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Private Lending Titans: Sharon Koh, Co-Founder & CEO, 1839 Asset Management

Insights» Industry Spotlight - Originate Report

October 4, 2021by Originate Report Team

Read the full Originate Report October edition here.

Why did you choose to enter into this industry?

I have spent my career in a broad range of finance functions – ranging from corporate finance, to wind energy project finance, to corporate turnarounds. No matter the role, the common thread throughout every job was to “organize the chaos”. When 1839 Asset Management was awarded a sizable investment mandate in the Spring of 2017, I saw the opportunity to grow the firm as a professional organization that would bridge the gap between a disparate/chaotic private lending space and a formal/regulated financial institution. When I joined this industry in early 2017, the majority of the originators and investors did not have structured underwriting, construction draw, and operational processes.

What is your current role and what do you do day to day?

1839 Asset Management runs a very tight operation, which means that I wear many hats. However, maintaining the relationships with our capital partners and originators are at the top on my list. Given that in a fixed-income strategy, the key to maintaining a great return for our capital partners is to control the downside risks. I have therefore chosen to personally manage non-performing loans.

What excites you about your role today?

Ask me again tomorrow… [LOL]. The private lending space has changed so quickly since 2018, there’s certainly no lack of “excitement”!

Can you explain a time where you faced adversity or had struggles early on in your career? Where did it all begin? How did these experiences mold and shape you into the leader you are today?

I have had an eclectic career path that has made upward mobility within a standard corporate environment more like a jungle gym than a straight-up ladder (borrowing the phrase from Sheryl Sandberg’s book). I have spent the last 20+ years of my career mostly in finance-related functions and eventually moved into management, overseeing functions that I had much to learn about – from Human Resources, to Technology, to Manufacturing Reporting. When I stepped into my current role, I felt like all my past disparate experiences fell into place like pieces of a jigsaw puzzle. Being an entrepreneur now, I am finally applying all my skills and experiences in one job.

Is there anything that you wish you could go back and tell yourself at the beginning of your career?

Be bold and speak up! I moved to the United States from Singapore when I was in my 20’s. In the early years, I felt somewhat intimidated by the cultural differences. I have been passed up on raises and opportunities for years – it was only when I started to speak up that I realized that I have the power to change the outcome.

Who is someone that has had a significant effect on your career and why?

One of my managers in corporate turnarounds showed me that kindness and honesty is the best policy when it comes to making and communicating difficult/unpleasant decisions. Not only has this practice served me well for my entire career, but it has also become part of our corporate culture at 1839 Asset Management. When my team is confronted with a difficult lending decision, we ask ourselves – “what is the intellectually honest answer to our conundrum”. The answer is often surprisingly obvious. Acting on our decisions kindly and fairly has rewarded us with strong relationships with our loan originating partners and borrowers.

What has been your favorite aspect of being in private lending over the years?

Being a part of the transformation of dilapidated homes into great homes that will be enjoyed by families for years. In some geographies, we have even been a part of transforming neighborhoods!

What would you consider to be the highlight of your career thus far?

Combining all the pieces of my skills and 20+ years of experience into one role.

What do you enjoy most about your job? Least?

Most – Working with new originators and brokers and watching their businesses grow and develop alongside ours. We truly believe that private lending is a very local business, and we count on local originators and brokers to be our on-the-ground partners.
Least – Parting ways with originators, brokers, and borrowers who are motivated more by short-term economics than building sustainable long-term partnerships.

Is time or money more valuable and why?

The only true limited resource everyone has is time, and this becomes more pronounced as one gets older.

How do you make sure your company stays ahead in this industry?

First of all, by listening, and I mean really listening, to all parties who are in the line of fire. That means borrowers, brokers, and contractors as well as the people on the capital side. All of them are engaged in a continuous balancing act in real time. To dismiss their concerns and observations is to dismiss primary data. Secondly, reading various publications and going to conferences are both extremely helpful because it gets you out of your comfort zone and creates exposure to what is happening outside of your day-to-day area of interest.

What tools do you use to aid you in your role to be most efficient, organized, and focused?

I am a huge fan of the Bullet Journal method or BuJo, as it is known by users of the method. My BuJo is a place where I can park both short-term tasks as well as longer-term projects that I plan to work on. Not only does it help me to stay focused, but it is also a great stress-management tool. Once a thought, an idea, or a task makes it onto my BuJo, I know it will get prioritized and completed.

Has your role changed significantly to address the current environment?

With the relative ease of access to warehouse lines of credit and cheap capital, building and retaining relationships with great loan originators has become more challenging. To counter this trend, I am ultra-focused on constantly tweaking our operations to make sure that we’re operationally efficient and easy to work with. We believe that our originators’ reputations are our reputation. In fact, throughout the initial months of the pandemic, we continued to honor our table funding and loan purchase commitments.

Standard mortgages in the private lending space are becoming more homogeneous than they have been in the past as this space continues to draw the interest of institutional investors. This trend has left a void in the market for qualified borrowers and good investment opportunities. We are increasingly forced to balance investment discipline and common-sense underwriting to structure deals that otherwise don’t fit the generic credit boxes of today.

What advice would you give to someone who has just started out in private lending?

There is a lot of money chasing after limited opportunities in this space. Don’t lose sight of the risks, especially in the current market of rapidly escalating property prices. Form your own investment thesis. Go back to the thesis when you’re unsure whether to say “yes” or “no” to a deal. Be focused on building a sustainable and sound reputational business.

What do you believe to be the best type of real estate investment opportunity available today and why?

Lower to middle income housing in geographic regions that are supported by strong job and population growth. There is a persistent structural shortage in lower to middle income housing, in part due to the economic incentives that reward builders more to build higher-end homes than to build 1800 square feet workforce housing. The strong demand in this lower to median segment supports a strong liquidity for both sellers as well as landlords.