In this episode, industrial investor Judd Dunning joins to share the real playbook for navigating tough conversations with investors. We unpack how to balance good news with bad news, how to stay transparent without creating panic, and how trust is built (or lost) in moments of uncertainty.
Whether you’re an LP, GP, or somewhere in between, this conversation is a masterclass in investor communication, reputation management, and what it means to lead with integrity in the private markets.

How to Balance Bad News, Good News, and LP Trust with Judd Dunning

Joe Guidi (00:00.792) Chad, thanks so much for joining me.

Judd Dunning (00:02.58) Thank you, great to be here. Thanks Joe.

Joe Guidi (00:05.302) Yeah, really looking forward to our conversation. We got to know each other a little bit, but I want to give you an opportunity before we get started for our listeners who might not be familiar with you. I would love to just give the 90-second version about yourself and DWG, if you wouldn't mind.

Judd Dunning (00:17.972) Thank you so much. My name is Judd Dunning. I am the owner of DWG Capital Group and DWG Capital Partners, as well as American Industrial Machining Partners, which is a private equity arm.

We're a conglomerate of an American post-institutional boutique brokerage that also has an investment wing. I'm here for the investment wing; it's what we do mostly, but I still have that company and we have 100 million AUM in industrial sale-leasebacks across the nation. We have a few business holdings and a few multifamily holdings, but we are a 95% industrial triple-net sale-leaseback shop. We have about 400 investors—a mixture of family offices, a few international investment groups, a few syndicated investor groups, and a lot of HNW investors.

Joe Guidi (01:08.802) Awesome. So what drew you to industrial sale-leaseback? I'm curious. I don't talk to a lot of people about that.

Judd Dunning (01:15.904) Yeah, it's interesting. We were talking before the show, and I started 22 years ago. I'm from a fourth-generation real estate family. When I first got in the business, I was actually in film finance. So I started doing real estate syndications, and in triple-net malls throughout Florida being developed, Walgreens or Publix was the star. The developer was the director, the subtenants were the actors. It was very similar.

It just took off. I did seven in a year. It was 2004, that period of time in Florida—which part of my family's from. We're from North Carolina, Florida, Colorado—we're a back East family, but I've been out in Colorado and now California for 30 years, and now Texas. I've been all over the United States. And so I was putting together groups of Israeli investors, Southern gentlemen, and HNW families. Immediately I came out of the box doing these syndicated assets. I was rookie of the year. Then I was scouted by Sperry. And then I started doing it across the nation.

I started doing Wendy's and Home Depots and malls. I've done two billion dollars of real estate that I've personally closed, maybe coming up on two and a half billion now. I've been around for a while, and then Newmark scouted me and I started working on distressed loans. I became an FDIC broker, and so then I started doing debt-equity bifurcation of distressed assets workouts. The banks would hire us and they'd say, "Hey, solve these 15 assets." So I ended up being the founder of Los Angeles Newmark Capital Markets. We went from 10th or 12th to now third in the world, to the biggest IPO a few years ago. And then I turned 50, gave myself a raise, opened my own post-institutional brokerage, and then went into industrial. And just a quick note:

Judd Dunning (03:06.856) We just did the Sony Animation Studios, about 165 million on the brokerage side. That was an industrial flex deal. We won the Los Angeles Business Journal's award for deal of the year. I established myself post-institutionally. Once I had that benchmark leaving the institutions, the perfect intersection for industrial sale-leasebacks was debt, knowing the nation, being able to underwrite businesses, being able to do joint ventures, and create that perfect arbitrage because you have to underwrite the business itself and the property itself. You have to go across the nation when the mergers and acquisitions and private equity happen. You have to have that understanding of complexity. I thrive in complexity. Also, last point: industrial has been an amazing sector. We can talk more about that.

Joe Guidi (04:00.886) Yeah, I would like to dig into that a little bit, but before we go there, you're working with pretty sophisticated deal structures and institutional-level underwriting. How are you breaking down that complexity to make it clear for investors so they feel confident?

Judd Dunning (04:14.047) Well, it's great. I was saying if you can't sell it on the page, you can't sell it on the stage. That's part of my brokerage role. If you get the cover of any of my deals, I call it a senior advisory note session. I tell people exactly what they're buying. Transparency, transparency, transparency. There are three rules that my dad said: never do a deal you wouldn't do on a handshake, always leave a little on the table for the other guy, and take the high road no matter what.

Joe Guidi (04:20.652) Okay.

Judd Dunning (04:43.711) If you have no secrets, if you have no shadows, if you're completely transparent, one, life is easier and you're in Judeo-Christian compliance and integrity. But two, it's also constitutionalism. I'm an older, pedantic person. I think about every time we do these deals, we're transferring—we're giving people more time through cashflow for God, nature, and family.

Joe Guidi (04:50.988) Fair enough.

Judd Dunning (05:08.977) And so it's really personal what we do. We have real passion for that.

Joe Guidi (05:14.894) Got it. That's really great that that's where you're coming at it from. It sounds like transparency is the philosophy around building trust. It is still a niche asset though. Do you find when you're able to simplify it—if you can't sell it on the page—how are you simplifying it? Do we have trouble sometimes communicating?

Judd Dunning (05:29.021) It is.

Judd Dunning (05:38.048) Yeah, I appreciate you getting back to that because I got into theory, which makes me happy. Because I do love...

Joe Guidi (05:43.182) I like the theory a lot.

Judd Dunning (05:45.408) Yeah, I just love creating results for individuals now. It's a lot of fun. We work for Goldman. We work for Chase. Now we get to work for friends, family, and colleagues. On a theory level, which you're talking about as far as simplifying the deal, here's the bottom line in industrial sale-leasebacks. I go out because I have 14,000 lenders I create—and I'm a debt broker. I create the best loan you can get: 70–75 percent, at the very lowest rate; nationals, mid-levels, regionals—and we create the very best debt. Then from the debt, we know where we can negotiate our cap rates relative to risk. A couple hundred basis points above, you can usually give people a seven to eight current pay, eight pref, 17 to 22 IRR, 2x MOIC with amazing cost seg. We call our bucket the "nearly value-add" bucket.

So for people to step in, then we have to hire credit risk analysis. We have to hire accountants. There are three things: property, product (buying essential properties and product lines), and then there's people. People is the hardest one because these operators—a lot of baby boomers—are leaving the sector. A good example: we bought something, the guy's like, "Yeah, I'm going to hold it forever, I'm a son," and then next year he's selling it. So we actually brought in a new CEO and now we are actually buying part of the business to stabilize the asset.

There's a complexity there that we get to bring forward for our clients to protect them. So once again, back to the cover page, if people come to work with us, we make it fun. We're Americans backing Americans, small-to-mid-cap businesses, and we do it through structured finance. But they get to just, through the click of the mouse to the office of the house: "Great, I want that cashflow. Great, I want that more. Great, I trust Judd Dunning's analysis and the team." You really do have to simplify the space.

Joe Guidi (07:51.724) That's pretty serious involvement with the business. So you do the leaseback, guy changes his mind—hey, my kid doesn't want to be in the business, we're ready to sell—and you actually step in and help place a CEO so that the business keeps going.

Judd Dunning (08:05.119) I just use that as an anomaly because you've got to have that depth. If you're going to do single-tenant industrial, you've got to dig deep. But what do you get for that?

Joe Guidi (08:08.627) It's an amazing anomaly though.

Joe Guidi (08:15.715) Yeah. Yeah.

Judd Dunning (08:20.511) If you find a good sponsor—every deal we do in that space, Joe, it's personal. People say, "How much skin do you have in the game?" and I'm like, "A hundred percent because I'm signing the loans." It's a personally guaranteed loan. We have one tenant out of 17 that we're repositioning, but we bought it in an urban infill market. We got an eight and a half cap in Phoenix; it's a 5.85 to six cap market. So we never...

Joe Guidi (08:30.39) A lot.

Judd Dunning (08:51.044) You never want to see a tenant leave. Usually you want to see another company buy them and then your cap rate compresses and the value goes up. But you do want to have a good team in the space that is able to lease a site. Because I'm a leasing broker, a debt broker, and an equity and sale broker prior—and still have the team—I think we're uniquely positioned to protect and prosper our investors.

Joe Guidi (09:16.494) Yeah, it's really interesting. Obviously there's been a lot of movement in the space, commercial specifically, in the past couple of years. It's been tested: debt, cap rates, valuations moving. Has that adjusted the way that you communicate to investors?

Judd Dunning (09:33.344) Yeah, definitively. The way that I think the key element that we communicate to our investors—Morgan Housel said something fantastic in The Psychology of Money. He said the average investor who invests through the storm continually...

Thanks, somebody just walked in. We are in the office here, so I'm not alone. So the average investor that invests—we can now look back—there's a 30% increase in net worth by the time we end up getting to retirement for people that didn't stall during Fed hikes and recessions, that kept investing with adjusted expectations.

Joe Guidi (10:03.106) We can cut that.

Judd Dunning (10:30.035) So that's a really important fact because we didn't have those kind of statistics. We didn't have democratized high-net-worth people making their own decisions; it was either mom-and-pops or institutional investments. Now we have this whole midline of this beautiful partnership between America's democratized investing. Really cool. There are two things happening at the same time, if I can get a little theoretical: you have BlackRock, Blackstone, Vanguard, and State Street. They're buying up America, but they're not a monopoly because they're micromanipulating ten different companies, but really America's being swept up into a mega-monopoly that's broken in all these pieces. And the investors have reacted—smart people like you and I and the people hopefully watching our show—and they're like, "Hey, I'm going to skip that. I'm going to go right to these mid-level GPs myself, not BlackRock, and make these decisions." And that's why Invest Clearly exists. You guys are also a force in that space. What I've told people is the Fed may be going crazy, but let's do this: I'd say let's put in some reserves. We know that the Fed, after its peak, goes down about 190 basis points historically from a peak. So we're going to use a refinance assumption of about 200 basis points out here. We may or may not get it, but I'm not going to make any cashflow until the refinance, but let's keep investing together. Let's keep moving. Let's buy at a lower basis and a higher cap rate when everybody else isn't, because we're smart.

That is the most important communication. I hope I took a long route to get there, but it's a very important point: these are the times you don't stop investing. You don't freeze up, but you find good people and you buy low basis and cap rates. Don't worry as much about cashflow and then you get into the game. That was our big thing. My first debt when I opened the platform two and a half years ago was 3.37. My highest debt is 7.15.

Joe Guidi (12:34.978) Right, right. So if I net that out a little bit, basically—I think if we look back over the past handful of years, the communication strategy in the Reg D space had a little more of a financial freedom, extremely quickly bent. That's putting it maybe too kindly—get rich quick, maybe that's putting it too bluntly. What you're saying is: "Hey guys, this is about the long-term." Just because things aren't as rosy as they were a couple of years ago, it doesn't mean we should stop. In fact, we can get deals at higher cap rates. We'll be better off. We're going to position ourselves for refinance and a cap rate compression down the road, and that's what's going to build your long-term wealth. Is that it?

Judd Dunning (13:28.061) Yeah, absolutely. Just keep moving, keep plotting along. But I will tell you, there's a flip side of that for GPs—and this is the transparency show, right? And that's the only way we are. The flip side for that is for us to deliver financeable deals at the preferential expectations of the HNW democratized middle markets. I've basically given most of the yield to the money. That's okay. It's an honor and a pleasure, and we'll continue to build. We've done 100 million. We want to do a half a billion within the next—I'm 58—so I think in the next few years, we'd like to take it further.

Joe Guidi (14:01.228) Right.

Judd Dunning (14:13.066) But it's an honor to have their trust. I will say that the LPs are making the majority of the money when rates are high.

Joe Guidi (14:20.384) Yeah, it's lean. It's lean on the GP side. Well, I think it's fair to share that. I think that's one of the things—it seems like a lot of GP marketing is aspirational, but it's good for people to know that you're really working for their money for a future benefit on the GP side. That's good. How much do you give in terms of financials? With your LPs, how much access do they have to financial data on the deals?

Judd Dunning (14:50.877) The sale-leaseback—we have a team that has worked at Angelo Gordon, STAG, STORE, and VEREIT. We have an institutional team that works for a bigger company that I actually still portfolio-manage with, and I just don't sleep. We pay a very discounted rate to have access to do an analysis. We'll give them the credit report. It doesn't make—if you take business financials, first thing you have to do is do redactions and add-backs, figure out EBITDAs, rent coverage ratios, debt-to-income ratios. To underwrite businesses is the calculus of finance. And then to underwrite that to debt and to real estate is even farther. We'll give them the snapshot—a very detailed summary—but it wouldn't make sense for them to go into the trailing pre-M&A merger financials or the post-financials. So we summarize that, but we will give them a credit report analysis. And that's like $50,000 just to generate that.

Joe Guidi (16:02.562) Yeah, that's interesting. So you've talked a lot about buying below replacement costs and targeting asymmetric risk. Can you tell me a little bit more about that and how that goes into your communication strategy?

Judd Dunning (16:18.173) Yeah, pretty much. I think that really the key to industrial is that it's really driven by founders. So we'll take risk in tertiary areas because there's credit.

But the key element is you want vacant defensibility and you want the ability to re-lease the site. So the rents can be at market, but you can't overbake the rents. They can be at market. You can take risks, but you can't overbake. That's number one. You don't want to set yourself up for serious issues. But the key element too is right now—it's a really interesting time because there's been so much in—and this is what cost-segregated accelerated depreciation is about. The cost went so high that you can accelerate this depreciation. There have been all these changes in the market. So we're buying things at 40% to 50% of what you could build them for. So on a fundamental level, that's great. That's the first element: buying below replacement costs with defensible rents is important.

Now you balance that because you're getting above-market rates; you balance that with the credit. So that's a real equation: tertiary is okay with credit. The magic of that is because it doesn't matter if it's in the middle of nowhere. If it's a good business, another big business is going to buy it. There's this huge wave of aggregation out there. So we're really creating these American business mid-cap, small-cap bonds. It's not just real estate. So there are two sides to it: buy below replacement costs, buy locations, but if you're going to go more tertiary, make sure you're buying something that is like a good credit bond. So it doesn't matter as much where it is because you are still buying American industrial in America, run mostly by Americans—and we're a pretty powerful country.

Joe Guidi (18:15.53) I love it. I love investing in America. So let's scoot back to the concept—I know you've given me one really good story on when something didn't go as planned—but maybe we'll stick in the philosophical realm. When something doesn't go as planned—something's delayed, financing shifts—what does transparency look like for you guys? How do you communicate that, and when do you communicate it? I think one of the things we've been playing with on these shows is balancing under-communication with over-communication. What's your philosophy on what they need to hear?

Judd Dunning (18:57.151) That's a great question because we've had one exit—we started two and a half years ago, 100 million—and we've had seven credit enhancements. We just did this thing called a "Week of Wins." There's negative and positive bias. So what you want to do is, if you go through different elements on assets, you also don't want to worry people if they've gotten their investment. Think of it as a parent or a husband. You don't want to come home and say, "Honey, the world is..."—I don't traumatize people. I'm a pretty good real estate executive. Until there's a real issue, you don't want to come to them. As of now, we haven't had any real issues. But in the highs and lows, we do quarterly and annual reports and we scan through the assets and we talk about all of them. But I also think people forget all the positives they just went through: an escalation, "Hey, we were at a hundred million dollars and now we have $500 million of sales because they got bought by another company."

So I'd say there are two sides to this. I don't mean hedging, but I think it's easy to deliver worrying news—which we do—but it's also important to put out positive news because of negative bias. If you hear one negative, people will run—you need 17 positives for every negative. So if we're out there working hundreds of hours a month to make sure we're making every element go, if a guy doesn't pay his rent for seven days because of an accounting issue, I'm not going to send the wolf out. I'm going to wait through cycle by cycle. But if you do have a real issue, I think it's important—as soon as you think distributions could be suspended—you should be proactive.

Joe Guidi (21:01.034) Yeah, without a doubt. That's really good. I want to think a little bit about—you've got an interesting background: sales and institutional experience. What have you learned about building trust with high-net-worth individuals? Let's focus on the high-net-worth avatar because that's the audience. I'm sure there are plenty of institutions and family offices that see Invest Clearly and listen to the podcast, but really it's individual LPs that are the target of this show. What have you learned about building lasting relationships with LPs?

Judd Dunning (21:36.384) Well, the most important thing is you're really grateful for them because institutions are slow and they're difficult. They've really created an amazing—so first of all, I see them all as individual partners with the greatest of gratitude. Unfortunately, the company starts to grow where the personal connection gets separated from the CEO and the IR.

So I'm actually doing something—we're launching it right now, we're leaving in a few hours. After two years, we're doing this thing called the "Industrious Tour," which is our one-off deals. And then I have the Great American Industrial Fund, which is another hundred million dollar fund—$35 million that we're capitalizing right now. And I'm not going to bring in my individuals... so I'm seated with my first institutional check because I want them to have momentum and I want them to have space and trust. You have to treat them a little differently. Let them come in second. Don't build your fund on the back of your investors; build your fund and let them benefit from the fruit. That's my theory. On the industrial side, there are people—because they think that funds lose control and the individual investors... the fund itself, they're buried in fees. That's actually not true. What you're doing is diversifying risk to protect everybody. But the HNW crowd tends to think, "No, I want to make every decision." There comes a point where the fund is a blessing to them to quiet the noise, simplify their taxes, and diversify risk for the LP and the GP. So we're in that transition. I'm doing a dinner with 23 people tomorrow night in Fremont. And then I just bought a ticket for the year unlimited, so now we're going to do 10 more dinners across the nation because we've reached a point where I think it's really important to be personal and get to know them—for them to see your face. I felt like I don't know a lot of people that are investing with me personally. So the first thing is a company should never get too big that there's not stockholders' meetings. It should be as equal a priority. I'm an emerging manager so I'm just crossing that threshold. At the same time, we've got two billion in my tank, a 100 million fund ahead of us and 100 million done. So I think we're in a good position.

Judd Dunning (23:55.056) I think personally connecting—and then to go a little farther because that happens to be exactly where we are today—I think it's very important for them to be able to call in and be heard. But at the same time, know that we have to time-block that because the most important thing is the next acquisition.

Companies thrive by a wheel of income. So it's a balance. It's setting up expectations: call any time, and then at the same time, go for the... excuse me for one sec. Hey guys, somebody has to wire on this closing. Somebody has to confirm the wiring information. Sorry, it's happening right now. So 131,000 square feet, 8.75 cap, 23-year lease by St. Louis is closing right now. We're really excited about that deal.

Joe Guidi (24:45.516) Nice. That's great. That's a good plug in the podcast right there. Closing deals while we're doing podcasts. Well, to your point though—this is a struggle. A lot of groups have started doing more of these in-person events. I think it's critical. Especially in a time where there's so much noise in the space around automation and AI communications. I actually think that's completely the wrong way to go for GPs because this is still a people business. So it's good to hear you're getting out there, doing the face-to-face. I think that'll likely bear a lot of fruit.

Judd Dunning (24:49.735) Thank you.

Joe Guidi (25:14.294) All right, well, so in addition to that, I'd love to just understand a little bit more. I was going to ask you what are the plans over the next 12 to 18 months, but I guess I know now. So you're launching a hundred million dollar fund. When does that go live?

Judd Dunning (25:41.852) It's like right now, actually. Pretty excited about that. We're just taking that out. And it's an interesting moment because launching a fund is interesting—you have to go after a really big tranche at once because you've got to tee up the deals and then you're working the equity. And I'm not kidding, man, I've probably put in a hundred hours in the last 12 days. It's been a lot of work, but we actually worked with these guys at Fund Launch.

Joe Guidi (25:43.564) Like as a...

Judd Dunning (26:09.967) I love those guys because I've had access the whole time to top fund managers all over the United States to say, "Hey, is this fair? Is this equitable? Is this market?" and make sure that I'm also walking in step with what HNWs are looking for. I'm triple-checking my work. Because it's interesting—you don't know if you're going to succeed as an agent until you jump into the abyss. You don't know if you're going to succeed as a broker, as an institutionalist, or as a sponsor. Every moment you step into the abyss, it's like no safety net, no ceiling. Free market capitalism rocks! That's what we say. So far we're really grateful, and if any of my folks watch this, we're really grateful. It's such an honor to have people's trust to build through this storm—those 12 to 14 Fed raises during our launching period—and to have people say, "Hey, Judd Dunning, I trust your theory and your experience." So, hundred million dollar fund, but in the meantime, we are going to continue to do one-off deals. We do have a couple of investments in American Industrial Machining Partners that are going live today. That's like bridge investment capital for 12, 24, 36 months, and then what we give our guys is about a 7% plus current pay, 8% pref, and then a 17 to 22 IRR, 2x MOIC. But our cost-seg... I have to say, let's talk about this, this is the most exciting thing of the podcast. We have two or three deals—we've done seven deals since November—and we go in and we take all the equipment in these manufacturing companies. I've got a guy touring the nation right now—this is another element people don't think about, that they would never do alone. That's why I'm not worried about people stealing our theory, because I wouldn't wish my job on them! No kidding, because there are a lot of guarantees and a lot of work.

Judd Dunning (28:18.367) Institutionally, it's a lot of work; it's a bigger venture than we thought at the beginning. But I've got a guy now going company-by-company, then I have what I call "cost-seg nerds" who are taking every serial number and throwing it into Chat and we are taking all the equipment and my guys are getting 100% cost-seg again. So negative K-1s on year one and year two. Our effective yields, even though they're at X—if you really are playing it straight down the tax rule—guys are making really high yields on cost-seg right now.

Joe Guidi (29:03.278) Sure. Yeah, it's an interesting space, especially because you've got so much equipment to depreciate. All right, so I'm going to let you go. Obviously a lot going on, but two more questions. One is—and we ask everybody this—you've been at this some time now: what part of passive investing needs to die? Just when you look at the idea of passive investing or the space as you see it writ large, what do you see that's not working that needs to go away?

Judd Dunning (29:33.748) Well, it is interesting because of aggregation like Realty Mogul and some of the bigger brands. Now they're only taking sponsors with like 500 million AUM. So there's an institutionalization of the crowd space. I'm not saying this should die, but it's interesting to think about it. That's why they should continue to work with you—to find that space. You just have to be aware of whether there are people in this space that are institutionalizing the middle space that has all this magic in it for us emerging managers. What I liked about the Fund Launch guys is they were like, "Hey, we don't want this space to become... we don't want everybody to sell out to Wall Street." We want to stay in this space and we Americans want to bless other Americans. It's a little more work. Guys like you are exactly what the gap has to have. Then we actually democratize and take back control from Blackstone, BlackRock, Vanguard, and State Street, and we stay in control. You have to stay conscious in the space as the space starts to aggregate for greater efficiency. Funds are okay, individual funds are okay, but are you losing the control you think you're gaining because you're tuning out on what's happening in the space? So I'd say the Wall Street approach to the middle market space—I wouldn't say it has to die, but I think we need to be aware of where we are just becoming a cog in the wheel and tuning out.

Joe Guidi (31:02.958) Sure. Okay, that's a great answer. Haven't gotten that one yet. All right, last: if someone wants to find you, where do they go?

Judd Dunning (31:12.159) DWGcapitalpartners.com. It doesn't hold everything that we're doing, but it'd be an honor and a pleasure to meet new people. And I just put this out there: we have a nice referral program as well. If anybody wants to throw together a dinner across the United States or a lunch—more than 10 people—we'd be glad to fly in and present and serve.

Joe Guidi (31:44.398) Awesome. All right. Thanks, Judd. Appreciate it.

Judd Dunning (31:46.591) Thank you so much. What a pleasure. I want to say this last thing: we worked until midnight last night, so I was a little verbose, but hopefully that's our passion. We have a passion about all the nuances here. We love real estate. So we appreciate coming on the show and being able to share with you.

Joe Guidi (32:05.71) The passion came through. All right, thanks.