things we're going to do? How much is that going to cost? How long is it going to cost, is it going to take? And what is our after renovation value? And after all of that, you know, what is, what is the return going to be? And that's the basics of it. And when the basics don't add up to 50%, then Mercedes clients are saying no. So if that basics add up to 30%, they say, don't even show it to me. So that's the difference really, I believe, between really understanding and using in essence. Right. That insider information or whatever it is, that specialized, it's a better name for
- [41:04]
C
it because it's less, totally less legalities.
- [41:07]
B
Yeah. So like relying on someone's specialized knowledge, you know, really allows you to pick, unlike a stock, allows you to pick a piece of property that's going to generate, going to generate a great return.
- [41:26]
C
For me, with advisors, because I was one, there's not a lot of greatness out there. I think at the upper levels there are. But for your average person, which I don't know about you guys, but I came from average beginning beginnings, like we were, we were not wealthy in the beginning. My parents, we couldn't afford fruit in the winter when I was a kid. I have worked unfortunately with some advisors who I was going to buy their book of business, their clients, where they would slide A list of 30 mutual funds across the table to the client and say, pick one like they're supposed to know. So unfortunately as well, when you're picking those types of investments or advisors are picking those types of investments, you're not dealing with the specialized knowledge that you need. What's the point of investing? What's the point making money? You're making money, you're trying to get money. Yeah, it's an investment. You're trying to buy your principal residence, it's also an investment. Sometimes you buy it for love. I bought mine for investment. So if you're dealing with someone who doesn't have that specialized knowledge, information, they're going to give you something that will not outperform going back to the S and P, it's not going to outperform it. So what are you doing? What are we doing here? Again, it's okay if you've got someone who's getting you that 8, 10, 15% every year and we go back to alpha and they add in that alpha, but adding that alpha, there's no way you're going to be able to add it properly if you don't have the specialized team behind you. So that might be your team. It might be my team. Right. It might be someone else. It might be a private equity team. Although I wouldn't go with a random firm. Not necessarily. You know, so I think it's, I think the problem is as well is there's a lot of information out there, so people are having a hard time sifting, especially now. It's, it's, it's tmi. It's too much information. Right. So unless they know you exist and your team exists or my team exists, what are they doing? Look at all that money out there. What are they doing?
- [43:32]
B
And are you. So you're raising the money. You are for your Yin and Yang. You're raising the money, you're maybe managing, you know, do you, do you decide how much are we going to put into emerging artists and how much of a long shot as an emerging artist? You know, can you tell me what, what's a blue chip? What's a blue chip artist?
- [44:00]
C
I think you're getting into masters. I was, I get education constantly. So again, this is not quite my lane, but Jimmy was telling me yesterday about like Mary Kors, she's an LA artist, people like that. So. But you also asked me what was your question right before that?
- [44:18]
B
How do you allocate between emerging and semi established?
- [44:23]
C
That is something we will put our heads together on. That's where the Yin and Yang comes together. So he'll come to me with specific opportunities. They're always incredible opportunities. And he knows my mandate is we're not buying something that's going to go up just a little bit because these people are expecting some kind of return. Even though the pieces are beautiful, they're cultural, they're legacy building and state building and so on and so forth. We do need to find a return. So he knows that that's the mandate, especially as he's become the PM for us. So we will come together and make the decisions on that. We'll have lots of meetings because I'm in Toronto most of the time or Mexico. We'll have a lot of phone meetings. I voice note, he doesn't, but that's okay, I'm getting him there. But we have a lot of meetings about that. I've got a piece, I've got this going on, what do we have, and so on. So there's a lot of communication that goes on between he and I and as the team grows, that will continue Between, I think just he and I, because we're the two main principals there. Right. So. And then everyone else will have to, you know, keep, Keep the, the wheels turning, basically.
- [45:32]
B
Do you have a target number for. For rate of return on a particular segment of the.
- [45:41]
C
I mean, I have big, big visions and big dreams all the time. So I always want to see the most knowing that that story exists out there about the Andy Warhol and the thousand 20% rate of return over the five years. I mean, I would love that. Is that always possible? No. Having said that, Jimmy will send me numbers at auction where something was expected to go for 40 and it went for. I forget what he sent me recently. 200 or something like that. So you never know. And I think that's the beauty of the art world. It's kind of a. It's the gift and the curse of the art world, because you don't know. But it's also. Okay, well, this is interesting because we know it's going to go somewhere. We just don't know how far. So do I have a goal? No. I didn't want to put that kind of pressure on us because I've been in that world of always and I've been in the hedge fund world and of always trying to make that, you know, the watermark of X amount. I didn't want that for us.
- [46:40]
B
What's the minimum investment?
- [46:43]
C
Minimum. So we weren't taking minimums at the beginning. We were helping out a bunch of little guys. And the reason was because, again, we come from humble beginnings. So who are we to say you can't come in, you know, you can't sit with us mean girls. Get it? We're in Hollywood. My quote, going forward, we like to see, for an individual, for like, you know, your smaller people. We like to see 100, a million. Family offices, if they want to just kind of test the waters in the beginning and start to get into some smaller pieces and they want to do a million, it's okay. I'm not. I've never been one to take minimums. I used to work with advisors who said, well, my minimum is a million. And I said, that's cool. Send me the guys who have 900 grand. I love to work with them. My mentor always taught me. I used to say to him, ralph, you think I should go out to Saskatchewan? You know, I make about three grand. And he said, well, if you don't take the three grand, I will. And this guy was worth. I don't know what he's worth now. 50100 million. Right. So. And he built his net worth just on being a financial advisor. So I've learned a lot of these little humbling things along the way. I've also, like I said, I come from humble beginning, so I try not to shun people. I have had people send me a small amount and the money will just sit there and not get allocated until there's something that's appropriate for them.
- [48:09]
B
But surely you have, you know, if I'm, if I'm, if I'm a sophisticated investor and you know, I'm investing in, you know, stocks and I have a business that's a running business and I'm also investing in real estate and I come and have a chat with you. Surely there's got to be a, you know, how safe is my investment, how safe is my principal? And then also what is the likely? You know, what, what, There might be a best case scenario, there might be a worst case scenario. What's sort of a likely scenario?
- [48:47]
C
You mean based on rate of return? Yeah, yeah, I think, I think your worst case scenario would be. It's hard for me to give you a percentage on that because art is so, it's so different than any other investment. So I would say worst quote, worst case scenario would be over like a three year period. I don't know, 30% kind of thing. A lot of the pieces, when we buy them, we immediately, because we have that information, they'll immediately be bumped up by 20, 30%. And that's just even before we've even deployed the capital out to whoever we're buying it from. So we usually will buy in that manner. So the investors already have that rate of return under their belt. That also helps us in terms of performance. We don't have to stress too much about it because we also know that if it's already bumped up that much, you know, it's going to go probably double that. So if we've bumped up 20% right in the beginning, it'll probably go 40, 50% at least. So that's more the way we do it. I've really had to train my brain differently. In the beginning I was quite obsessed with the rate of return was. And I've really had to train myself to not be because it's just, it's so variable.
- [50:04]
B
Have you sold a piece of artwork from your collection?
- [50:07]
C
We have interest and we will not let them go yet.
- [50:13]
B
Okay, so you've bought.
- [50:14]
C
Yes, yes.
- [50:15]
B
But you haven't sold yet?
- [50:16]
C
No. Okay, I'm not, I don't want to Yet. Okay, we're too new. And honestly, every piece that people want is because they're so desirable. So what does that say? You're not going to let it go yet because, you know, it's going to continue to grow.
- [50:30]
B
Right? And, you know, I think it's a strong question to ask. I do appreciate your answer. I understand your answer. I haven't yet had. I wrote a. I wrote a wealth building book called Wealth Can't Wait, which is a New York Times bestseller. And my co author, David Osborne, is. Between the two of us, I would say if you had to pick one, that was tough as nails, he's the one. And I was buying, you know, I went through this period of time of buying these domain names, and I probably, you know, have paid, you know, definitely into the six figures for sure, you know, for domain names. And I'm like, oh, well, the value is this value. He would always say to me, well, have you sold one? And, you know, it was 10 years before I sold one. And, you know, as long as I hadn't sold one, he's like, well, then you haven't made any money, you know, and he would just really hammer me on that. Now, he and I. He and I bought two domain names together with a third person that was really our Jimmy. It was the domain guy. And we paid $25,000 for each of the two domain names. That means $50,000. Do the math. Divided by three. That's what we invested. We have sold one of the two domain names. So I actually did sell one. Right. So we sold one of the two domain names for $250,000. So, you know, and then. And then, you know, my friend David's like, well, maybe we should reinvest in domain names with which, you know, I was. Have become less bullish. But. Yeah. So I think it's a fair question,
- [52:17]
C
you know, because I think with that said, though, we. And this is something we've learned from our private equity side. We always have the exit planned out before we buy a piece. We know exactly who and where and when we want to sell it. So. And I think that in the private equity world, that's where a lot of them go wrong. If you're gonna get into something, you need to know exactly how you're gonna get out and when. If you don't have an exit plan and you're just open and it's. Whatever happens, happens, I think that's a big mistake. So we always have the back end planned. So my husband actually works with us as well. And basically he's on exits. Basically, Jimmy's the last say. But Andrew and Jimmy will basically work together on Andrew's because he and I were in that private equity world together. He's that brain of thinking, okay, this is really beautiful. And he's very passionate about the art as well. But great. How are we getting rid of it as well? How are we going to get that rate of return? So we almost make sure that we have a guarantee on the back end.
- [53:21]
B
How much do you currently have invested in art?
- [53:24]
C
We're just over a million, but we have conversations in the tens of millions happening now. So we started with our, I hate to say, little people. We started with our smaller investors, let's put it that way. And we're growing very rapidly. It's been overwhelming, which has been incredible.
- [53:46]
B
One of the things that I did with my domain names, even before I sold one is, of course, I have that spreadsheet and I have what I paid for them. And I think the most we ever paid for a domain name was $25,000. But. But there's certainly more than the $20 that you can get for one that's readily available. And then in another column of that spreadsheet, I would have what I considered to be market value for that million dollars worth of art. Do you have that column where you're like, this is what we think it's worth on exit?
- [54:23]
C
I do, I do. I believe. And Jimmy may think, I'm not sure what he'll say about this when I can't see him because he's behind me. But I believe we're in the 1.5 to 2 million at least present day. And this is all very new. We're still very startup. So I'm impressed with the fact that I can see the. Because some of the pieces have gone up already 150. Some of them have gone up, up 50 or 60%. So how do you make that average? Well, I see between 1 and a half to 2 million. However, also some of those pieces that are in that collection or the first or second collection, those are one of those. Some of those that have gone to auction and have blown it out of the water and done, you know, five or six times what they thought it would do, right? They're expecting a 30% rate of return or $30,000, and it's gone for 120 200.
- [55:19]
B
That is a real way to value it. Because, you know, one of the things. And I think David Osborne, my business partner, co author, you know, had more right to stick it to me than I do to you. Because, you know, you could get a very equivalent piece that you have. And then that sells. Oh, so we bought this for, you know, $75,000. And it just sold, you know, a very similar piece just sold at auction for 125,000. So you, you really can get great comps. Now. Our dobing, our domain guy, unlike David and me, right? Unlike, unlike the two of us, the domain guy really has that too. He's like, all right, well, this is a three letter domain name expert there.
- [56:08]
C
Yeah.
- [56:08]
B
And this sold at this price. And he, you know, you ask him any domain name and he's like, well, this is what. But this is the wholesale price. We put it up for auction right now. This is the price if somebody really wanted it. And so that is the sort of very specific knowledge that you need. What is the. In the collection now? What's the most expensive piece in terms of purchase price and what's the least expensive piece?
- [56:36]
C
I think least we'll start there would be more on the emerging side. And again, I'll be corrected later, I'm sure on this it's probably about 10,000. And I think the most expensive would be 160, more or less.
- [56:56]
B
And even 160 is not. That's not blue chip.
- [57:00]
C
No, no. Although we just acquired a piece of blue chip that is a smaller work and It's. It's like 20,000. So just because it's blue chip doesn't mean that it's in the millions. Because if the piece is tiny or depends on. Depends on the piece, then it doesn't necessarily mean it has to be in the millions. But you can still participate in blue chip and not have to spend millions. Right.
- [57:23]
B
Do you want to tell me what artist that is?
- [57:24]
C
No, I don't.
- [57:25]
B
Okay, good. That's okay. I appreciate it.
- [57:28]
C
I'll get in trouble for it. I know. I could feel it.
- [57:30]
B
No, that's okay. I totally, totally get. And what sort of. What's your fee structure?
- [57:37]
C
Oh, so we take a one and a half percent fee per year, which basically pays for storage, insurance, any moving around of the pieces or anything because we're so new as well. I think we're good there. I think we'll probably stay there. I didn't want to go into. I know we can go into the two and two and a half percent, but come on, like, you know, we've all been in this, this fee world. I lived in that world and I was at firms where they were charging like three and A quarter percent. Like, how are people making money? Right at the end of the day, I have a heart and a conscience. Like, yes, I love money. I'm greedy for myself, I'm greedy for my clients. On their behalf, I want them to make the most. So the fees I want to charge, you know, what's fair for us, but then also what's going to cover the cost. So it may change as we move forward. We'll have to see.
- [58:32]
B
Okay, so that's the fee part. And when you do that math, you know, based on. And that's based on acquisition price. Is that right?
- [58:42]
C
The fee?
- [58:43]
B
Yeah. No, no, it's total. I mean, but total amount in the portfolio.
- [58:49]
C
What do you mean?
- [58:51]
B
So you have. You have purchased a million dollars worth of art. The 1 1/2% is based on what it is.
- [59:00]
C
What it is.
- [59:00]
B
But the 1.5% of a million dollars.
- [59:03]
C
Yes, yes, yes. Sorry, I understand what you're saying.
- [59:05]
B
Assets under management.
- [59:06]
C
Yes, yes, totally. So we did adapt that model from the investment management industry. It was a very baffling thing to figure out because this is a whole other animal. There is another company who has more of an actual fund and they do charge. I think they charge about two or two and a half percent the last I looked. Anyway, the problem is any review I see on that company, and I won't mention who it is, the people are compl. I actually had someone reach out to me and say, well, I'm invested with so and so, and I haven't made any money. And I said, well, that's. How long have you been invested? 7 or 10 years or something like that. So it's a different model. So I had to take little pieces because we need to survive. We need to pay for things.
- [59:53]
B
Okay, so you've got the one and a half percent on the assets under management. Totally understand that. And then what percentage of the upside do you do that as?
- [60:02]
C
Well, yeah, It'll be about 10% of the upside, depending on the piece. Yeah. But yeah, call it 10. So. And I know hedge funds a lot of times, again, because I come from the hedge fund world, they'll take a 20 and 2. Right. So it could go to 20, but more likely on. It'll more likely be on the 10. I think that the auctions do 20 or 25 or something like that.
- [60:25]
B
But that's. Yeah, that's a disposition fee, essentially. And. And then, you know, you would net out what you netted out and then it makes sense for you. You're not going. You're not going to. Like you said, between insurance and, you know, hand painting handling and all that sort of thing that, you know, you're not making. You're not making a living on the.
- [60:44]
C
On the fee.
- [60:45]
B
On the fee?
- [60:45]
C
No.
- [60:46]
B
So it's gotta be on the.
- [60:47]
A
On the.
- [60:48]
C
You'll make a living on the fee once we get to where my goal is.
- [60:51]
B
Sure.
- [60:51]
C
Then that'll be a nice thing.
- [60:53]
B
Sure.
- [60:53]
C
So.
- [60:54]
B
Got it. And then it's really the. It's really the.
- [60:58]
C
On the backside.
- [60:59]
B
On the backside, yeah, yeah.
- [61:00]
C
And also we participate in shares as well. We buy some of the shares as well. So that way we also have a piece of controlling interest in, say, in a Warhol, where we're not gonna. We don't want. I don't want to put two and a half million dollars out of my own money right now into a Warhol, but I'd love to buy a share. When I tell that story, everyone's jaw drops and they're like, couldn't I have just bought the corner of that painting? So, yeah, right, you can.
- [61:24]
B
So I love it. Okay, well, it's been super educational. We're getting, we're getting the. We got to get out of here because we're going to go to the LA Art festival called Freeze, which is, I don't know, it's like Art basel, but. But LA's version kind of thing.
- [61:43]
C
Yeah, it's wonderful.
- [61:44]
B
So I'm going to ask you what we call the Fire Round. I'm going to ask you a series of questions, just sort of top of mind. They're deep questions. We could go on and on, but we'll run through them and take it from there.
- [61:58]
C
All right, I'm ready.
- [62:00]
B
What's your idea of perfect happiness?
- [62:03]
C
Perfect happiness for a day in the life to be my life. As it is, I get to travel. I get to live in Puerto Vallarta in the winter. I get to be with my husband and my son every day. I homeschool my son. So that's my perfect happiness. And to make a bunch of money, which I get to do.
- [62:24]
B
What's your greatest fear?
- [62:26]
C
My greatest fear is losing my husband and my son.
- [62:30]
B
What's the trait you most deplore in others?
- [62:35]
C
Indecisiveness.
- [62:36]
B
What's the trait you most deplore in yourself?
- [62:41]
C
Indecisiveness. What else you got?
- [62:46]
B
What do you consider the most overrated virtue? Oh, indecisiveness.
- [62:53]
C
Yeah, indecisiveness. No. Fake personalities.
- [63:00]
B
Which talent would you most like to have that you don't already have.
- [63:04]
C
Okay. Superpower is to be invisible, but actual existing power would be. I don't know. I feel like I'm pretty powerful. I'm good. I love me. No, that's not true. A little more calm. Boom.
- [63:25]
B
Okay.
- [63:25]
C
Yeah.
- [63:26]
B
What's your greatest extravagance?
- [63:29]
C
Flying private and staying in beautiful homes all over the world with my husband and my son and my sister in law.
- [63:39]
B
What's your most treasured possession?
- [63:43]
C
Probably my mom's diamond, which is in my engagement ring because I don't want to call my husband and my son possessions because they're not.
- [63:53]
B
So. In la, there are a lot of great hikes. It's one right near my house.
- [63:58]
C
Very steep.
- [64:01]
B
And you climb up. Maybe in Toronto, you crest this great hill and you get to the very top and you look down and you see your husband and your son and your family and your friends and colleagues in your community and you shout one thing. What is it that you shout?
- [64:18]
C
I did it.
- [64:19]
B
Yes. All right. Thank you very much. Really great.
- [64:25]
C
Could have gone on and on.