First-Lien Lending to Triple Net Cash Flow (The Two Sided Strategy) with David Hansel

First-Lien Lending to Triple Net Cash Flow (The Two-Sided Strategy) with David Hansel

On Accredited Investors Only, host Peter Neill sits down with David Hansel to unpack how a vertically integrated real estate platform can combine private lending with private equity ownership. David explains why first-lien lending and small bay industrial assets are core to his strategy, how the businesses feed one another, and what disciplined underwriting and acquisitions look like in practice.

Who is David Hansel?

David began in real estate after the dot-com bust, moving from brokerage and house flipping into private lending and then launching a private equity firm. Today he runs two complementary businesses: Alpha Funding (private lending, fix-and-flip and construction loans) and Lucern Capital (private equity ownership focused on multifamily and, more recently, small bay industrial).

The two-sided platform: how lending and ownership reinforce each other

Alpha Funding and Lucern Capital were built to play different but complementary roles. Alpha sources deal flow, underwrites risk, and provides first-lien loans. Lucern acquires and operates assets where the team can execute value-add strategies. The benefits of owning both sides include cross-pollination of investor relationships, a deeper understanding of market dynamics, and an ability to act quickly when opportunities arise.

Alpha Funding: disciplined first-lien lending

First-lien lending is attractive because it offers yield while providing downside protection when underwritten correctly. Key elements of Alpha’s lending approach:

  • Loan structure: Typical loans for fix-and-flip and ground-up construction. Financing can include up to 90% of acquisition and 100% of construction costs, with limits that keep total loan exposure no more than roughly 60–70% of after-repair value in most cases.
  • Underwriting fundamentals: Get to know the borrower, assess credit and background, confirm construction scope and budget, and order ARV (after repair value) appraisals before funding.
  • Servicing and controls: In-house servicing, draw processes, and human underwriters who interview borrowers to peel back the layers of each deal.
  • Yields and fees: Early market yields were extremely high (mid-teens with multiple points); today’s yield environment for private lending tends to be in the low double digits with lower points.
  • Capital evolution: Started with retail investor capital and friends and family, scaled with institutional capital (insurance companies, hedge funds), and now runs pooled instruments like borrower-dependent notes for investors who want exposure with diversification.

Origination and reputation

Origination is multi-pronged: direct relationships with brokers, digital marketing, thought leadership, events, and a referral network built from consistent execution. A strong track record—over $1.2 billion in fix-and-flip originations—creates momentum and deal flow.

Lucern Capital: from multifamily to small bay industrial

Lucern started by acquiring multifamily assets across the Northeast and Carolinas. Over time, rising third-party costs (insurance, labor), a tougher interest rate environment, and slowing rent growth made the multifamily value-add thesis more challenging. That led to a strategic pivot.

Why small bay industrial?

Small bay industrial became the target for several reasons:

  • Scarcity of supply: Local zoning often restricts new small bay industrial construction. Where industrial zoning exists, municipalities typically prefer large distribution centers rather than small multi-tenant industrial parks.
  • Lease flexibility: Typical lease terms of one to five years (average around three) allow owners to mark rents to market more frequently than long-term multifamily leases.
  • Triple net conversions: Converting leases to triple net reduces variable operating expenses and produces more predictable cash flow for investors.
  • Light value-add: Many small bay buildings have older ownership that left rents below market. Upgrading leases and converting to triple net often requires relatively light physical work and can unlock immediate cash flow improvements.
  • Tenant diversity: Tenants range from HVAC, plumbing, and other trades to small manufacturing and last-mile distribution—essential businesses that follow rooftops and population growth.

Markets, deal size, and acquisition strategy

Lucern focuses on high-barrier-to-entry markets along the East Seaboard—New Jersey, Maryland, northern Virginia, the Carolinas, and select Atlanta/Georgia opportunities. Deal sizes for small bay industrial are typically smaller than core multifamily acquisitions—often $5 million to $15 million—so Lucern structures investments as syndicated offers rather than closed-end funds. Syndication lets investors cherry-pick deals and build tailored portfolios much like creating a custom fund.

Execution: underwriting, hold periods, and returns

Underwriting small bay industrial emphasizes location (proximity to major roadways and local markets), tenant mix, lease expirations, and the ability to mark rents up on lease renewal.

  • Typical hold period: Lucern plans on a three to five-year hold to execute rent roll-ups and demonstrate stabilized cash flow to future buyers; a shorter sale is possible when opportunistic buyers emerge.
  • Cash yields: Stabilized projects can produce low double-digit cash yields at the property level; converting leases to triple net helps sustain those yields by reducing expense variability.
  • Example outcome: Lucern sold an industrial asset in one year and returned a 1.5x multiple to investors—an outlier but illustrative of opportunistic upside when acquisition basis is low, and market timing is favorable.
  • Long-term plan: The ideal scenario includes options to refinance and return investor capital while holding the stabilized asset for ongoing cash flow. However, most investors prefer a five-year liquidity window when participating in syndicated deals.

Practical lessons and investing philosophy

Two recurring themes from this platform approach:

  1. Master the basics: Banking fundamentals—know your borrower, verify scope of work, order accurate valuations—are the backbone of both lending and ownership businesses.
  2. Perfection as refinement: Success comes from many small things executed well—continuous improvement across underwriting, acquisition sourcing, operations, and investor relations.

Notable quote

“If you’re in real estate as an agent for more than two years and you don’t invest in real estate for yourself, you should get out of the business.”

This contrarian comment highlights the value of aligning professional activity with personal investment—to better understand markets, incentives, and execution risks.

Five key takeaways

  • First-lien lending can offer attractive yields with downside protection when disciplined underwriting is applied.
  • Institutional capital has reshaped private lending; operators should adapt processes and capital structures accordingly.
  • Small bay industrial benefits from supply scarcity and zoning constraints that limit new construction.
  • Triple net leases deliver more predictable cash flow than many multifamily investments subject to variable operating costs.
  • Platform value: Combining lending and ownership creates complementary deal flow and investor pathways that feed each side of the business.

Interested in learning more or investing?

For inquiries or to explore participation:

Alpha Funding and Lucern Capital illustrate how a thoughtful, two-sided strategy—rooted in underwriting discipline and targeted acquisitions—can deliver stable cash flow and equity upside. The edge lies in process, timing, and the ability to execute and refine dozens of small decisions that together create meaningful investor outcomes.