1
00:00:00,420 --> 00:00:03,660
So Tom Burton,
welcome to icons of DC Real Estate.

2
00:00:03,660 --> 00:00:07,530
Thank thank you for joining me today.
Well, thanks for uh, thanks for

3
00:00:07,530 --> 00:00:10,500
being with me today as well.
And thanks. Thanks.

4
00:00:10,500 --> 00:00:14,340
Thanks for organizing these podcasts.
The series is terrific.

5
00:00:14,700 --> 00:00:18,840
And, um, and I know just a
really great resource, uh, for,

6
00:00:18,840 --> 00:00:21,630
for young people learning about
our industry and trying to

7
00:00:21,630 --> 00:00:25,380
understand their way around it.
So, um, what a terrific thing

8
00:00:25,380 --> 00:00:28,170
you've you've got going here,
John. Thank you so much. Yep.

9
00:00:28,590 --> 00:00:32,820
Could you describe your role at
Alex Brown Realty or ABR now

10
00:00:32,820 --> 00:00:35,910
it's called sure.
You're focused day to day. Sure.

11
00:00:35,910 --> 00:00:40,080
So I, uh I have a couple roles here,
uh, along with Ed Norberg.

12
00:00:40,080 --> 00:00:43,710
I serve as, uh,
co senior managing director.

13
00:00:43,710 --> 00:00:45,240
So we're both senior managing
directors.

14
00:00:45,240 --> 00:00:48,930
We we run the firm together.
Uh, I'm also the chief

15
00:00:48,930 --> 00:00:52,770
investment officer.
And then Ed and I both spent a fair

16
00:00:52,770 --> 00:00:56,970
amount of time and fund fundraising.
Um, okay.

17
00:00:58,140 --> 00:01:01,620
Um, let's kind of go back,
take the Wayback Machine and

18
00:01:01,620 --> 00:01:04,560
look at your origins.
So tell me about your origins and

19
00:01:04,560 --> 00:01:08,580
youth and who your parents were and
what you learned from them. Sure.

20
00:01:08,580 --> 00:01:13,050
Well, uh, I grew up in South Jersey
near Atlantic City, and, uh,

21
00:01:13,050 --> 00:01:18,060
my mother was a stay at home mom, and
my father was a small businessman.

22
00:01:18,060 --> 00:01:21,420
My father ran a gas station.
He owned a gas station on the

23
00:01:21,420 --> 00:01:24,630
Atlantic City Expressway,
which is, uh, between

24
00:01:24,630 --> 00:01:28,470
Philadelphia and Atlantic City.
It's a 55 mile toll road opened

25
00:01:28,470 --> 00:01:32,790
in around 1965.
And if you run up and down the

26
00:01:32,790 --> 00:01:36,780
turnpike, you see these gas
stations with a big service plaza.

27
00:01:36,780 --> 00:01:41,850
So he, uh, he owned that as a,
as a dealer, basically a franchise

28
00:01:41,850 --> 00:01:45,600
with Gulf Oil Corporation.
So golf had a 20 year lease with the

29
00:01:45,600 --> 00:01:48,390
Atlantic City Expressway Authority.
And my father had a 20 year

30
00:01:48,390 --> 00:01:52,770
lease with, with golf.
So, um, uh, uh, he, um,

31
00:01:52,770 --> 00:01:56,580
he took that when he was,
I believe, about 46 years old.

32
00:01:56,790 --> 00:02:00,720
Uh, he had worked at other, uh,
at other service plazas on the

33
00:02:00,720 --> 00:02:04,440
Pennsylvania Turnpike for golf.
And along came this opportunity

34
00:02:04,830 --> 00:02:07,710
for him.
And, um, and actually, it was it

35
00:02:07,710 --> 00:02:11,730
was really a great, a great way
for myself. I have two brothers.

36
00:02:11,730 --> 00:02:13,890
We all worked in the business
with our father.

37
00:02:14,250 --> 00:02:16,740
It was a it was a 24 over seven
enterprise.

38
00:02:17,130 --> 00:02:21,090
Uh, so, uh, we had a, you know,
a shift of people, three,

39
00:02:21,120 --> 00:02:25,560
eight hour shifts and, um,
and from a very, very young age,

40
00:02:25,560 --> 00:02:28,710
I worked for my father.
I probably six, seven,

41
00:02:28,710 --> 00:02:30,780
eight years old.
I'd go to work with him on a

42
00:02:30,780 --> 00:02:35,490
summer day or maybe on a weekend,
and, uh, I'd do things like, uh,

43
00:02:35,490 --> 00:02:38,370
fill the map. Rats. Right.
Remember when there was free baths?

44
00:02:38,370 --> 00:02:41,880
You know, a gas station? Oh, yeah.
Um, and there was a time when

45
00:02:41,880 --> 00:02:45,180
cars used a lot of oil,
so I was we'd go out and fill

46
00:02:45,180 --> 00:02:48,810
the racks with oil and, uh,
help clean windshields and so forth.

47
00:02:49,290 --> 00:02:51,480
Um, at the age of 12,
in new Jersey, you could get

48
00:02:51,480 --> 00:02:56,460
your workers worker's permit.
So I was able to, to start working,

49
00:02:56,460 --> 00:03:00,390
put on my golf uniform and, uh,
pump gas.

50
00:03:00,390 --> 00:03:04,260
And so every summer, really,
until I got out of college,

51
00:03:04,260 --> 00:03:07,530
that was that was my summer job.
And I would come home, you know,

52
00:03:07,530 --> 00:03:10,890
in holidays from college.
And if I wanted some extra money,

53
00:03:11,070 --> 00:03:13,290
you know, my dad was always,
you know, looking for somebody

54
00:03:13,290 --> 00:03:16,530
to kind of fill in.
It was a really interesting business

55
00:03:16,530 --> 00:03:24,270
because, um, when he took the, the,
uh, the lease in 1968, um, the,

56
00:03:24,270 --> 00:03:28,680
the business was very seasonal.
So the Jersey Shore's extremely

57
00:03:28,680 --> 00:03:31,950
popular in the summer and not as
popular in the winter.

58
00:03:31,950 --> 00:03:37,530
So we made money from, uh, from June,
July and August, and we lost

59
00:03:37,530 --> 00:03:40,320
money on the other nine months.
But we made enough money in the

60
00:03:40,320 --> 00:03:44,100
summer to sort of carry us over this,
this seasonal, uh, this seasonal,

61
00:03:44,220 --> 00:03:49,230
this beach driving traffic. Right.
Um, but in 1976, the state and new

62
00:03:49,230 --> 00:03:54,390
Jersey passed legislation that
allowed for casinos in Atlantic City.

63
00:03:54,510 --> 00:03:57,960
And suddenly we made money every
month, I'll bet.

64
00:03:57,960 --> 00:04:01,290
And lots of businesses around
the South Jersey area.

65
00:04:01,290 --> 00:04:03,960
My father in law had an insurance
and real estate business.

66
00:04:03,960 --> 00:04:08,400
Suddenly there were many more people,
uh, needing insurance and, uh,

67
00:04:08,400 --> 00:04:11,100
and lots of homes trading and
and so forth.

68
00:04:11,100 --> 00:04:15,450
So it was actually a, you know,
a very big economic impact to,

69
00:04:15,450 --> 00:04:19,620
uh, to the region and, uh,
certainly a big impact back to us.

70
00:04:19,620 --> 00:04:22,440
But it was it was really a
really a great experience

71
00:04:22,440 --> 00:04:26,100
working with my father.
He was he was an excellent manager,

72
00:04:26,610 --> 00:04:30,000
um, and just had a good,
good nose for business.

73
00:04:30,000 --> 00:04:34,050
And, um, he, um,
he grew up and my mother both

74
00:04:34,050 --> 00:04:38,460
grew up in very modest means,
I would say my mother, uh, you know,

75
00:04:38,460 --> 00:04:42,090
grew up. She had five sisters.
Her father died when she was

76
00:04:42,090 --> 00:04:44,610
pretty young.
So her mother raised these six girls,

77
00:04:45,030 --> 00:04:47,820
uh, in a little town west of
Philadelphia.

78
00:04:48,390 --> 00:04:52,080
Um, she told me once there was 25
people in her high school class.

79
00:04:52,080 --> 00:04:54,150
Oh, my. You know, graduated class.
It was just a, you know,

80
00:04:54,150 --> 00:04:58,020
these are small towns. Um, wow.
And, uh,

81
00:04:58,020 --> 00:05:03,030
and my father grew up in Saint Louis.
Um, a very a very poor, uh,

82
00:05:03,030 --> 00:05:06,930
his his father was well, I think
today you'd call him homeless.

83
00:05:06,930 --> 00:05:11,040
Did that back then you call him a
hobo, and he would he would literally

84
00:05:11,040 --> 00:05:14,460
ride the rails and like that.
So my father didn't really know his

85
00:05:14,460 --> 00:05:19,080
father. I never met my grandfather.
Um, and when he was 17,

86
00:05:19,080 --> 00:05:21,720
he joined the Navy.
His mother took him down and

87
00:05:21,840 --> 00:05:26,400
signed the papers for him.
Uh, that was September of 1941.

88
00:05:26,400 --> 00:05:29,190
And serving in the Navy was
undoubtedly a really important

89
00:05:29,190 --> 00:05:30,480
right before.
December,

90
00:05:30,480 --> 00:05:32,850
right before Pearl Harbor. Yeah.
Um,

91
00:05:32,970 --> 00:05:35,580
he never graduated from high school.
Uh,

92
00:05:35,580 --> 00:05:39,540
and yet it was really interesting.
He he had a just a great,

93
00:05:39,960 --> 00:05:45,090
a great mathematical mind.
Um, he could add a column of

94
00:05:45,090 --> 00:05:48,240
numbers in his head.
He could, uh,

95
00:05:48,240 --> 00:05:51,960
he could divide numbers.
He could multiply all in a said I,

96
00:05:51,960 --> 00:05:54,150
I often wondered whether he'd
actually be really good in our

97
00:05:54,150 --> 00:05:57,120
industry and how we sit around and
we talk about, you know, well,

98
00:05:57,120 --> 00:06:00,420
you know, what would it be at a
six cap or a six and a half cap?

99
00:06:00,420 --> 00:06:04,530
Well, you have to take a number
divided by right .06 or .065.

100
00:06:04,530 --> 00:06:07,470
If he could do that kind of stuff
in his head, it's really very

101
00:06:07,470 --> 00:06:11,040
interesting. Um, is that why you.
Got your propensity to numbers,

102
00:06:11,040 --> 00:06:15,630
do you think. I wonder about that?
Um, I think it's that and, uh,

103
00:06:15,990 --> 00:06:19,950
the other part of working with my my,
uh, my dad and his business, um,

104
00:06:20,910 --> 00:06:24,120
we did some mechanical things.
So this is a gas station that

105
00:06:24,120 --> 00:06:26,340
you came through.
You got gas, and you left.

106
00:06:26,910 --> 00:06:30,030
Unless, of course,
you had a flat tire or you, uh,

107
00:06:30,030 --> 00:06:33,750
you had a broken fan belt.
Of course, today nobody knows

108
00:06:34,410 --> 00:06:37,860
about this, right? Or a hose.
So we would fix that and get you

109
00:06:37,860 --> 00:06:41,760
on the road.
So my older brother, he gravitated

110
00:06:41,760 --> 00:06:46,470
towards that part of the business and
to this day and his whole career is

111
00:06:46,470 --> 00:06:49,920
very sort of the physical world.
He's really he's a really good

112
00:06:49,920 --> 00:06:54,540
mechanic and he can fix anything.
And his whole career has been

113
00:06:54,540 --> 00:06:57,630
oriented not in cars so much,
but just the physical world.

114
00:06:58,170 --> 00:07:01,560
The other thing we did, of course,
is we we counted all the cash,

115
00:07:01,560 --> 00:07:04,830
we counted all the change.
And we, we, we kept books.

116
00:07:04,950 --> 00:07:08,160
And my father taught me that,
and I just really liked it.

117
00:07:08,160 --> 00:07:13,500
And I kind of gravitated towards it.
Um, and I'm sure by the time I got

118
00:07:13,500 --> 00:07:16,410
to Maryland and started to think
about a major, I mean, that I know

119
00:07:16,410 --> 00:07:19,140
that that was one of the influences.
It's just interesting working

120
00:07:19,140 --> 00:07:22,290
with my dad.
Um, and, and basically he taught

121
00:07:22,290 --> 00:07:25,920
me how to, to do the books.
What's interesting about new Jersey

122
00:07:26,670 --> 00:07:31,650
still, it's the only state that I
know that requires that you cannot

123
00:07:31,650 --> 00:07:35,700
get out of your car and fill your
own tank, pump your own gas. Right.

124
00:07:35,790 --> 00:07:37,620
And do you know the story behind
that?

125
00:07:37,620 --> 00:07:42,090
Or my dad always said it was it was
the Gasoline Retailers Association,

126
00:07:42,090 --> 00:07:44,730
which is the dealers. Right.
These are these are independent.

127
00:07:44,730 --> 00:07:48,870
So Wawa owns a lot of gas
stations in new Jersey. Now.

128
00:07:49,080 --> 00:07:52,800
They would love to not have to
pay their labor to pump gas.

129
00:07:53,010 --> 00:07:57,750
But if you run a gas station with a,
you know, with a with a repair shop,

130
00:07:57,780 --> 00:08:03,000
you know, in the garage, um, yeah.
You don't you'll your ability to

131
00:08:03,000 --> 00:08:05,610
compete with the Warriors of the
world will go down a lot.

132
00:08:06,210 --> 00:08:08,550
Um, you know,
if they can just sell it, you know,

133
00:08:08,730 --> 00:08:11,730
at the slimmest of margins.
So that's what he always told me,

134
00:08:11,730 --> 00:08:15,240
that in theory, you know,
the politicians will say it's just

135
00:08:15,240 --> 00:08:20,340
a matter of safety, but there's,
uh, Oregon used to be the only

136
00:08:20,340 --> 00:08:25,050
other state that had the same law.
I think that's changed now. Um.

137
00:08:25,500 --> 00:08:28,980
Uh, it is strange because my son
went to Princeton and we were up

138
00:08:28,980 --> 00:08:33,030
in new Jersey quite a bit, okay.
And just, you know, gee, I'd like

139
00:08:33,030 --> 00:08:36,720
to do my own build, my own tank,
but no, that's not the case here.

140
00:08:36,720 --> 00:08:39,000
So anyway. Well, the.
Other the other, uh,

141
00:08:39,390 --> 00:08:43,260
the other thing I always observed
about my parents, both of them, um,

142
00:08:43,260 --> 00:08:47,190
they never complained about anything.
It's just really interesting to me.

143
00:08:47,190 --> 00:08:49,140
And I don't know if it was their
upbringing.

144
00:08:49,650 --> 00:08:54,630
Um, but they worked very hard,
and they just never complained.

145
00:08:54,630 --> 00:08:59,370
And I think that's, um,
is something I think I've tried

146
00:08:59,370 --> 00:09:03,900
to instill in my own children.
And, um, and try to live that,

147
00:09:03,900 --> 00:09:07,320
you know, sort of pattern myself.
This it's just very interesting to

148
00:09:07,320 --> 00:09:10,650
me. I reflected on it many times.
Then undoubtedly there were

149
00:09:10,650 --> 00:09:12,840
hardships.
And just like in any other family,

150
00:09:12,840 --> 00:09:15,210
their struggles.
And my father ran a business and

151
00:09:15,210 --> 00:09:18,540
he was a 24 seven business.
And it's like I never heard him

152
00:09:18,540 --> 00:09:20,610
complain.
It's just so in my mother either.

153
00:09:20,610 --> 00:09:24,570
It's just so interesting to me.
Well, you're you're you're probably

154
00:09:24,570 --> 00:09:27,570
ingrained with the ethic of hard
work, just looking at your

155
00:09:27,570 --> 00:09:32,400
parents and what they had to go
to do to run a 24 over seven gas

156
00:09:32,400 --> 00:09:36,420
station operation, I would think.
Uh, my brothers and I all worked.

157
00:09:36,420 --> 00:09:42,510
We, um, we just always had a job and
always have a job sometimes, too.

158
00:09:42,540 --> 00:09:45,870
We all through high school and
college. Yeah.

159
00:09:46,290 --> 00:09:49,380
Um, you know, I didn't work for
my father so much in, uh,

160
00:09:49,380 --> 00:09:54,660
in the school year, but I worked for
another gas station around town.

161
00:09:54,840 --> 00:09:57,570
Uh, I worked for a florist
around town in College Park.

162
00:09:57,570 --> 00:09:59,700
When you were in school?
Uh, in College Park, I.

163
00:09:59,810 --> 00:10:03,050
Actually worked for the University of
Maryland. Oh, you did resident life.

164
00:10:03,530 --> 00:10:07,670
Uh, Department.
Um, I we've all all of us have

165
00:10:07,670 --> 00:10:10,040
always had a job.
We just have always worked and

166
00:10:10,040 --> 00:10:13,130
sometimes more than one job.
Mhm. That's good.

167
00:10:13,460 --> 00:10:18,170
So, uh, any other experiences
growing up other than, you know,

168
00:10:18,170 --> 00:10:20,810
before you got to College Park
and University Maryland?

169
00:10:20,840 --> 00:10:25,670
You know, I think during that time
frame, uh, in addition to my, uh, the

170
00:10:25,670 --> 00:10:31,250
influence of working with my father,
um, I know a lot of your your guests,

171
00:10:31,340 --> 00:10:35,780
uh, uh, had great experiences playing
sports. That was not my world.

172
00:10:35,990 --> 00:10:37,970
Uh, I didn't play a lot of sports,
uh, growing up,

173
00:10:37,970 --> 00:10:42,350
but I was involved in Boy Scouts. Ah.
And, um, uh, what a great

174
00:10:42,350 --> 00:10:43,970
experience that was for me.
At the time,

175
00:10:43,970 --> 00:10:48,830
we had a very active troop.
Uh, I, we did a almost every weekend.

176
00:10:48,830 --> 00:10:51,800
We did something.
We went hiking the Appalachian Trail.

177
00:10:52,190 --> 00:10:55,520
Uh, we did all kinds of really
terrific activities.

178
00:10:55,520 --> 00:10:59,720
And all my brothers, two brothers
and I were all Eagle Scouts.

179
00:11:00,050 --> 00:11:02,540
Uh, and to become an Eagle Scout,
you have to get.

180
00:11:02,570 --> 00:11:05,840
Yeah, it's a lot of work.
Um, and it takes a plan, right?

181
00:11:05,990 --> 00:11:07,430
There's this sort of planning
element to it.

182
00:11:07,430 --> 00:11:10,610
You have to get 22 merit badges, and
you have to do a lot of other things.

183
00:11:11,030 --> 00:11:16,100
Um, and of those 22 merit badges,
14 are elective.

184
00:11:16,280 --> 00:11:21,290
You have there you have to get,
uh, I should say 14 are required

185
00:11:21,290 --> 00:11:26,690
in 7 or 7 are elective.
And so every almost everybody that

186
00:11:26,690 --> 00:11:29,990
spends any time in Boy Scouts gets,
you know, first aid and camping and,

187
00:11:30,350 --> 00:11:33,320
uh, cooking merit badge.
But by the time you start to work

188
00:11:33,320 --> 00:11:36,770
your way towards Eagle Scout,
you have to pick some other things.

189
00:11:37,010 --> 00:11:41,930
So, um, so we got fingerprinting
merit badge and oceanography merit

190
00:11:41,930 --> 00:11:47,390
badge, and, um, and I always look
back on that, and I think it was a

191
00:11:47,390 --> 00:11:51,980
great opportunity to go, go learn
something that you would never have

192
00:11:51,980 --> 00:11:55,700
had any real reason to learn anything
about fingerprinting when you're,

193
00:11:55,790 --> 00:11:58,820
you know, 13 years old. Right.
But I went down to the police

194
00:11:58,820 --> 00:12:01,400
station and I had to ask them a
lot of questions.

195
00:12:01,400 --> 00:12:04,160
I have to, because there's a
part of every merit badge where

196
00:12:04,160 --> 00:12:06,890
you have to do something,
and then you have to learn, learn

197
00:12:06,890 --> 00:12:10,370
and write up something, and you're
down and you get fingerprinted.

198
00:12:10,370 --> 00:12:12,590
Uh,
and it was just it was just great.

199
00:12:12,590 --> 00:12:16,070
You also, of course, learn a lot
about leadership over time.

200
00:12:16,400 --> 00:12:20,120
Um, and we had, uh,
just wonderful experiences.

201
00:12:20,120 --> 00:12:24,410
But, uh, I think about it a lot,
this whole notion of learning,

202
00:12:24,710 --> 00:12:28,790
uh, leadership and planning.
Every trip you go on a hiking

203
00:12:28,790 --> 00:12:31,460
trip or canoeing trip,
we would go to Canada for two

204
00:12:31,460 --> 00:12:35,270
weeks in the wilderness. Canoeing.
Well, you got to think about

205
00:12:35,270 --> 00:12:37,160
what you're going to take.
And what are you going to cook

206
00:12:37,160 --> 00:12:39,710
every single meal.
And there's this sort of planning

207
00:12:39,710 --> 00:12:45,230
element to it that is really
valuable to learn at an early age.

208
00:12:45,860 --> 00:12:48,800
The more stuff you carry,
the heavier your bag is.

209
00:12:48,800 --> 00:12:52,640
So are you a checklist lover?
I'm a big checklist.

210
00:12:53,870 --> 00:12:56,630
It's funny you should say that.
Yes, yes, that's.

211
00:12:56,630 --> 00:13:02,750
Yeah, I'm a checklist guy. Yes.
I have a checklist that tells me

212
00:13:02,750 --> 00:13:06,170
to make a checklist. Yeah.
What you just said about.

213
00:13:06,380 --> 00:13:08,990
I mean, you had the.
You got to think it all through.

214
00:13:08,990 --> 00:13:11,210
Yeah.
It's my my son is a pilot,

215
00:13:11,210 --> 00:13:14,660
you know? Okay.
You know, as a pilot, you have to

216
00:13:14,660 --> 00:13:19,910
have a checklist, right? Right.
It's the same. Interesting. Yeah.

217
00:13:21,530 --> 00:13:26,690
So University of Maryland why
they're and from new Jersey.

218
00:13:26,690 --> 00:13:31,070
I mean, you could have gone to
Rutgers or, you know, Penn or. Yeah.

219
00:13:31,070 --> 00:13:33,740
It's a it's a it's interesting
question.

220
00:13:33,980 --> 00:13:36,770
I didn't look at many schools in
new Jersey.

221
00:13:36,770 --> 00:13:41,090
I have a of a sister who an
older sister who was living here

222
00:13:41,090 --> 00:13:44,690
in Baltimore at the time.
And so Maryland was on my mind.

223
00:13:44,690 --> 00:13:48,260
I had been here from time to time.
I'd never been to to the

224
00:13:48,260 --> 00:13:52,280
University of Maryland.
Uh, and and I had this idea I

225
00:13:52,280 --> 00:13:54,410
wanted to be an architect.
So, again,

226
00:13:54,410 --> 00:13:56,210
you're a junior in high school.
You're starting to think about

227
00:13:56,210 --> 00:14:00,890
colleges and majors.
Um, I didn't know anyone that

228
00:14:00,890 --> 00:14:03,530
was an architect.
Uh, we didn't do anything around

229
00:14:03,530 --> 00:14:07,670
real estate in my family,
but I just liked buildings, and I

230
00:14:07,670 --> 00:14:10,040
just thought it would be interesting.
I did take in high school.

231
00:14:10,040 --> 00:14:16,070
I took two years of drafting,
uh, which is really more for a

232
00:14:16,070 --> 00:14:18,950
mechanical drawing. Right.
That would really be better for

233
00:14:18,950 --> 00:14:21,830
an engineering major than right.
Uh, than architecture.

234
00:14:21,830 --> 00:14:26,210
Because in architecture, you don't
get to use a, a T-Square as much

235
00:14:26,210 --> 00:14:30,020
as you do in mechanical drawing.
Um, but in any event,

236
00:14:30,020 --> 00:14:32,420
that was for my ideas.
And the University of Maryland

237
00:14:32,420 --> 00:14:35,390
accepted me into their pre
architecture program.

238
00:14:35,390 --> 00:14:38,210
So I thought, all right, well, off we
go to the University of Maryland.

239
00:14:38,660 --> 00:14:41,060
It turns out pre architecture is
the major they put you in.

240
00:14:41,060 --> 00:14:43,490
If they think you're probably never
going to qualify to be in the

241
00:14:43,490 --> 00:14:47,300
architecture school. Oh really. Yeah.
Uh I did you know your,

242
00:14:47,300 --> 00:14:50,960
your fall of your freshman year.
You take a pre this architecture

243
00:14:50,960 --> 00:14:56,270
survey class uh, which I did enjoy.
Um, but you had to do a lot of

244
00:14:56,270 --> 00:15:00,230
freehand drawing,
and that was not in my skill set.

245
00:15:00,530 --> 00:15:04,490
Um, so, uh,
by the end of that semester,

246
00:15:04,490 --> 00:15:09,410
I began to look at other majors,
and, um, I just ended up picking

247
00:15:09,410 --> 00:15:12,380
accounting again.
I think probably because of the

248
00:15:12,380 --> 00:15:15,740
time I spent working with my dad.
Um, I didn't know anything about

249
00:15:15,740 --> 00:15:18,890
accounting except the bookkeeping
experience I had with my father.

250
00:15:19,490 --> 00:15:22,610
Um, but but I moved into to an
accounting major.

251
00:15:23,780 --> 00:15:31,100
And then went on to get your CPA.
I did, I did, and, um, uh, at at

252
00:15:31,100 --> 00:15:35,060
Maryland, it was at the time you
only you only needed four years to,

253
00:15:35,090 --> 00:15:37,730
to become a CPA. Today you need five.
You probably know, right?

254
00:15:37,730 --> 00:15:41,600
You need that fifth year.
Um, but one of the things that was

255
00:15:41,600 --> 00:15:44,870
great for me at the University of
Maryland, um, this is thinking

256
00:15:44,870 --> 00:15:49,670
back on the experiences that were
really influential and impactful.

257
00:15:49,700 --> 00:15:55,370
Um, I joined a fraternity.
So, uh, I have two, two guys

258
00:15:55,370 --> 00:15:58,220
that I met during orientation
before you go to college, right?

259
00:15:58,220 --> 00:16:01,820
That summer, you're at orientation,
and we're standing in line, and,

260
00:16:01,820 --> 00:16:05,600
uh, we're both from the same
area of South Jersey.

261
00:16:05,600 --> 00:16:09,200
We went to rival high schools.
None of us have housing.

262
00:16:09,320 --> 00:16:12,620
And so we decided we're going to
come back in a couple of weeks and

263
00:16:12,620 --> 00:16:14,570
we're going to look for housing.
We're going to find a place to live,

264
00:16:14,570 --> 00:16:17,960
the three of us.
And at the time, the University of

265
00:16:17,960 --> 00:16:20,840
Maryland didn't have enough dormitory
space for out-of-state students.

266
00:16:20,840 --> 00:16:23,930
So if you're in state,
you almost certainly got into a dorm.

267
00:16:23,930 --> 00:16:28,040
But if you're out of state, you were,
you know, beyond below the list.

268
00:16:28,040 --> 00:16:32,840
So we go to the off campus housing
office, and they have a list of

269
00:16:32,840 --> 00:16:36,530
places that would you might look
into apartments and so forth.

270
00:16:36,890 --> 00:16:39,860
As it turns out, on the list are
fraternities who would board you.

271
00:16:39,860 --> 00:16:41,930
You could be a boarder at a
fraternity house.

272
00:16:42,110 --> 00:16:44,930
So we went to a couple
fraternity houses and ended up

273
00:16:44,930 --> 00:16:49,040
at the Sigma Chi house.
Um, and they had a room that was

274
00:16:49,040 --> 00:16:53,120
a triple.
So we signed a lease, swore we

275
00:16:53,120 --> 00:16:55,250
would never join the fraternity.
The three of us.

276
00:16:56,000 --> 00:16:59,540
Uh, and within 2 or 3 weeks,
we were completely sold.

277
00:16:59,540 --> 00:17:01,550
And honestly,
it was really one of the greatest

278
00:17:01,550 --> 00:17:03,500
experiences of of my life.
I mean,

279
00:17:03,500 --> 00:17:08,780
we we definitely had a lot of fun.
Uh, but this was a really well

280
00:17:08,780 --> 00:17:14,810
organized and well led fraternity.
Um, we we did a lot of great things.

281
00:17:14,810 --> 00:17:19,550
I'd say on the charitable side,
uh, we ran the whole house.

282
00:17:19,730 --> 00:17:23,270
When I'd say we ran the whole house,
we employed two cooks.

283
00:17:23,270 --> 00:17:27,260
We paid their their wages.
We did it all.

284
00:17:27,560 --> 00:17:33,500
Um, my, my junior year, I was elected
treasurer, and I did all of that.

285
00:17:33,500 --> 00:17:36,350
I've created financial
statements every month.

286
00:17:36,650 --> 00:17:38,900
Uh, and I kept books and paid bills.
Sure.

287
00:17:39,260 --> 00:17:42,860
Um, amuse a very pretty serious job.
And then my senior year, I was,

288
00:17:42,860 --> 00:17:46,580
uh, I was elected president.
And the fraternity,

289
00:17:46,580 --> 00:17:50,420
many fraternities have this, um,
had a really wonderful leadership

290
00:17:50,420 --> 00:17:54,560
training program that they would
run you through every summer.

291
00:17:54,560 --> 00:17:58,010
And I participated in,
in three summers.

292
00:17:58,100 --> 00:18:01,340
Um, and then actually, as an alumni,
I was on the faculty of the,

293
00:18:01,340 --> 00:18:04,010
of the Sigma.
I think it's the largest fraternity

294
00:18:04,010 --> 00:18:07,850
in the country, if I'm not mistaken.
Could could be as far as chapters.

295
00:18:07,850 --> 00:18:12,260
But really, really a great a great
experience to say. You okay?

296
00:18:13,820 --> 00:18:17,060
Um, but it was a really, uh,
you know,

297
00:18:17,060 --> 00:18:19,730
life is a bit serendipitous, right?
We were just looking for a place

298
00:18:19,730 --> 00:18:22,420
to live. Yeah.
Um, and then we end up,

299
00:18:22,420 --> 00:18:25,630
you know, walking into, uh, to,
you know, to this particular

300
00:18:25,630 --> 00:18:29,380
building and renting a room.
And that's, by the way, I never

301
00:18:29,380 --> 00:18:34,000
lived anywhere else for for eight
semesters, all eight semesters in,

302
00:18:34,150 --> 00:18:37,090
uh, in that chapter house.
That's great. So very good.

303
00:18:37,270 --> 00:18:39,970
Lifelong friends, I assume.
And I have a bunch of lifelong

304
00:18:39,970 --> 00:18:42,340
friends, actually.
Great friends in the industry.

305
00:18:42,370 --> 00:18:44,830
Yeah. Um, really?
That I've worked with, uh,

306
00:18:44,830 --> 00:18:47,800
some friends who should, uh,
you might be candidate for your

307
00:18:47,800 --> 00:18:52,150
podcast. Uh, so that's cool.
Yeah. That's great.

308
00:18:52,210 --> 00:18:57,280
So, uh, no sports, but, you know,
you were active in the fraternity

309
00:18:57,280 --> 00:19:01,540
there. Yeah, I was, yeah, it was it.
By the way, this was a little ironic

310
00:19:01,540 --> 00:19:06,940
because this was the fraternity that
was the most active athletically.

311
00:19:06,940 --> 00:19:11,350
So big inter fraternity.
Uh, a rivalry and sure,

312
00:19:11,350 --> 00:19:16,600
in every sport we competed in
and I'm not sure I participated.

313
00:19:16,750 --> 00:19:20,560
Maybe ping pong just wasn't was
it pi thing?

314
00:19:20,560 --> 00:19:23,140
Well, you were doing the books and
you're running the fraternity as a

315
00:19:23,140 --> 00:19:26,980
president the senior year, right?
So that's that's important. Yeah.

316
00:19:27,430 --> 00:19:30,430
So, uh, then you went into the
accounting profession, right?

317
00:19:30,580 --> 00:19:34,060
I did I ended up moving to
Philadelphia, and I worked at

318
00:19:34,060 --> 00:19:38,020
Ernst and Winnie, which is now,
uh, now Ernst and Young and and I

319
00:19:38,020 --> 00:19:40,300
worked there for, for four years.
Uh,

320
00:19:40,300 --> 00:19:45,100
I spent two of the years as a staff
accountant and the audit practice,

321
00:19:45,100 --> 00:19:48,880
which was a great experience.
Uh, of course, at that time,

322
00:19:48,880 --> 00:19:52,480
you had to sit for your CPA.
So everybody studied and passed

323
00:19:52,480 --> 00:19:57,910
the CPA, or else you'd have to go
find another job. Um, but we, uh.

324
00:19:57,910 --> 00:19:59,890
But we all did that.
And what did you like about

325
00:19:59,890 --> 00:20:02,560
accounting?
You know, it's interesting.

326
00:20:02,560 --> 00:20:07,630
I, um, I think I think what I
like the most about it was going

327
00:20:07,630 --> 00:20:11,230
from client to client,
and they were all pretty different.

328
00:20:11,470 --> 00:20:16,420
So you might have a client.
We had a client that made dumpsters.

329
00:20:16,420 --> 00:20:19,000
I mean, it's really interesting.
And I had a client that was a

330
00:20:19,000 --> 00:20:24,310
non-for-profit and I had a client
that was a health insurance company.

331
00:20:24,910 --> 00:20:29,200
Um, the 70 Sixers were a client.
I was on the audit of the 76 ers.

332
00:20:29,200 --> 00:20:33,010
It was tastic.
Uh, really a fun experience at that

333
00:20:33,010 --> 00:20:36,910
time, I learned this goes back a
few years, but a professional

334
00:20:36,910 --> 00:20:40,480
basketball team barely made
money during the regular season.

335
00:20:40,480 --> 00:20:43,450
But if you get into playoffs,
then you start to make money.

336
00:20:43,450 --> 00:20:46,150
So get into playoffs.
So that's how they, they, uh,

337
00:20:46,150 --> 00:20:49,630
they got profitable.
How much was television revenues

338
00:20:49,630 --> 00:20:54,460
part of their uh. I don't remember.
Uh, it's a good question. Large.

339
00:20:54,460 --> 00:20:59,170
Large I think it was it was a large
portion of it at at that time

340
00:20:59,170 --> 00:21:02,020
it's owned by, um, a guy by the
name of Harold Katz on the team.

341
00:21:02,020 --> 00:21:06,130
And he had founded Nutrisystem.
Oh, yeah. Uh, and Nutrisystem was.

342
00:21:06,130 --> 00:21:10,330
It was a client. Oh, there you go.
So it was really I really did enjoy

343
00:21:10,660 --> 00:21:14,680
you just show up again on the the
junior staff account auditor,

344
00:21:14,680 --> 00:21:17,710
if you will.
Um, and you had to basically

345
00:21:17,710 --> 00:21:22,300
learn a whole new, new industry.
Learn how did you work down on.

346
00:21:22,300 --> 00:21:24,070
Market Street in Philadelphia then,
or.

347
00:21:24,070 --> 00:21:28,660
Yeah, it was right at, uh, market
in broad, um, 2900 Center Square.

348
00:21:28,660 --> 00:21:31,300
Yeah. Um, on Market Street.
One of my other clients was

349
00:21:31,300 --> 00:21:34,240
Strawberries and Clothier, which is.
Oh, sure, no longer around.

350
00:21:34,240 --> 00:21:38,110
Is that right?
A department store, but I did enjoy.

351
00:21:38,260 --> 00:21:43,900
I made some friends with some guys
around my second year who, um,

352
00:21:44,140 --> 00:21:47,530
who were in the consulting practice.
So at the time, all these firms,

353
00:21:47,530 --> 00:21:53,080
they sort of had three practices tax
audit and consulting and consulting

354
00:21:53,080 --> 00:21:58,600
sounded really exciting to me.
Uh, so I got myself into the

355
00:21:58,600 --> 00:22:02,020
consulting practice,
and most of what they did was health

356
00:22:02,020 --> 00:22:04,420
care consulting, which of course,
I really didn't know anything about.

357
00:22:04,420 --> 00:22:07,930
But they one of the other things
really great about these firms

358
00:22:07,930 --> 00:22:11,380
is they just send you to a
training program that they run

359
00:22:11,380 --> 00:22:15,130
and build up your skill set for.
So if you like learning,

360
00:22:15,130 --> 00:22:22,720
it's really a fantastic career.
So I, I moved into consulting.

361
00:22:22,720 --> 00:22:26,590
Uh, but what would happen is the
last two years I was there,

362
00:22:26,590 --> 00:22:30,310
busy season would roll along and
they would be understaffed on the

363
00:22:30,310 --> 00:22:35,170
audit team. And I'd get a phone call.
Tom, we'd like you to come out

364
00:22:35,170 --> 00:22:38,650
and work on this, this audit.
And honestly, it was great.

365
00:22:38,890 --> 00:22:42,520
It worked out just fine.
I had a chance to do both.

366
00:22:42,850 --> 00:22:47,290
Um, the last year I was there,
they the whole the entire firm

367
00:22:47,290 --> 00:22:53,230
had begun a, uh, a small practice
to serve small businesses.

368
00:22:53,440 --> 00:22:59,590
And they asked me to be a resource to
the partner that was responsible for

369
00:22:59,590 --> 00:23:03,580
building out that practice for them.
So he hadn't really started out.

370
00:23:04,120 --> 00:23:10,210
Um, but one of the things that
this practice was going to do is,

371
00:23:10,210 --> 00:23:14,080
uh, prepare financial statements,
forecasts, financial statements

372
00:23:14,080 --> 00:23:16,360
for a small business.
So let's just say you want to go

373
00:23:16,360 --> 00:23:19,240
ahead. We had a client.
He was, um, my neighbor,

374
00:23:19,240 --> 00:23:22,200
Frank Turetsky. He.
Was working at, um,

375
00:23:22,200 --> 00:23:27,180
at a Wanamaker's, but he wanted
to start his own departments.

376
00:23:27,180 --> 00:23:30,060
He really wants to start his own
clothing store. Men's clothing store.

377
00:23:30,360 --> 00:23:34,830
And I get sent over to his to
his office, and and I'm there to

378
00:23:34,830 --> 00:23:38,400
help him prepare the,
the forecasts, the projections

379
00:23:38,400 --> 00:23:41,940
for what would this look like?
You know, income statement, balance

380
00:23:41,940 --> 00:23:45,780
sheet and a cash flow statement.
So I sat and got all the

381
00:23:45,780 --> 00:23:50,070
assumptions from them and went back
and built a Lotus spreadsheet.

382
00:23:50,670 --> 00:23:53,310
If anyone knows what remembers
what Lotus is, of course.

383
00:23:53,430 --> 00:23:55,740
Um, well, just one, two, three.
And I mean,

384
00:23:55,740 --> 00:23:59,670
what a fantastic experience. Uh.
And now you do it for real estate.

385
00:23:59,670 --> 00:24:03,960
I know how it feels, right?
Right. Little did I know. Yeah.

386
00:24:04,470 --> 00:24:08,100
Uh, so, no, it was.
I always say every everybody has

387
00:24:08,100 --> 00:24:12,030
to have a first job. Yeah.
And I, I really believe my heart

388
00:24:12,030 --> 00:24:14,700
of hearts that public accounting
is a first job.

389
00:24:15,090 --> 00:24:18,060
Unless you find your way into
something else that you know for

390
00:24:18,060 --> 00:24:21,300
sure you want to do.
It's a fantastic first job.

391
00:24:21,300 --> 00:24:23,700
Well, it's interesting accounting.
I've been studying it.

392
00:24:24,000 --> 00:24:27,780
It's looking backwards.
It's, you know, today true

393
00:24:27,930 --> 00:24:31,620
finance is looking forwards.
And to me that was more exciting.

394
00:24:31,620 --> 00:24:34,260
Yeah. No, I like that.
I like that analogy when.

395
00:24:34,260 --> 00:24:37,020
You think about it. Yeah.
Because really what you're doing

396
00:24:37,020 --> 00:24:40,620
is reporting you're you're really
putting everything together.

397
00:24:40,620 --> 00:24:45,060
That's history to really report
what's there in finance.

398
00:24:45,060 --> 00:24:48,030
You're saying, okay, I know what
was there, but we don't know what's

399
00:24:48,030 --> 00:24:50,880
going to happen in the future.
So we have to care what what do

400
00:24:50,880 --> 00:24:54,330
we need to do here, you know?
Right. How do we project?

401
00:24:54,330 --> 00:24:56,940
What are the assumptions we need
to use for that?

402
00:24:56,940 --> 00:25:00,240
And that's what you were doing on
the consulting side with that,

403
00:25:00,270 --> 00:25:03,360
with that clothing client. Right.
You're doing a forecasting thing.

404
00:25:03,390 --> 00:25:05,430
Right.
That was really it was really a

405
00:25:05,910 --> 00:25:11,280
a great, a great experience.
And and I'm a very young person

406
00:25:11,280 --> 00:25:16,740
working with the very senior guy.
I mean, I, you know, 20, 23,

407
00:25:16,740 --> 00:25:20,610
24 years old, you know, working with
a guy that's about he, first of all,

408
00:25:20,610 --> 00:25:23,880
at the moment he ran he was the he
was the president of water makers.

409
00:25:23,880 --> 00:25:26,910
And he had this idea to leave
Wanamaker's and start this new,

410
00:25:27,300 --> 00:25:31,590
this new business. Um.
But he was not a finance guy, so,

411
00:25:31,590 --> 00:25:34,530
you know, he needed your help,
right? I was it was fun.

412
00:25:34,530 --> 00:25:38,130
I really enjoyed it.
And I learned a ton. That's cool.

413
00:25:38,580 --> 00:25:43,680
So then you decided to go back,
get your MBA at Wharton.

414
00:25:43,680 --> 00:25:46,680
So why did you do that?
I did, you know, I,

415
00:25:46,680 --> 00:25:51,120
I had some colleagues that I watched
some older colleagues do this,

416
00:25:51,120 --> 00:25:54,210
you know, spend three,
4 or 5 years in public accounting and

417
00:25:54,450 --> 00:25:58,050
one day you'd hear that, you know,
this one or that one had left to,

418
00:25:58,050 --> 00:26:01,410
um, to go back to business school.
Someone went to law school to.

419
00:26:01,410 --> 00:26:08,250
It was interesting.
Um, and I still had this idea

420
00:26:08,250 --> 00:26:12,600
about the the built environment.
I didn't pursue a degree in

421
00:26:12,600 --> 00:26:16,650
architecture,
but I still had an interest in the

422
00:26:16,650 --> 00:26:19,590
built environment and wondered
whether I could make a career of it.

423
00:26:20,730 --> 00:26:25,890
Uh, the building, my office den
was next to Liberty Place,

424
00:26:25,890 --> 00:26:31,230
where Bill Rouse built Jim
Ross's nephew, built two large

425
00:26:31,230 --> 00:26:34,380
office towers on Market Street.
And I sort of watched that get built.

426
00:26:35,370 --> 00:26:37,830
And I had this idea that I
should be a developer.

427
00:26:37,830 --> 00:26:40,440
I'd like to be a developer.
I didn't know anything about

428
00:26:40,800 --> 00:26:43,980
development.
Uh, and I didn't know a lot about

429
00:26:43,980 --> 00:26:50,010
real estate, but I, I understood
that if I went back to school and,

430
00:26:50,040 --> 00:26:55,920
um, I could, I could then major in,
in that area and maybe pivot into,

431
00:26:55,920 --> 00:26:58,950
into that career.
So that's what really put kind

432
00:26:58,950 --> 00:27:01,920
of Wharton in my head or an MBA
in my head.

433
00:27:01,920 --> 00:27:06,510
And I applied to schools and got into
Wharton, and I was living in Philly

434
00:27:06,510 --> 00:27:09,750
at the time and recently married,
and it seemed like the easiest

435
00:27:09,750 --> 00:27:13,440
thing to do is just go down the
street to Wharton is, you know,

436
00:27:13,440 --> 00:27:17,010
instead of into the Ernst and
Whinney offices on a Monday morning.

437
00:27:17,490 --> 00:27:19,950
And that's what I did.
So you went full time?

438
00:27:19,950 --> 00:27:24,600
Oh, yeah, I went full time. Yeah.
So my car to pay the first year's

439
00:27:24,600 --> 00:27:28,110
tuition. Yeah. Uh, did they give.
You a scholarship?

440
00:27:28,230 --> 00:27:33,090
You know, I got a I got a handful
of scholarships from a variety

441
00:27:33,090 --> 00:27:37,200
of different places that helped.
I don't I don't know if I got

442
00:27:37,200 --> 00:27:41,730
anything from the Warren School.
I may have, um, but one of the one

443
00:27:41,730 --> 00:27:49,260
of the things I did to help pay
my tuition was I, um, I was a Ta

444
00:27:49,260 --> 00:27:53,640
in cost accounting. There you go.
So that actually was a very good,

445
00:27:53,760 --> 00:27:57,030
uh, gig for. Undergraduates.
Uh, for undergraduates. Right.

446
00:27:57,030 --> 00:28:02,160
And I had one cost accounting class
at the University of Maryland.

447
00:28:02,610 --> 00:28:06,390
Um, so I had to reteach myself
cost accounting in order to

448
00:28:06,390 --> 00:28:12,000
teach it to very, very bright
young men and women at Wharton.

449
00:28:12,330 --> 00:28:16,350
Uh, I mean, it was a real the first
semester was the biggest challenge.

450
00:28:16,350 --> 00:28:19,560
After that, I kept my notes and I.
But I'd also.

451
00:28:19,840 --> 00:28:24,550
While I was thinking about
applying to schools, I had my CPA.

452
00:28:25,000 --> 00:28:28,240
I'd come out of the University
of Maryland with good grades,

453
00:28:28,240 --> 00:28:31,300
but not not impressive grades.
And I thought, well,

454
00:28:31,300 --> 00:28:35,200
what else could I do to make myself
look like a better candidate?

455
00:28:35,200 --> 00:28:39,460
And so I, I sat and passed the
something called a certificate

456
00:28:39,460 --> 00:28:42,700
in management accounting,
which is just like the CPA is

457
00:28:42,700 --> 00:28:45,010
just another credential thing.
It's multiple tests.

458
00:28:45,490 --> 00:28:49,810
Um, but it was a it was a really
good body of work. For me.

459
00:28:49,810 --> 00:28:55,900
It's more about, um, things like
cost benefit analysis break even.

460
00:28:56,440 --> 00:29:01,150
Um, it's more management accounting
than GAAP accounting. And, uh.

461
00:29:01,270 --> 00:29:05,560
So if you're doing an M&A type of
analysis with some, you know, like a

462
00:29:05,560 --> 00:29:09,070
merger, yeah, that kind of thing.
And, um, and it had a whole

463
00:29:09,070 --> 00:29:12,340
section on economics and on data
science and so forth.

464
00:29:12,340 --> 00:29:17,170
It was it's really interesting.
It was a it was a fantastic piece,

465
00:29:17,230 --> 00:29:20,560
you know, piece of information,
the body of work to learn, uh,

466
00:29:20,560 --> 00:29:22,630
some of which you knew.
So you just had to sort of

467
00:29:22,630 --> 00:29:27,190
reteach yourself a bit.
And, um, and so when I went to teach

468
00:29:27,190 --> 00:29:30,010
cost accounting at Wharton as a,
as a Ta.

469
00:29:30,040 --> 00:29:33,430
I think it was helpful to have
done that CMA work. Sure.

470
00:29:33,610 --> 00:29:40,150
Uh, but I did I did that, and then,
um, actually, my old fraternity had a

471
00:29:40,150 --> 00:29:46,660
grant program to for alumni members
who were going to graduate school.

472
00:29:46,660 --> 00:29:50,200
You basically served as a scholarship
chairman to the local chapter.

473
00:29:50,440 --> 00:29:54,820
And although, again,
the students at Penn were very,

474
00:29:54,820 --> 00:29:58,090
very bright, I'm not sure they really
needed a scholarship chairman,

475
00:29:58,540 --> 00:30:02,080
but I was their scholarship chairman,
and that helped help pay my way

476
00:30:02,080 --> 00:30:06,820
through through school as well.
So you decided to focus on real

477
00:30:06,820 --> 00:30:11,530
estate there? I did, yeah, yeah.
I, uh, I was a real estate major.

478
00:30:11,530 --> 00:30:16,240
It's, you know, it's fall of 1988
and it seemed like a wonderful.

479
00:30:16,990 --> 00:30:19,900
Doctor, Peter Lindemann having
influence on you at all. Yeah.

480
00:30:19,900 --> 00:30:22,180
Actually, uh,
it's funny you should ask.

481
00:30:22,180 --> 00:30:26,830
Um, I got to know Peter very well.
Uh, he's a he's a he's a good friend.

482
00:30:27,040 --> 00:30:32,380
Um, and, uh, I'm sure many of
your guests, if they have any

483
00:30:32,380 --> 00:30:36,160
interaction with Peter, they have a
lot of story to go along with it.

484
00:30:36,250 --> 00:30:40,060
Um, one of my guests, Willie Walker,
introduced him about every quarter,

485
00:30:40,060 --> 00:30:42,190
so. Oh, right. For his. Podcast.
Yeah.

486
00:30:42,190 --> 00:30:44,230
So we just did that in New York
recently, right.

487
00:30:44,410 --> 00:30:50,080
Um, so in probably October of my
first year.

488
00:30:50,080 --> 00:30:55,120
So, so fall, my first semester.
Speaking of paying your way

489
00:30:55,120 --> 00:30:58,780
through school, um,
there's a bulletin board that says

490
00:30:58,780 --> 00:31:01,330
this long before the internet, right.
There's a bulletin board that

491
00:31:01,330 --> 00:31:05,380
was advertising for a strategic
planning consultant.

492
00:31:06,130 --> 00:31:08,320
And I didn't know a lot about
strategic planning,

493
00:31:08,320 --> 00:31:11,650
but in theory, I had been a
consultant at Ernst and Winnie.

494
00:31:11,650 --> 00:31:16,300
So I pulled it off the bulletin
board and went up to meet somebody.

495
00:31:16,300 --> 00:31:18,400
I didn't know who it was.
I'd never met the person before,

496
00:31:18,400 --> 00:31:22,450
but it's Peter.
So at that time, Peter had just

497
00:31:22,450 --> 00:31:25,300
taken over the real estate
department at the Wharton School,

498
00:31:25,300 --> 00:31:29,320
and there was a real estate center,
but he was really charged with

499
00:31:29,320 --> 00:31:34,660
making it something relevant.
And he wanted he wanted to create a

500
00:31:34,660 --> 00:31:39,400
strategic plan to launch this or
relaunch this real estate center.

501
00:31:39,730 --> 00:31:42,400
And his and he was looking for
some students to help.

502
00:31:42,400 --> 00:31:47,770
And so a young lady and I, you know,
classmate, she showed up at the same

503
00:31:47,770 --> 00:31:51,370
time I did that Tuesday afternoon.
And um, Peter said, okay,

504
00:31:51,610 --> 00:31:57,670
you both do it. Okay. Okay.
So the assignment was for us was to,

505
00:31:57,700 --> 00:32:04,690
um, go survey other universities
and this the academic centers

506
00:32:04,690 --> 00:32:07,120
that they had.
And what were they doing and how did

507
00:32:07,120 --> 00:32:10,570
they raise money and what was their
programming and how did they staff

508
00:32:10,570 --> 00:32:15,940
it? Uh, long before the internet.
So Peter had a list of some ideas.

509
00:32:15,940 --> 00:32:20,560
So I literally just got on the
phone and started calling these

510
00:32:20,560 --> 00:32:23,710
different universities and I
finally get Ahold of the director,

511
00:32:23,710 --> 00:32:28,810
and I just interviewed them, and
then I write up my notes for Peter.

512
00:32:29,380 --> 00:32:34,150
Um, that's Wisconsin on that list.
Yeah, yeah. There.

513
00:32:34,330 --> 00:32:37,450
When I was in graduate school,
they were they were the real

514
00:32:37,450 --> 00:32:41,560
estate program. Right.
Um, and, uh,

515
00:32:43,360 --> 00:32:46,870
we finished that assignment.
And then up here, you had a

516
00:32:46,870 --> 00:32:50,740
couple of other assignments that
he would just ask me to consult,

517
00:32:50,740 --> 00:32:54,610
and he paid beside on what he paid,
but, um, but I would I basically

518
00:32:54,610 --> 00:32:58,030
work for him as this, you know,
this sort of part time consultant.

519
00:32:58,030 --> 00:33:03,730
I remember once he he was asked by,
I believe it was Cushman Wakefield to

520
00:33:03,730 --> 00:33:09,790
speak at their, uh, their annual,
uh, conference where they take

521
00:33:09,790 --> 00:33:14,800
all the highest producing people,
and they asked him to speak on the

522
00:33:14,800 --> 00:33:19,510
industry and compare us to other,
you know, other brokerage firms.

523
00:33:20,020 --> 00:33:21,970
So Peter said, okay,
here's what I want you to do.

524
00:33:21,970 --> 00:33:25,150
So I had to go out and basically
gather the data on all these

525
00:33:25,150 --> 00:33:27,430
different brokerage firms and
beat it back to Peter.

526
00:33:27,430 --> 00:33:30,760
And he organized it into into a
presentation.

527
00:33:30,880 --> 00:33:35,320
Um, so then, of course, uh,
when I had a chance to get in any of

528
00:33:35,320 --> 00:33:40,480
his classes, uh, I did he and, uh,
a woman, a professor by the name of

529
00:33:40,480 --> 00:33:45,910
Anita Summers, uh, taught a real
estate and public policy course,

530
00:33:45,910 --> 00:33:49,120
which is really fantastic.
And if you know anything about Anita,

531
00:33:49,330 --> 00:33:53,080
she is Larry Summers mother.
Oh, Larry Summers,

532
00:33:53,080 --> 00:33:55,540
the secretary of treasury and.
Also the president of Harvard

533
00:33:55,540 --> 00:34:00,820
University. Right. Um, and I think.
My son was a classmate of his

534
00:34:00,820 --> 00:34:04,240
his his twin daughters.
Oh, is that right? Yes. Okay.

535
00:34:04,720 --> 00:34:11,590
I think at that time he was the
president or recent had recently been

536
00:34:11,590 --> 00:34:15,610
the president of the world Bank.
And, um, she had a lot of

537
00:34:15,610 --> 00:34:19,480
stories about her son,
which was just sort of fun to hear.

538
00:34:19,480 --> 00:34:26,410
She's, uh, just a fantastic, uh,
teacher and instructor and, um,

539
00:34:27,130 --> 00:34:29,830
and really thinker around public
public policy.

540
00:34:29,980 --> 00:34:33,460
So, so I took that class and
very much enjoyed it.

541
00:34:33,460 --> 00:34:37,960
And then Peter also had a real estate
entrepreneurship class that I took.

542
00:34:37,960 --> 00:34:41,740
I think that was my, uh,
my fourth, fourth semester.

543
00:34:42,220 --> 00:34:48,160
The the other Peter Letterman's story
and I is, um, in the fall of eight,

544
00:34:48,160 --> 00:34:55,900
1989, Peter calls me up to his
office and he says, uh, hey, a guy

545
00:34:56,020 --> 00:35:00,670
named Peter Bedford from California
just bought all of Henry Kaiser's

546
00:35:00,670 --> 00:35:05,590
real estate holdings in Hawaii.
And he's very active in Uli,

547
00:35:05,950 --> 00:35:11,080
and he's willing to sponsor a
Uli advisory panel to go study

548
00:35:11,080 --> 00:35:15,370
what he just bought.
And he wants a professor from

549
00:35:15,370 --> 00:35:19,750
Wharton and a student from Wharton
to go on this advisory panel.

550
00:35:19,750 --> 00:35:23,230
To Hawaii to Hawaii.
And, uh,

551
00:35:23,230 --> 00:35:26,740
I think you should be the student.
I said, well,

552
00:35:26,740 --> 00:35:31,150
that's very interesting.
Uh, I said, um,

553
00:35:31,150 --> 00:35:35,530
that's very interesting.
Um, can I get back to you?

554
00:35:35,530 --> 00:35:40,060
He said, absolutely, because I'm
thinking to myself, you know,

555
00:35:40,060 --> 00:35:44,230
recently married, my wife and I are
living a very frugal lifestyle.

556
00:35:44,230 --> 00:35:48,340
We're certainly not going to Hawaii.
Uh, like, how do I tell my wife?

557
00:35:48,340 --> 00:35:51,160
Like I'm going to Hawaii?
So at the time,

558
00:35:51,160 --> 00:35:55,840
I worked for a guy part time who, um,
he had been married three times,

559
00:35:55,840 --> 00:35:57,490
and I thought he knew a lot
about being married.

560
00:35:57,490 --> 00:36:01,930
So I asked him what I should do,
and he said, look, you go back to

561
00:36:01,930 --> 00:36:07,150
Professor Lehman and you say, uh,
I'd love to go. Can I take my wife?

562
00:36:07,150 --> 00:36:10,150
He's going to say, no,
and you're going to go back and

563
00:36:10,150 --> 00:36:12,730
tell your wife this whole story
and that you did ask, could he,

564
00:36:12,730 --> 00:36:15,610
you know, could you bring your wife?
I'm like, brilliant.

565
00:36:15,910 --> 00:36:17,740
It's a brilliant idea.
And there's no wonder you've

566
00:36:17,740 --> 00:36:21,310
been married three times.
So I go back to Professor Lindemann

567
00:36:21,880 --> 00:36:26,980
and I ask him and he says, sure,
you could take your wife. So we.

568
00:36:26,980 --> 00:36:31,810
And by the way, I went on this,
this advisory panel, uh, trip and,

569
00:36:31,810 --> 00:36:35,920
uh, I was the only one there with a
wife, I can assure you that, um, but

570
00:36:35,920 --> 00:36:39,490
that was a really great experience
because the rest of the panel was

571
00:36:39,490 --> 00:36:43,510
was all real estate professionals.
Uh, Doug Mitchell, uh,

572
00:36:43,510 --> 00:36:47,200
who had Peachtree Center south
of Atlanta. Uh huh.

573
00:36:47,530 --> 00:36:51,430
Um, Roger Gladys had, uh,
The woodlands.

574
00:36:51,520 --> 00:36:53,260
Oh,
she's the president of The woodlands.

575
00:36:53,800 --> 00:36:58,660
Um, yep. I've got a Kauffman.
Oh, I know, okay, so he was he

576
00:36:58,660 --> 00:37:01,210
was on the panel with us.
Um, got his grade,

577
00:37:01,480 --> 00:37:08,320
and he was terrific.
Uh, so, um, what I observed is

578
00:37:08,320 --> 00:37:15,880
that these people all shared all
their experiences and their ideas

579
00:37:16,120 --> 00:37:20,800
in the most collaborative way.
Was just so interesting to watch

580
00:37:20,800 --> 00:37:23,230
them.
I not sure that I had much to

581
00:37:23,230 --> 00:37:24,970
contribute.
I may have done a spreadsheet for

582
00:37:24,970 --> 00:37:31,510
them, uh, but it was so terrific
to see them collaborating.

583
00:37:31,510 --> 00:37:35,920
And when I got into our industry,
I realized that's a really

584
00:37:35,920 --> 00:37:40,120
common part of our industry,
that that we all just collaborate

585
00:37:40,120 --> 00:37:43,750
and we collaborate on things that
we're not even working on together.

586
00:37:43,750 --> 00:37:47,560
So I could call you about something
in Washington, DC, and you would

587
00:37:47,560 --> 00:37:50,530
just tell me what you think.
Let me let me back up just for a

588
00:37:50,530 --> 00:37:53,350
moment.
Um, because I've been on a

589
00:37:53,350 --> 00:37:58,330
technical advisory council for Uli.
They call it a tap in Washington.

590
00:37:58,840 --> 00:38:05,890
Was this a council where Kaiser or
the buyer hired Uli as an advisor

591
00:38:05,890 --> 00:38:09,010
to make sure that they were
absorbing this portfolio properly?

592
00:38:09,010 --> 00:38:13,030
I mean, is this was this an
engagement that Uli was given?

593
00:38:13,030 --> 00:38:16,150
And so.
As I understand it, um,

594
00:38:16,330 --> 00:38:21,750
an advisory this advisory panel was.
Financed by Peter Bedford

595
00:38:21,750 --> 00:38:27,000
Bedford properties. Right.
And and the charge was I've just

596
00:38:27,000 --> 00:38:30,030
bought this really large portfolio
of real estate in Hawaii,

597
00:38:30,030 --> 00:38:33,090
most of it in Honolulu,
most of it around Hawaii. Kai.

598
00:38:33,120 --> 00:38:36,570
You know where that is?
Um, what should I do?

599
00:38:36,570 --> 00:38:40,740
What do you recommend I do with
all this? With real estate?

600
00:38:41,160 --> 00:38:44,790
And and we came back with a
recommendation.

601
00:38:45,510 --> 00:38:49,710
Um, you know, we recommended that
he build luxury, uh, luxury homes.

602
00:38:49,770 --> 00:38:54,990
We recommended that he establish
himself as a leader in the community,

603
00:38:55,500 --> 00:39:01,560
uh, that he hires somebody local to
run all of this who had relationships

604
00:39:01,560 --> 00:39:06,960
with, uh, with the community.
You might know that in Hawaii,

605
00:39:06,960 --> 00:39:13,800
it's really common for real estate to
be owned by one or more trust police,

606
00:39:14,070 --> 00:39:16,860
trust leaseholders.
And then, you know, if you and I

607
00:39:16,860 --> 00:39:20,910
owned a home there, it's it's
almost certain that we would we

608
00:39:20,910 --> 00:39:24,300
would own our homes subject to a
ground lease to one of these trusts.

609
00:39:24,450 --> 00:39:27,510
So the real estate that he owned,
sure enough, most of it was

610
00:39:27,510 --> 00:39:32,730
subject to, uh, to a leasehold.
And, and they recommended that he,

611
00:39:33,390 --> 00:39:38,280
uh, he cement his relationship with,
with the the ground lessor.

612
00:39:39,240 --> 00:39:42,090
Was Allen want a shopping center
right next to the property.

613
00:39:42,270 --> 00:39:45,690
Yeah. Yeah, yeah, yeah.
So I've been only been in

614
00:39:45,690 --> 00:39:51,420
Louisville once, but, uh,
short story, uh, I met my son.

615
00:39:51,420 --> 00:39:56,670
They're coming in on an aircraft
carrier. Oh, terrific.

616
00:39:56,670 --> 00:40:01,500
And then he and I rode out together
on the carrier. Coming back. Okay.

617
00:40:01,500 --> 00:40:04,020
On what's called a Tiger Tiger
cruise for the Navy.

618
00:40:04,020 --> 00:40:07,950
Because my son was in the Navy.
Um, that was probably the one of

619
00:40:07,950 --> 00:40:10,950
the top 3 or 4 bucket list items
in my life.

620
00:40:10,980 --> 00:40:14,070
Let's do it to do that for six days.
Wow. Six. You were there.

621
00:40:14,220 --> 00:40:17,160
Six days on an aircraft carrier
across the Pacific Ocean.

622
00:40:17,160 --> 00:40:21,150
Yeah, and I'd never been in the
service before, so this was a

623
00:40:21,150 --> 00:40:25,260
very special experience anyway.
Oh, I loved that detail today.

624
00:40:25,260 --> 00:40:27,270
But that's.
No thank you for sharing that.

625
00:40:27,360 --> 00:40:32,130
Yeah, that was a special time.
So that that's my big memory of

626
00:40:32,130 --> 00:40:35,280
Hawaii.
So so then you, uh,

627
00:40:35,280 --> 00:40:40,260
finished up at Wharton and, uh,
what was your thought process then?

628
00:40:41,220 --> 00:40:46,050
Well, think about it.
I'm graduating in May of 1990.

629
00:40:46,350 --> 00:40:51,840
Are so. So, uh.
Uh, there's an enormous real estate

630
00:40:51,840 --> 00:40:55,740
recession, uh, working its way
around the country. All right?

631
00:40:55,740 --> 00:40:59,850
It sort of didn't happen in
every market at the same time.

632
00:40:59,850 --> 00:41:02,580
Did you see it in Philadelphia?
I mean, was it hitting hard?

633
00:41:02,580 --> 00:41:08,490
Pretty there when you were in school?
You know, how the way we could

634
00:41:08,490 --> 00:41:13,920
tell was, my friends and I,
who were all real estate majors in

635
00:41:13,920 --> 00:41:17,730
the fall of our first year when all
the employers are coming through

636
00:41:17,940 --> 00:41:23,790
hiring either permanent or summer
interns, um, they threw big,

637
00:41:23,790 --> 00:41:28,980
lavish, uh, events, you know,
with all kinds of food and everything

638
00:41:28,980 --> 00:41:32,760
and give a long presentation and
then interview a lot of people.

639
00:41:33,450 --> 00:41:37,440
That was the fall of 88.
In the fall of 89,

640
00:41:37,710 --> 00:41:41,730
there was virtually none of that
on the real estate side.

641
00:41:42,270 --> 00:41:46,140
It was very, very different.
And many of my friends who were real

642
00:41:46,140 --> 00:41:50,790
estate majors, uh, ended up pivoting
into to other, other careers.

643
00:41:50,790 --> 00:41:55,680
By the way, they did great.
Um, but I kind of hung in there and,

644
00:41:55,680 --> 00:42:01,500
uh, and I ended up, uh, you get to
today, you would do an internet

645
00:42:01,500 --> 00:42:06,570
search to find employers in a market.
Um, but at that time, you went,

646
00:42:06,570 --> 00:42:09,510
you know, you went to the book
of lists, you get the, you know,

647
00:42:09,510 --> 00:42:12,930
the the Baltimore Business Journal
or the Chicago Business Journal,

648
00:42:12,930 --> 00:42:15,360
and you go to their book of lists,
and you scroll your fingers down and

649
00:42:15,360 --> 00:42:17,460
you try to find a name of something
that looks like a real estate.

650
00:42:17,460 --> 00:42:20,280
There was some real estate companies
interviewing, but not that many.

651
00:42:20,520 --> 00:42:26,550
And, um, uh, and I ended up because
my sister lived here in Baltimore.

652
00:42:26,550 --> 00:42:30,120
Baltimore was sort of all in my mind,
it's not that far from Philly.

653
00:42:30,120 --> 00:42:35,190
And I ended up, uh,
connecting with a woman who ran one

654
00:42:35,190 --> 00:42:40,140
of two real estate portfolios at an
insurance company, US based here,

655
00:42:40,350 --> 00:42:44,340
based here in Baltimore.
And I remember interviewing with

656
00:42:44,340 --> 00:42:51,120
her in early March and she said,
I do need to hire somebody, but I

657
00:42:51,120 --> 00:42:55,890
need somebody to start right away.
So now it's the spring of my my

658
00:42:55,890 --> 00:42:58,530
last year.
And I told her, I said, well,

659
00:42:58,530 --> 00:43:02,070
I don't have classes on Fridays
and I could be here every Friday.

660
00:43:02,070 --> 00:43:06,060
My sister lives literally around
the block and I can stay with her.

661
00:43:06,180 --> 00:43:09,360
And my spring break is coming up.
I can give you a whole week.

662
00:43:09,780 --> 00:43:13,290
So that's how I spent my spring,
and my spring break was coming

663
00:43:13,290 --> 00:43:17,970
here every Friday working for her.
And and then I spent my spring break.

664
00:43:17,970 --> 00:43:21,960
The others went skiing.
Uh, but I came here to Baltimore and,

665
00:43:21,960 --> 00:43:24,330
uh, and work for the woman's
name was Marilyn McGuinn.

666
00:43:24,330 --> 00:43:28,770
She's really just a really talented,
smart, uh, woman who had been given

667
00:43:28,770 --> 00:43:33,420
responsibility for a, I would
call it like, a nonconventional

668
00:43:33,420 --> 00:43:37,200
a non-conventional part of the
insurance companies portfolios.

669
00:43:37,200 --> 00:43:41,850
So by nonconventional, I mean, uh,
the, the, the insurance company had

670
00:43:41,850 --> 00:43:47,850
made investments in golf courses
and land development, and, uh, we

671
00:43:47,850 --> 00:43:52,890
actually owned some driving ranges.
So, uh, things that were not

672
00:43:53,160 --> 00:43:56,340
conventional because they,
they also had a portfolio of very

673
00:43:56,340 --> 00:44:01,350
conventional insurance investments,
loans, mostly, mostly loans, uh,

674
00:44:01,350 --> 00:44:08,940
to to apartment developers, office
retail, you know, more traditional.

675
00:44:08,940 --> 00:44:11,790
She had the non-traditional
portfolio.

676
00:44:12,690 --> 00:44:18,480
So I, um, uh, I was able to
start with her and then, you.

677
00:44:18,480 --> 00:44:22,050
Know, so was it workouts from
the get go? No, it wasn't.

678
00:44:22,050 --> 00:44:28,140
So, honestly, I sometimes
reflect that maybe this was the

679
00:44:28,140 --> 00:44:31,110
last financial services company
to get the memo that there was a

680
00:44:31,110 --> 00:44:34,560
real estate recession. Coming.
Because they were still making

681
00:44:34,560 --> 00:44:38,130
commitments. Really.
They had they had a joint venture

682
00:44:38,130 --> 00:44:44,730
with, uh, with Gleneagles out of
Scotland to build Gleneagles in

683
00:44:44,730 --> 00:44:47,580
the United States,
build Gleneagles Resorts.

684
00:44:47,910 --> 00:44:50,880
They they hired the guy who was
running the Greenbrier.

685
00:44:50,910 --> 00:44:55,200
They put him on a team, uh,
and they were going to they were

686
00:44:55,200 --> 00:44:58,350
going to build Gleneagles Resorts.
They bought the old Lake Placid

687
00:44:58,350 --> 00:45:01,500
resort in Lake Placid. Again.
This is this is like,

688
00:45:01,500 --> 00:45:04,920
like a month before I got there,
not years before I got there.

689
00:45:05,040 --> 00:45:12,780
And, um, and so when I started
that spring, they were not in

690
00:45:12,780 --> 00:45:18,540
workout mode, but and I,
I never quite understood why, but,

691
00:45:18,660 --> 00:45:26,010
um, by July, she was let go and
they merge the two portfolios,

692
00:45:26,160 --> 00:45:30,900
and it then was treated as a,
as a workout portfolio.

693
00:45:30,930 --> 00:45:35,790
The team that was running the
more traditional portfolio took

694
00:45:35,790 --> 00:45:41,280
on the whole portfolio.
Um, I, you know, I as I said,

695
00:45:41,280 --> 00:45:45,210
I worked in the, in the on Fridays
and during my spring break and on a

696
00:45:45,210 --> 00:45:48,930
Saturday I graduated in Saturday
in May, I graduated from Wharton.

697
00:45:48,930 --> 00:45:52,890
And on Monday I came here and went
to, went to work, actually in this

698
00:45:52,890 --> 00:45:56,370
building on the seventh floor.
Really where we sit here.

699
00:45:56,370 --> 00:45:59,340
Absolutely. 100 live stream.
We she was on the seventh floor.

700
00:45:59,370 --> 00:46:04,440
That's where I, where I worked.
And um, and then they merged our

701
00:46:04,440 --> 00:46:09,300
two groups that the, uh,
the group that that inherited our

702
00:46:09,300 --> 00:46:13,140
portfolio was, uh, very receptive
to having me work for them.

703
00:46:13,140 --> 00:46:17,700
I suppose they didn't have to be,
but they but they were. And, um.

704
00:46:17,700 --> 00:46:19,710
That's right.
This building was the USF and G

705
00:46:19,710 --> 00:46:21,750
building wasn't the USF.
And G building. Right.

706
00:46:22,110 --> 00:46:26,250
And, um, so that's July of 1990.
Yeah.

707
00:46:26,250 --> 00:46:31,440
By November of 1990,
the the CEO who ran the business,

708
00:46:31,440 --> 00:46:35,400
he gets replaced by, uh,
got my name and Norm Blake.

709
00:46:35,640 --> 00:46:40,740
So Norm came from Heller,
and they recruited him to stabilize

710
00:46:40,740 --> 00:46:43,110
the insurance company and hopefully,
you know,

711
00:46:43,110 --> 00:46:48,060
rebuild it into into something again.
Uh, but it was it was a very

712
00:46:48,060 --> 00:46:52,800
difficult time for, uh,
for the insurance company and, uh,

713
00:46:52,800 --> 00:46:56,940
really a great experience for me,
um, to, to be involved in,

714
00:46:56,940 --> 00:47:01,110
in workouts, as you know,
it actually is a fantastic way

715
00:47:01,110 --> 00:47:05,310
to learn our industry. It is.
You know, I was young, young men and

716
00:47:05,310 --> 00:47:09,660
women call me sometimes and they ask,
you know, about career opportunities.

717
00:47:09,660 --> 00:47:13,890
And more recently I told them,
I said, look, we very well may be

718
00:47:13,890 --> 00:47:17,820
heading into a period where there's a
lot of workouts that we know there's

719
00:47:17,820 --> 00:47:21,870
going to be an office period, right?
But they're very well may be in

720
00:47:21,870 --> 00:47:26,670
some other asset classes.
So be on the lookout for special

721
00:47:26,670 --> 00:47:31,410
servicers or banks that are standing
up, you know, work out departments.

722
00:47:31,500 --> 00:47:35,040
Uh, we're, uh,
Maryland National Bank created

723
00:47:35,040 --> 00:47:39,240
basically like a bad bank. Charles.
You know, Charles Charles Realty.

724
00:47:39,240 --> 00:47:42,540
Baltimore. Right.
Um, and right over in that

725
00:47:42,690 --> 00:47:47,070
building near us and, um,
and that's a fantastic experience.

726
00:47:47,070 --> 00:47:49,920
It's a really great way to learn
the business.

727
00:47:49,920 --> 00:47:52,470
You learn valuation,
learn negotiation.

728
00:47:52,470 --> 00:47:56,340
You have to read a lot of documents,
which, as it turns out, is really

729
00:47:56,340 --> 00:48:00,420
important to our profession.
Well, you also have to figure out how

730
00:48:00,420 --> 00:48:05,190
to unwind deals that were structured,
uh, certain ways that no longer

731
00:48:05,190 --> 00:48:09,720
make any sense. Right. Right.
So and then figuring out you know

732
00:48:09,720 --> 00:48:14,280
so this pro forma doesn't work.
So we make one that does.

733
00:48:14,280 --> 00:48:17,850
And what do we have to do to adjust
it to make it make it pencil.

734
00:48:17,850 --> 00:48:20,910
And you just have to rewrite the
business plan of the property every

735
00:48:20,910 --> 00:48:26,340
time. And it's it's a challenge.
So but it's the it's the one upside

736
00:48:26,820 --> 00:48:31,590
for a young person's career when we
enter into a down market. Right.

737
00:48:31,590 --> 00:48:35,070
The one upside is that a lot of
workout firms are probably going

738
00:48:35,070 --> 00:48:38,520
to be hiring.
And it's it's a good experience

739
00:48:38,520 --> 00:48:42,420
in my opinion. Yeah.
So you were with USF and G for a

740
00:48:42,420 --> 00:48:48,300
couple of years and uh, then what?
Well, when I was looking for a

741
00:48:48,300 --> 00:48:53,520
job coming out of Wharton, I said
letters to lots of organizations in

742
00:48:53,520 --> 00:48:59,340
Baltimore and all around the country.
Uh, but one of them ended up, uh,

743
00:48:59,340 --> 00:49:02,910
with a guy named John Prew who
was running Alex Brown Realty at

744
00:49:02,910 --> 00:49:07,140
the time. And he was very nice.
He responded to me, actually called

745
00:49:07,140 --> 00:49:10,170
me today. I got your resume.
I'm not hiring,

746
00:49:10,410 --> 00:49:12,450
but I saw your resume.
I thought I'd give you a call,

747
00:49:12,450 --> 00:49:16,590
and, uh, uh, you know, told me a
little bit about the business.

748
00:49:16,590 --> 00:49:20,490
So when I moved here, I looked him
up and went to lunch with him.

749
00:49:20,490 --> 00:49:26,040
And then the summer of 92,
I kind of re-engaged with them.

750
00:49:26,130 --> 00:49:30,630
And he had just had a, um,
an asset manager leave.

751
00:49:30,630 --> 00:49:35,010
She she was working at the firm,
and I left to move to, uh,

752
00:49:35,040 --> 00:49:38,280
to Tennessee with her husband.
And he said, so I'm going to be

753
00:49:38,280 --> 00:49:41,460
hiring another asset manager.
And I thought, well,

754
00:49:41,460 --> 00:49:46,590
I'm working for an insurance company
that's trying to preserve capital.

755
00:49:46,800 --> 00:49:49,980
And this is a group,
a private company that's going

756
00:49:49,980 --> 00:49:53,610
to deploy capital.
Uh, John and some partners had

757
00:49:53,610 --> 00:49:57,030
taken the firm private from the
old Alex Brown and Sons investment

758
00:49:57,030 --> 00:49:59,400
banks that have started by an
old investment bank.

759
00:49:59,400 --> 00:50:04,500
And then the year before, they had
taken it private and with a plan to

760
00:50:04,500 --> 00:50:08,520
take advantage of the distress in the
market and raise capital and, uh,

761
00:50:08,520 --> 00:50:12,570
and, and acquire assets and build,
build a portfolio.

762
00:50:12,870 --> 00:50:16,530
So it just looked like a very
different, uh, opportunity for me.

763
00:50:16,530 --> 00:50:19,410
So,
so talk about the cultural change.

764
00:50:19,410 --> 00:50:23,130
And then and then after that,
tell me about the history of Alex

765
00:50:23,130 --> 00:50:27,330
Brown Realty and how it all was
formed originally before the taking

766
00:50:27,330 --> 00:50:30,390
private and all the evolution of
it since then, if you can.

767
00:50:30,390 --> 00:50:35,130
Well, the cultural change,
I think was in some ways it's

768
00:50:35,130 --> 00:50:41,310
related to large versus small
and in some ways related to, uh,

769
00:50:41,580 --> 00:50:48,300
the circumstances of one company and
where they are, uh, in their kind of

770
00:50:48,300 --> 00:50:53,310
financial condition versus another.
So USF and G at the time was

771
00:50:53,310 --> 00:50:57,690
trying to re stabilize themselves.
I remember having lunch with

772
00:50:57,690 --> 00:50:59,940
Norm black.
So Norm black um,

773
00:51:00,150 --> 00:51:06,960
was really a great leader.
Interesting guy. He would have lunch.

774
00:51:06,960 --> 00:51:10,530
You could have lunch with them.
Um, on the on the 17th floor of

775
00:51:10,530 --> 00:51:12,720
this building,
there's a cafeteria and you could

776
00:51:12,720 --> 00:51:14,580
sign up to have lunch with them.
And I don't know how,

777
00:51:14,580 --> 00:51:17,040
like once a month, he would just
have lunch with whoever signed up

778
00:51:17,040 --> 00:51:19,680
so you could sit at a table like
you and I are sitting right here

779
00:51:19,680 --> 00:51:25,530
and sit with the CEO of a large
public insurance company, and I think

780
00:51:25,530 --> 00:51:29,370
he had been there about a year.
And I remember asking him, I said,

781
00:51:29,490 --> 00:51:33,480
I'm sure you did a lot of research,
you know, on on the company

782
00:51:33,480 --> 00:51:36,360
before you accepted the job.
What's been what was your

783
00:51:36,360 --> 00:51:39,510
biggest surprise?
He said, I did a ton of research and

784
00:51:39,510 --> 00:51:43,830
he was a he was a financial manager.
He worked at GE capital, worked at

785
00:51:43,830 --> 00:51:47,520
Heller. Brilliant guy. He said.
I did a lot of research,

786
00:51:47,760 --> 00:51:50,160
went through all the financial
statements, poured over them.

787
00:51:50,160 --> 00:51:53,880
I had no idea how close to
bankruptcy we were. Wow.

788
00:51:53,880 --> 00:51:58,320
And he stabilized the company,
brought some capital in, um,

789
00:51:59,400 --> 00:52:04,530
disgorged themselves of some
non-profitable lines and began

790
00:52:04,530 --> 00:52:08,580
to re stabilize the company.
But all of that was sort of

791
00:52:08,580 --> 00:52:11,040
rolling through.
Every department,

792
00:52:11,040 --> 00:52:13,980
including the real estate department,
is just a lot of turmoil.

793
00:52:14,430 --> 00:52:17,760
Um, and you sort of sense it a
little bit.

794
00:52:17,760 --> 00:52:20,490
I think people there was a sense
of just a little bit of a sense

795
00:52:20,490 --> 00:52:25,020
of anxiety and uncertainty, uh,
you know, kind of month after month,

796
00:52:25,020 --> 00:52:29,790
day after day.
Um, whereas when I went to to

797
00:52:30,240 --> 00:52:33,510
Alex Brown Realty,
they had just bought themselves

798
00:52:33,510 --> 00:52:37,650
from the investment bank, uh, they,
they had raised some capital to,

799
00:52:38,250 --> 00:52:41,430
uh, to deploy around a couple of
strategies. One was parking lots.

800
00:52:41,430 --> 00:52:45,210
They had actually raised two to
through two public limit, uh,

801
00:52:45,210 --> 00:52:48,360
limited partnership offerings.
They were acquiring parking lots

802
00:52:48,360 --> 00:52:51,210
all around the country.
Uh, they were they had they had

803
00:52:51,210 --> 00:52:53,610
clients that they were raising
capital through the old Alex

804
00:52:53,610 --> 00:52:55,650
Brown and Sons networks.
They were still very close.

805
00:52:55,650 --> 00:52:59,610
And all the investment managers
or brokers at the firm thought

806
00:52:59,610 --> 00:53:02,940
very well of them.
So it was it was just different,

807
00:53:02,940 --> 00:53:06,300
the sense of confidence and
looking forward and.

808
00:53:07,940 --> 00:53:10,850
And just working together into
collaboration and teamwork.

809
00:53:10,850 --> 00:53:13,340
Why did they start a real estate
group in the first place?

810
00:53:13,340 --> 00:53:15,320
I guess is what I'm trying to
figure out also.

811
00:53:15,320 --> 00:53:20,780
Well, uh, remember Alex, uh,
Alex Brown and Sons was founded

812
00:53:20,780 --> 00:53:25,820
in 1800, I know, and in 19 and
run as an investment bank, uh,

813
00:53:26,000 --> 00:53:31,730
by the by the descendants of
Alexander Brown until mid-seventies.

814
00:53:31,730 --> 00:53:35,690
So in 1972, it's 172 year old
investment bank still run by the

815
00:53:35,690 --> 00:53:40,190
descendants of Alexander Brown.
And, uh, and by the way,

816
00:53:40,460 --> 00:53:43,220
like all those investment banks
are private limited partnership.

817
00:53:43,220 --> 00:53:45,680
So they're just partners of the
firm that own effectively owned

818
00:53:45,680 --> 00:53:49,460
the company.
And they created a real estate

819
00:53:49,460 --> 00:53:53,030
practice, really, to make
investments for the partners and

820
00:53:53,030 --> 00:53:59,720
the better clients of of the firm,
and started out as a, uh, as a, um,

821
00:54:00,170 --> 00:54:03,350
mostly just like a syndication shop.
People would bring us deals and

822
00:54:03,350 --> 00:54:07,160
we would we would invest in
apartments or so would.

823
00:54:07,160 --> 00:54:10,340
The partners just all put in a bunch
of dough and invest basically.

824
00:54:10,340 --> 00:54:12,650
Partners and their clients?
Yeah. Yeah. Right.

825
00:54:12,710 --> 00:54:18,050
Um, so we, we, um, when I say we
this is before, you know,

826
00:54:18,050 --> 00:54:21,830
the first 20 years before our,
before I got there, but they,

827
00:54:22,190 --> 00:54:26,330
they would execute a real estate
investment strategy.

828
00:54:26,750 --> 00:54:31,250
Interestingly, uh, it is in many ways
consistent with what we do today.

829
00:54:31,460 --> 00:54:34,640
So I'll describe what we do and
think through the things that are,

830
00:54:34,670 --> 00:54:37,760
that are very different than things
that are absolutely the same.

831
00:54:37,760 --> 00:54:41,270
So the things that are absolutely
the same are its value add.

832
00:54:41,360 --> 00:54:45,890
And we invest with real estate
operators and it's diversified.

833
00:54:45,950 --> 00:54:49,100
Things that are different is we're
not as diversified as we used to be,

834
00:54:49,100 --> 00:54:53,360
but it's it's diversified across
different property sectors and

835
00:54:53,360 --> 00:54:57,290
it's middle market sized.
And things that are a little

836
00:54:57,290 --> 00:55:01,610
different would include today.
This the transaction transactions

837
00:55:01,610 --> 00:55:04,610
are a little bit bigger than they
were when I came to the firm in 92,

838
00:55:04,610 --> 00:55:07,610
we would still write one two,
$3 million equity checks.

839
00:55:07,790 --> 00:55:11,300
Today it's closer to 10 million
on average, let's say.

840
00:55:11,660 --> 00:55:14,870
Because you know, that's still
it is middle market, you know,

841
00:55:14,870 --> 00:55:22,880
but it's lower middle market.
Um, and um, and that was it was an

842
00:55:22,880 --> 00:55:27,380
opportunity for them to, you know,
provide a product to their clients

843
00:55:27,380 --> 00:55:29,930
that, you know, is different
than than the things that they

844
00:55:29,930 --> 00:55:34,040
were they were otherwise doing.
The the gentleman that ran the

845
00:55:34,040 --> 00:55:37,880
business at the time is, you know,
like late 80s, early 90s saw the

846
00:55:37,880 --> 00:55:42,410
changes in, in the marketplace,
the distress that was coming.

847
00:55:42,410 --> 00:55:48,740
And um, and I think the firm by
then the firm had become the firm,

848
00:55:48,740 --> 00:55:51,590
meaning Alex Brown had signs it
was a public company by then.

849
00:55:51,680 --> 00:55:55,460
And they had become a very,
very active and one of the most

850
00:55:55,460 --> 00:55:59,990
prolific IPO shops.
So they took they took Microsoft

851
00:55:59,990 --> 00:56:03,410
public, they took Sun Microsystems,
Outback Steakhouse.

852
00:56:03,410 --> 00:56:08,330
I mean, they they took a lot of
brand names, public word. They did.

853
00:56:08,330 --> 00:56:12,950
At one point they merged with
Bankers Trust. So that's 1997.

854
00:56:13,040 --> 00:56:17,450
That was later. Okay.
97 they, they, they are sold really

855
00:56:17,450 --> 00:56:22,640
sold to Bankers Trust I see.
And wasn't um, it was something

856
00:56:22,640 --> 00:56:25,640
some other big institution involved
with them too. But Deutsche.

857
00:56:25,760 --> 00:56:30,500
Well then then in 99 Deutsche
Bankers Trust gets sold to Deutsche

858
00:56:30,500 --> 00:56:33,710
Bank okay. That's. Yeah okay.
And of course you probably know

859
00:56:33,710 --> 00:56:38,300
in 1998 USB and G gets sold to
Saint Paul.

860
00:56:38,390 --> 00:56:43,730
So by then they had uh by then
they had very much re stabilize.

861
00:56:43,850 --> 00:56:47,810
The insurance company had stabilized
the real estate portfolio under

862
00:56:47,810 --> 00:56:50,810
the leadership of, uh,
if you have ever met Charlie Warren.

863
00:56:51,020 --> 00:56:56,240
No, just a, just a fantastic, uh,
really a really smart investor,

864
00:56:56,240 --> 00:57:00,650
a great leader and and a really,
really good manager of people.

865
00:57:00,650 --> 00:57:03,920
So he,
he was part of the real estate team.

866
00:57:03,920 --> 00:57:07,910
And when Norm Blake came in, um,
he kind of reshuffled the team and

867
00:57:07,910 --> 00:57:13,310
had a, had Charlie serve as leader
of it. And he did a fantastic job.

868
00:57:13,310 --> 00:57:17,570
My friends that stayed, uh,
that had perfectly good careers, uh,

869
00:57:17,570 --> 00:57:21,950
with the firm um, by when they now
when they sold the firm, the sold the

870
00:57:21,950 --> 00:57:26,660
insurance company to to Saint Paul.
Um, I mean, they all they didn't

871
00:57:26,660 --> 00:57:29,720
keep I don't think any of them, they
sort of moved everybody into other

872
00:57:29,750 --> 00:57:33,230
they all went off to other careers.
Right? Sure. Um, but he did it.

873
00:57:33,230 --> 00:57:38,120
He really did an excellent job.
Uh, sort of stabilizing and then

874
00:57:38,120 --> 00:57:43,160
building, building the portfolio of
like they began to deploy capital

875
00:57:43,160 --> 00:57:48,700
again at the insurance company.
So when you joined Alex Brown,

876
00:57:49,330 --> 00:57:52,990
it was 1992. Tough market.
So what were you looking at

877
00:57:52,990 --> 00:57:57,340
doing at that time?
Well, we were still we were we were

878
00:57:57,820 --> 00:58:00,820
still managing our existing assets,
of course.

879
00:58:00,820 --> 00:58:04,720
And some of them were in, uh,
somewhat distressed condition.

880
00:58:04,720 --> 00:58:08,590
But most of what we had was
multifamily parking.

881
00:58:08,590 --> 00:58:10,870
We owned a portfolio of nursing
homes.

882
00:58:11,590 --> 00:58:16,120
Um, we didn't own a lot of office.
We didn't own a lot of retail,

883
00:58:16,120 --> 00:58:19,390
which were, you know, there's just
like today office in particular

884
00:58:19,930 --> 00:58:22,420
back then for different reasons.
But, you know,

885
00:58:22,420 --> 00:58:28,090
that was that was really struggling.
So, um, it wasn't it wasn't a

886
00:58:28,090 --> 00:58:32,620
workout portfolio.
Uh, as distressed as I think

887
00:58:32,620 --> 00:58:34,780
others might have been,
one of the things the firm never

888
00:58:34,780 --> 00:58:38,800
did is you recall there was a
time when a lot of investment was

889
00:58:38,800 --> 00:58:42,070
made for tax purposes. Oh, yeah.
If you buy something, you'll

890
00:58:42,070 --> 00:58:46,990
leverage it way up and you generate
extremely large. Syndicates, write.

891
00:58:47,140 --> 00:58:51,130
Extremely large tax losses to your
your clients, who can then use

892
00:58:51,130 --> 00:58:55,150
those to offset, um, you know,
offset their ordinary income.

893
00:58:55,150 --> 00:58:59,620
Well, by the time the 1986 tax law
passes, you really can't do that.

894
00:58:59,770 --> 00:59:03,100
And the firm never did that.
They never had they never had

895
00:59:03,100 --> 00:59:08,320
tax driven investment strategy.
It was always much more fundamental,

896
00:59:08,740 --> 00:59:12,760
uh, than than tax driven.
And, you know, that turns out to have

897
00:59:12,760 --> 00:59:18,340
been really fortuitous because the,
the I mean the assets at the

898
00:59:18,340 --> 00:59:21,880
time and you're in a recession.
So maybe income is down a little bit.

899
00:59:21,880 --> 00:59:27,370
But um, but it wasn't it wasn't a
blatantly distressed portfolio.

900
00:59:27,430 --> 00:59:31,630
At the same time, we were able to
raise capital to buy new assets

901
00:59:31,630 --> 00:59:35,890
and we were buying multifamily.
We did buy we bought some,

902
00:59:35,890 --> 00:59:41,410
some bank notes, um, and so forth.
But yeah, the day I came there, they

903
00:59:41,410 --> 00:59:45,190
were, I think the week I came there,
we closed on an apartment project

904
00:59:45,190 --> 00:59:50,410
in Atlanta near the airport. Um.
So you probably saw some good

905
00:59:50,410 --> 00:59:53,500
deals then when and when the
markets were sure.

906
00:59:53,500 --> 00:59:55,360
Uh, we, we did see some good
deals in hindsight.

907
00:59:55,360 --> 00:59:59,500
Those were, those were very good
years to to be deploying capital.

908
00:59:59,500 --> 01:00:03,310
And, um,
I was on the asset management side,

909
01:00:03,310 --> 01:00:06,010
so I wasn't responsible for right,
for sourcing events.

910
01:00:06,100 --> 01:00:09,550
But uh, but we we did we were
deploying capital through the

911
01:00:09,550 --> 01:00:14,830
parking portfolio as well still.
Um, um, and, and actually have

912
01:00:14,830 --> 01:00:20,020
really, really great outcomes.
So you went on to become the head of

913
01:00:20,020 --> 01:00:24,610
asset management here at the firm.
I did, you know, when I came to Alex

914
01:00:24,610 --> 01:00:31,120
Brown Realty, uh, they had built
they built a very good, good team of

915
01:00:31,120 --> 01:00:36,220
investment professionals and, and a
good asset management protocols.

916
01:00:36,670 --> 01:00:41,740
But maybe because of my accounting
background, I kind of brought in,

917
01:00:42,400 --> 01:00:47,710
um, a sense of or just the way I
do things was, you know, very,

918
01:00:47,890 --> 01:00:51,280
very organized, very methodical.
And, uh,

919
01:00:51,280 --> 01:00:54,850
there was a woman that worked there.
Her name was Pat, and she always

920
01:00:54,850 --> 01:00:58,120
laughs. She's like, you came here.
And the first thing you did was

921
01:00:58,120 --> 01:01:01,780
you created a filing system
because they didn't really have

922
01:01:01,780 --> 01:01:04,690
one fevered asset manager.
You just had a drawer full of

923
01:01:04,690 --> 01:01:08,530
everything.
And yeah, you know, I'm a little,

924
01:01:09,670 --> 01:01:12,970
uh, I like to be organized
checklist by checklist, guys.

925
01:01:12,970 --> 01:01:15,550
So I came up with a filing system,
and this is.

926
01:01:15,550 --> 01:01:18,850
And I numbered the different
sections of the file,

927
01:01:18,850 --> 01:01:23,620
and it was all paper then.
Right now it's now it's all digital,

928
01:01:23,620 --> 01:01:26,440
but it is still a filing system
for the asset managers.

929
01:01:26,860 --> 01:01:30,550
Um, but yeah, I created this because
if you were to get if you were,

930
01:01:30,550 --> 01:01:33,520
if you were to be transferred a
file like, oh, you know, you're

931
01:01:33,520 --> 01:01:37,990
now responsible for the apartment
project in Atlanta, you basically

932
01:01:37,990 --> 01:01:43,660
you got a box full of paper, right?
And I wanted the box to be organized.

933
01:01:43,690 --> 01:01:45,970
Sure.
So I, uh, that was one of the things.

934
01:01:45,970 --> 01:01:49,090
I mean, this sounds like the smallest
of things, but it was just like

935
01:01:49,570 --> 01:01:53,200
an example of things that I did.
And I really like to do. Right.

936
01:01:53,500 --> 01:01:58,030
Well, in due diligence, you know,
it helps to have things.

937
01:01:58,330 --> 01:02:00,910
You know,
I want to analyze the financials.

938
01:02:00,910 --> 01:02:03,760
I want to answer your insurance.
I want all these different things.

939
01:02:03,760 --> 01:02:08,470
You gotta you gotta know where
they are, right? Yes, yes.

940
01:02:08,620 --> 01:02:15,340
So I so slowly the whole all the
boxes got put in these these these

941
01:02:15,370 --> 01:02:20,260
these files it all it all worked out.
Um, the other thing that, uh, I,

942
01:02:20,260 --> 01:02:25,870
I did and I really brought this
from USF and G at us and g we,

943
01:02:26,080 --> 01:02:33,460
we adopted a business plan process.
So the when Norm Blake came in,

944
01:02:33,790 --> 01:02:37,330
he very quickly wanted to get
his hands around.

945
01:02:37,330 --> 01:02:43,270
What are my cash flows over the next.
You know four to you know four

946
01:02:43,270 --> 01:02:47,380
to 8 to 12 quarters I.
Need to know what my cash flows are.

947
01:02:47,530 --> 01:02:50,350
And so the only way to really do
that with your real estate

948
01:02:50,350 --> 01:02:52,810
portfolio is you've got to build
out some projections.

949
01:02:54,040 --> 01:02:57,280
And rather than have every asset
manager just build their own for

950
01:02:57,280 --> 01:02:59,770
whatever they want,
we came up with a template.

951
01:02:59,770 --> 01:03:04,000
What would it look like? Watts.
And so we built we built this

952
01:03:04,000 --> 01:03:10,360
template for a call almost like a,
like a deck of of reports that

953
01:03:10,360 --> 01:03:15,820
comprise the business plan.
And I brought that idea over to

954
01:03:15,820 --> 01:03:19,060
Alex Brown Realty, said, you know,
we we ought to do something the

955
01:03:19,060 --> 01:03:21,640
same every and every year.
We'll review these these

956
01:03:21,640 --> 01:03:23,350
business plans.
We'll put them in front of the

957
01:03:23,350 --> 01:03:28,930
management team and have them review
of what we're what we're projecting.

958
01:03:28,930 --> 01:03:33,250
That begs the question,
so before you came and did that,

959
01:03:33,760 --> 01:03:37,510
and I assume did they have a
fund at that time or was every

960
01:03:37,510 --> 01:03:42,310
asset a stand alone type deal?
And so how did they report to their

961
01:03:42,310 --> 01:03:45,850
partners and to, to, you know,
investors and it's more it.

962
01:03:45,850 --> 01:03:49,720
Was more backwards reporting.
I mean, they certainly could tell you

963
01:03:49,720 --> 01:03:55,120
what happened last quarter, right.
But they and each asset manager

964
01:03:56,020 --> 01:04:00,550
had something of a forecast for
what might happen in the future.

965
01:04:00,550 --> 01:04:04,450
But it wasn't standardized.
So when you made investments,

966
01:04:04,450 --> 01:04:07,420
how would you evaluate the I mean,
how would you value a property when

967
01:04:07,420 --> 01:04:10,120
you're looking to buy something?
We had we did have a standardized

968
01:04:10,120 --> 01:04:14,290
approach to underwriting, okay.
But the asset manager wasn't

969
01:04:14,290 --> 01:04:17,230
necessarily responsible for
maintaining that.

970
01:04:17,230 --> 01:04:19,930
They could they might have.
You didn't have a budget for the

971
01:04:19,930 --> 01:04:22,210
property. Of course.
We had a budget for the property.

972
01:04:22,210 --> 01:04:26,350
Yeah, we we had an underwriting okay.
That included a budget.

973
01:04:26,350 --> 01:04:31,570
And every year we would get new
budgets from our property managers,

974
01:04:31,570 --> 01:04:34,150
our partners, okay.
And we would review those.

975
01:04:34,810 --> 01:04:37,120
But that's a, you know,
that's the next 12 months.

976
01:04:37,120 --> 01:04:40,930
That's not the next five years.
Yeah, I got it. Okay.

977
01:04:41,350 --> 01:04:46,000
So you took more of a a
strategic approach to it than a

978
01:04:46,000 --> 01:04:48,310
tactical approach.
You were trying to say okay,

979
01:04:48,310 --> 01:04:51,310
let's look beyond that.
When are we going to sell this asset.

980
01:04:51,310 --> 01:04:54,520
What are we going to think about
doing, you know, refinancing or

981
01:04:54,520 --> 01:04:59,020
all these different things?
And how do we approve the budget?

982
01:04:59,020 --> 01:05:01,060
Right.
So an asset manager could

983
01:05:01,060 --> 01:05:03,220
approve the budget they get from
the property manager.

984
01:05:03,220 --> 01:05:06,400
But maybe the thing to do is for the
asset manager to take that budget,

985
01:05:07,420 --> 01:05:10,930
uh, certainly provide their initial
comments to the property manager,

986
01:05:10,930 --> 01:05:17,830
but roll that up into an updated
forecast of our ownership plan and

987
01:05:17,830 --> 01:05:21,460
then take that and their other
assets and present them to the

988
01:05:21,460 --> 01:05:26,140
management team for their review and
understanding and, and approval.

989
01:05:26,740 --> 01:05:32,680
Um, and and so that's we slowly
migrated into to that.

990
01:05:32,680 --> 01:05:36,160
I initially I was the only one
that did business plans and then

991
01:05:36,160 --> 01:05:39,430
eventually other asset managers.
So you basically turned this,

992
01:05:39,760 --> 01:05:42,130
this company into an
institutional investor.

993
01:05:42,130 --> 01:05:45,040
In essence, when you came here.
That's how I didn't know I was

994
01:05:45,040 --> 01:05:46,870
doing that.
I was just trying to be really

995
01:05:46,870 --> 01:05:50,530
organized. That's what you did.
Um, yeah.

996
01:05:51,250 --> 01:05:56,560
Well, and it was, it was I will say
it was very much embraced by the,

997
01:05:56,590 --> 01:06:00,070
by the management team.
They, you know, it wasn't like I was,

998
01:06:00,070 --> 01:06:04,030
you know, pushing up, you know, a
rock up a hill. It was very embrace.

999
01:06:04,030 --> 01:06:08,890
It all made sense to them.
Um, it if I had an idea that maybe it

1000
01:06:08,890 --> 01:06:13,300
was a little far reaching and like,
they helped balance out, uh,

1001
01:06:13,720 --> 01:06:17,860
the, you know, overarching ideas
on how to be organized.

1002
01:06:18,130 --> 01:06:20,710
And it it worked out, I think,
really well.

1003
01:06:20,710 --> 01:06:26,890
And it allowed us uh, by, you know,
by 2005, we had begun to organize

1004
01:06:26,890 --> 01:06:30,040
our clients into funds instead
of single asset syndications.

1005
01:06:30,040 --> 01:06:33,190
And the first funds in the mid
to late 80s and mid to late 90s

1006
01:06:33,190 --> 01:06:36,670
were very, very small,
like 20 million or 40 million.

1007
01:06:37,270 --> 01:06:42,190
Um, in 2005, we launched what we
hoped would be an institutional fund.

1008
01:06:42,190 --> 01:06:47,470
So we went out to raise $250 million.
We raised 255 million.

1009
01:06:47,950 --> 01:06:50,890
The capital was dominated by
institutional investors.

1010
01:06:50,890 --> 01:06:55,990
And to your point,
we had to present an institutional

1011
01:06:55,990 --> 01:07:00,640
plat looking platform and protocols
and the way we do things and,

1012
01:07:01,150 --> 01:07:04,510
um, the the best way to think of
is like repeatable processes.

1013
01:07:04,510 --> 01:07:06,550
We do the same thing over and
over again.

1014
01:07:06,700 --> 01:07:10,000
And reporting had to be somewhat
standardized, right,

1015
01:07:10,000 --> 01:07:12,910
for your investors.
So we, we we did upgrade our

1016
01:07:12,910 --> 01:07:17,590
reporting, uh, over time at the
get back to single asset

1017
01:07:17,590 --> 01:07:23,170
syndications in the 90s, early 90s.
Um, we would as an asset manager,

1018
01:07:23,170 --> 01:07:25,270
you would write the report to
the investor, the quarterly

1019
01:07:25,270 --> 01:07:31,120
report at what their protocol at
the time was just a letter.

1020
01:07:31,120 --> 01:07:37,240
And I introduced the idea of a
letter with with some boxes that

1021
01:07:37,240 --> 01:07:43,030
were financial statements in write.
So narrative plus of financial

1022
01:07:43,030 --> 01:07:47,110
reporting and.
And then by the time we launched

1023
01:07:47,110 --> 01:07:51,940
our funds,
we created a an investor reporting

1024
01:07:51,940 --> 01:07:57,070
team and an investor relations team.
And they took over reporting and

1025
01:07:57,070 --> 01:08:02,020
have done a fantastic job actually.
Well that's interesting.

1026
01:08:02,380 --> 01:08:09,820
So, uh, that's about the time we met.
Yeah, around 2004 or 5,

1027
01:08:09,820 --> 01:08:12,850
something like that.
That's, uh, you know,

1028
01:08:13,660 --> 01:08:17,650
you were on the radar screen for
people then to bring deals, you know,

1029
01:08:17,950 --> 01:08:20,890
potential partners to at that time,
I don't know when you started

1030
01:08:20,890 --> 01:08:24,730
actively marketing it,
but obviously you had relationships

1031
01:08:24,730 --> 01:08:29,050
you were building and and, you know,
what was your at that time?

1032
01:08:29,050 --> 01:08:31,300
Just out of curiosity,
what was your AUM at that point?

1033
01:08:31,300 --> 01:08:35,260
Did you know, do you know, offhand or
not? Uh, that's a good question.

1034
01:08:35,260 --> 01:08:40,180
I would tell you that our, uh,
our the number of assets that we had,

1035
01:08:40,960 --> 01:08:48,010
we probably had probably 70 assets.
Um, some of them, you know, some of

1036
01:08:48,010 --> 01:08:51,880
them were small, some were larger.
You know, the parking assets were

1037
01:08:51,880 --> 01:08:56,020
actually pretty small, right?
They might be 2 or 3 or $4 million.

1038
01:08:56,020 --> 01:09:00,250
Just garages or what?
We owned 28 lots in garages all

1039
01:09:00,250 --> 01:09:02,830
around the country in that portfolio.
Mhm.

1040
01:09:03,610 --> 01:09:07,810
Um,
we have probably 70 very diversified,

1041
01:09:07,810 --> 01:09:12,640
including categories that, uh,
that we don't invest in anymore,

1042
01:09:12,910 --> 01:09:15,970
like commercial land or
residential land or. Right.

1043
01:09:15,970 --> 01:09:19,900
We want someone to nine hole
golf course in Manassas,

1044
01:09:20,890 --> 01:09:27,790
which I don't recommend. No. Uh.
So then you evolved into the

1045
01:09:27,790 --> 01:09:31,300
acquisitions area to talk about
how that transition occurred and

1046
01:09:31,300 --> 01:09:34,990
why what happened there?
Well, uh, you know,

1047
01:09:34,990 --> 01:09:38,740
I've been running the asset
management team as a player coach.

1048
01:09:38,740 --> 01:09:42,700
I had my own portfolio of assets,
but I was responsible for for

1049
01:09:42,700 --> 01:09:44,380
managing the team.
And it's a, by the way,

1050
01:09:44,380 --> 01:09:49,720
it's a small team is 3 or 4 people.
Um, and then John had asked me

1051
01:09:49,720 --> 01:09:55,840
to to work on acquisitions,
and initially, uh, he would just

1052
01:09:55,840 --> 01:09:59,290
refer people to me because I,
I didn't know anybody that would

1053
01:09:59,290 --> 01:10:01,720
want to use our capital unless
they were already a partner.

1054
01:10:01,840 --> 01:10:05,020
But people would find their way to
us, and John would he asked me to

1055
01:10:05,020 --> 01:10:09,850
work on something and underwrite it,
and I ended up all my earliest

1056
01:10:09,850 --> 01:10:13,900
acquisitions that I was
responsible for were in mostly

1057
01:10:13,900 --> 01:10:17,590
Florida or or California.
We had we had never really done

1058
01:10:17,590 --> 01:10:22,330
any investing in California.
And I went out there in 1989,

1059
01:10:22,330 --> 01:10:28,150
and like a lot of things,
it was it was somebody we knew in

1060
01:10:28,150 --> 01:10:33,070
California who said, you should come
out and meet these these folks.

1061
01:10:33,070 --> 01:10:36,220
If you if you're looking for
interesting opportunities to

1062
01:10:36,220 --> 01:10:38,860
deploy capital around.
I think in that case, actually,

1063
01:10:38,860 --> 01:10:41,860
it was a guy at Alex Brown and
Sons in San Francisco.

1064
01:10:41,860 --> 01:10:45,070
So we were still very close to
the old investment bank.

1065
01:10:46,120 --> 01:10:51,730
Um, but I went out to, uh,
to to California, I remember and

1066
01:10:51,730 --> 01:10:55,720
I went to San Francisco and then
I went to, uh, Orange County,

1067
01:10:55,840 --> 01:11:00,220
you know, throughout the 4 or 5,
six months back and forth and

1068
01:11:00,220 --> 01:11:03,250
ended up doing a lot of business
in California over the years.

1069
01:11:03,640 --> 01:11:06,520
We ended up building a good
sized portfolio out there.

1070
01:11:06,520 --> 01:11:12,580
We have one partner, in fact, that
we first transacted with in 1998.

1071
01:11:12,610 --> 01:11:14,770
Uh, we bought some flex
industrial with them,

1072
01:11:14,770 --> 01:11:18,190
and we still own an asset with them.
We been working with them ever

1073
01:11:18,190 --> 01:11:22,210
since 25 years.
So yeah, it's been a great,

1074
01:11:22,480 --> 01:11:25,390
great experience.
They they like a lot of our partners.

1075
01:11:25,390 --> 01:11:28,600
When I met them,
I would say they were pretty small.

1076
01:11:28,600 --> 01:11:32,080
They was all friends and family.
And they were, uh, we think of them

1077
01:11:32,080 --> 01:11:38,080
today as an emerging operator. Right.
And, and, uh, and then we bought

1078
01:11:38,080 --> 01:11:41,110
a lot of assets with them,
had fantastic outcomes.

1079
01:11:41,110 --> 01:11:47,500
And about 3 or 4 years ago,
they wanted to build their portfolio,

1080
01:11:47,500 --> 01:11:50,830
you know, really reset what they
were doing and ended up with a $250

1081
01:11:50,830 --> 01:11:54,730
million commitment from Almanack,
which I'm delighted for them.

1082
01:11:54,730 --> 01:11:57,370
I'm I miss working with them as
much as I used to.

1083
01:11:57,370 --> 01:12:01,990
Although we're, we're we're great
friends, but they've really evolved.

1084
01:12:01,990 --> 01:12:05,590
And that's not uncommon for some of
the, the partners that we've worked

1085
01:12:05,590 --> 01:12:08,620
with over the years that they've
sort of started friends and family,

1086
01:12:08,620 --> 01:12:13,540
and we help them transition to
more institutional like capital

1087
01:12:13,540 --> 01:12:16,210
and grow their businesses.
And sometimes they outgrow us.

1088
01:12:16,210 --> 01:12:18,220
Sometimes we're still with them.
Right?

1089
01:12:18,370 --> 01:12:21,310
Sometimes a little bit of both.
Well, because of the size of

1090
01:12:21,310 --> 01:12:24,610
your investments and you're a
middle market investor,

1091
01:12:24,760 --> 01:12:30,520
you're you're probably, uh, you know,
breaking the cherry of a lot of

1092
01:12:30,970 --> 01:12:34,360
developer operators with regard
to institutional relationships,

1093
01:12:34,360 --> 01:12:37,840
I'm guessing, am I? Oh, I.
Think that's very that's very true.

1094
01:12:37,840 --> 01:12:44,500
I think I think we have been a
resource to those sized, uh,

1095
01:12:44,500 --> 01:12:47,890
managers.
Operators who again get just get

1096
01:12:47,890 --> 01:12:54,970
exhausted by trying to raise money
from friends and family want or kind

1097
01:12:54,970 --> 01:12:58,300
of outrun the amount of capital
that they have at some point,

1098
01:12:58,300 --> 01:13:02,530
if they maybe, maybe their their
network can support one transaction a

1099
01:13:02,530 --> 01:13:05,800
year of 5 or 6 million of equity,
but not three.

1100
01:13:06,100 --> 01:13:09,910
It's interesting, you know, our
industry doesn't have a quote unquote

1101
01:13:09,970 --> 01:13:17,710
venture capital source really per se.
But your, your firm and, and and I've

1102
01:13:17,710 --> 01:13:22,690
been involved in with a lot of firms.
Your firm seems as close to that

1103
01:13:22,690 --> 01:13:25,090
as any other firm that I know in
the equity side.

1104
01:13:25,180 --> 01:13:27,550
You know,
as far as equity investment, um,

1105
01:13:28,300 --> 01:13:32,080
because you'll look at a company
that has they've done a few deals,

1106
01:13:32,080 --> 01:13:35,530
but all friends and family,
and it's just it's a different

1107
01:13:35,530 --> 01:13:38,530
environment, as you well know,
you structure a deal differently

1108
01:13:38,740 --> 01:13:41,740
than a friends and family deal.
Structure is going to be on the

1109
01:13:41,740 --> 01:13:43,570
equity side, right.
You know,

1110
01:13:43,570 --> 01:13:49,000
you're you may be able to as a as a
friends and family sponsor, be able

1111
01:13:49,000 --> 01:13:52,660
to charge all the fees you want.
And they don't know any different.

1112
01:13:52,660 --> 01:13:56,800
Right? Right. You sit down with Alex.
You know they are right.

1113
01:13:56,980 --> 01:14:00,250
No, I don't think they're going to
get that fee on this deal. Right.

1114
01:14:00,250 --> 01:14:05,260
So talk about how that transition
occurs and how you educate people

1115
01:14:05,440 --> 01:14:08,950
coming out of the friends and family
environment into what you do.

1116
01:14:09,280 --> 01:14:12,010
Well, we've done that a lot.
I've certainly done it my whole

1117
01:14:12,010 --> 01:14:16,360
career working with, uh,
what I'll refer to as emerging

1118
01:14:16,360 --> 01:14:22,000
operators. Right.
And sharing with them how how

1119
01:14:22,000 --> 01:14:24,310
this works.
How would it how would it be working

1120
01:14:24,310 --> 01:14:29,230
with an institutional operator and
getting them to appreciate that

1121
01:14:29,230 --> 01:14:33,670
their, their current compensation
is almost certainly going to be

1122
01:14:33,670 --> 01:14:36,460
less than what they could get
out of their friends and family.

1123
01:14:37,210 --> 01:14:40,390
The trade off is, and it's for
them to make the decision whether

1124
01:14:40,390 --> 01:14:43,600
the trade off is worth it.
But the trade off is they get an

1125
01:14:43,600 --> 01:14:49,600
investor who is in the market almost
always, uh, is very anxious to see

1126
01:14:49,600 --> 01:14:52,930
other opportunities from them.
And, you know,

1127
01:14:52,930 --> 01:14:57,400
we we rarely get credit for this.
Uh, when we meet somebody,

1128
01:14:57,400 --> 01:14:59,290
you have to be in business with
us for a while.

1129
01:14:59,290 --> 01:15:03,820
But eventually, uh, I think our
operating partners appreciate us

1130
01:15:03,820 --> 01:15:07,390
as as a strategic partner,
not just financial partner.

1131
01:15:07,540 --> 01:15:10,450
So, as you know, we're investing in
value add deals, which means we're

1132
01:15:10,450 --> 01:15:15,460
going to buy something and execute
a business plan that has a lot of

1133
01:15:15,850 --> 01:15:19,510
points of problems along the way.
Not everything is going to work out

1134
01:15:19,900 --> 01:15:21,970
according to the business plan.
It never does.

1135
01:15:21,970 --> 01:15:25,600
And so there's going to be tons
of decision points that we're

1136
01:15:25,600 --> 01:15:29,410
gonna have to all weigh in on.
And we've been through a lot of

1137
01:15:29,410 --> 01:15:33,040
those decisions,
and we have a lot of experience with

1138
01:15:33,040 --> 01:15:38,290
a very talented, uh, team here,
and we can make a lot of great

1139
01:15:38,290 --> 01:15:42,460
contributions around those decisions.
When we go to sell it,

1140
01:15:42,460 --> 01:15:46,030
sell the asset, we we have a lot
of experience selling assets.

1141
01:15:46,030 --> 01:15:52,390
I since I've been here,
we bought and sold 200 things.

1142
01:15:52,540 --> 01:15:55,000
We have a lot of experience in
doing this.

1143
01:15:55,000 --> 01:16:01,870
And we have a legal team that is
very hands on, very helpful, uh,

1144
01:16:01,870 --> 01:16:04,810
negotiating contracts and loan
documents.

1145
01:16:05,500 --> 01:16:08,860
So we get a lot of credit for that.
But never when you're meeting

1146
01:16:08,860 --> 01:16:11,050
somebody across the table for
the first time, they're just not

1147
01:16:11,050 --> 01:16:14,260
going unless maybe they've talked
to some of our existing partners.

1148
01:16:14,260 --> 01:16:16,420
They're probably not going to
appreciate that.

1149
01:16:16,420 --> 01:16:19,600
So you have to and you you can't
talk them into it.

1150
01:16:19,600 --> 01:16:22,900
You explain that a little bit.
But mostly what they're interested

1151
01:16:22,900 --> 01:16:25,870
in is your is your capital.
And then you share with them how

1152
01:16:25,870 --> 01:16:28,240
you could help them grow their
business and what we've done for,

1153
01:16:28,720 --> 01:16:32,530
uh, for others.
But yeah, I, I and others in the firm

1154
01:16:32,530 --> 01:16:38,320
have had the conversation with folks
around their compensation, um, a lot.

1155
01:16:38,770 --> 01:16:42,100
Well, you know,
consistency is important.

1156
01:16:42,100 --> 01:16:47,080
And, you know, that's one thing.
And as almost every sponsor that's

1157
01:16:47,080 --> 01:16:51,250
getting into the sponsorship
business and becoming an operator,

1158
01:16:51,280 --> 01:16:54,730
the hardest thing for them to do,
and several of my guests said it

1159
01:16:54,730 --> 01:16:58,990
when they started up, is raising
capital and going to partners to,

1160
01:16:59,020 --> 01:17:02,380
you know, believe me,
I'm going to get this done.

1161
01:17:02,380 --> 01:17:07,480
You know, it's really a tough sell.
Um, you know, sometimes it's out

1162
01:17:07,480 --> 01:17:10,090
of the goodness of their heart
because they, they believe in

1163
01:17:10,090 --> 01:17:14,140
their children or their friend,
but it's a little harder.

1164
01:17:14,140 --> 01:17:18,610
So you have to screen that because
you're looking at, oh, well, they've

1165
01:17:18,610 --> 01:17:21,190
done it with friends and family.
They've had a couple of deals they've

1166
01:17:21,190 --> 01:17:26,170
done well with, but you're kind of
whereas somebody like Prudential

1167
01:17:26,170 --> 01:17:30,670
or some of the big investors say,
well, you need a big track record.

1168
01:17:30,670 --> 01:17:33,490
We have to see that you've
turned assets and done a lot of

1169
01:17:33,490 --> 01:17:35,950
things before.
We're going to sit down and do,

1170
01:17:36,160 --> 01:17:39,970
you know a joint venture with you?
Well, it's a good it's a good point.

1171
01:17:39,970 --> 01:17:45,940
When John asked me to begin working
in acquisitions. He. Uh, he.

1172
01:17:45,940 --> 01:17:50,590
He told me early on, he said.
He said, look, you you're going

1173
01:17:50,590 --> 01:17:54,370
to be great at underwriting and
modeling and diligence,

1174
01:17:54,520 --> 01:17:58,810
but the part you also have to become
great at is assessing character,

1175
01:17:58,990 --> 01:18:03,100
because we're partners with these
people, and we're going to have legal

1176
01:18:03,100 --> 01:18:05,800
documents that say they have to
do this, and we have to do that,

1177
01:18:05,800 --> 01:18:09,010
and we get the right to do that
no matter what they think.

1178
01:18:09,010 --> 01:18:13,540
But none of that's going to matter.
You need you need to assess people

1179
01:18:13,540 --> 01:18:18,100
to size people up and figure out
do or they have good character,

1180
01:18:18,100 --> 01:18:20,530
or are they going to be are they
going to be a fiduciary for our

1181
01:18:20,530 --> 01:18:24,580
capital the way we are a fiduciary
for our clients capital?

1182
01:18:24,580 --> 01:18:27,340
Are they going to be reasonable
or are they ill tempered?

1183
01:18:27,730 --> 01:18:30,970
Uh, are they going to are they
going to be fair when you when

1184
01:18:30,970 --> 01:18:35,080
you go to work with them,
are they going to be responsive?

1185
01:18:35,080 --> 01:18:39,910
Just communicate with you and
you have to figure that out.

1186
01:18:40,270 --> 01:18:43,930
It's really important.
And one of the things all of us

1187
01:18:43,930 --> 01:18:47,920
at the firms, you know, that,
you know, benefited from was the

1188
01:18:47,920 --> 01:18:53,230
leadership here behave that way.
It's just a these John and the

1189
01:18:53,230 --> 01:18:58,210
people that ran the firm.
And Alex Branson's was this way

1190
01:18:58,240 --> 01:19:03,460
very fair, very strong fiduciary
responsibilities.

1191
01:19:03,580 --> 01:19:09,430
Client first was was everything
um very good at communication,

1192
01:19:10,960 --> 01:19:15,100
very responsive.
So something comes up, you just tell

1193
01:19:15,100 --> 01:19:20,320
them you just you just work it out.
Transparent a lot of transparency.

1194
01:19:20,320 --> 01:19:23,800
And, uh, so we had like it had
been modeled for us.

1195
01:19:23,800 --> 01:19:27,340
So when when we go to look,
look for it, we have a sense of

1196
01:19:27,340 --> 01:19:30,730
what it looks like.
And I'd like to think that those who

1197
01:19:30,730 --> 01:19:34,990
interacted with us saw it as well,
and which is why we we have a

1198
01:19:34,990 --> 01:19:39,340
lot of repeat business.
But like all of us do,

1199
01:19:39,370 --> 01:19:43,120
there are blind spots occasionally.
So I'm guessing that once or

1200
01:19:43,120 --> 01:19:47,740
twice you made a mistake.
I definitely have, yes, yes,

1201
01:19:47,740 --> 01:19:51,310
we have made. I have made mistakes.
I've made mistakes on that

1202
01:19:51,310 --> 01:19:56,290
assessment. Um.
So is it a gut feeling?

1203
01:19:56,290 --> 01:19:59,590
Are there assessments?
You know, you ask people to take

1204
01:19:59,590 --> 01:20:03,910
some kind of an exam or, uh,
do you put you ask them certain

1205
01:20:03,910 --> 01:20:06,100
questions to kind of get a sense
of their character.

1206
01:20:06,100 --> 01:20:08,950
How do you do that evaluation,
out of curiosity?

1207
01:20:10,090 --> 01:20:12,580
Uh, it'd be great if there was a
test would be given.

1208
01:20:12,580 --> 01:20:16,660
I hadn't thought about that. Right.
Uh, now, the best way is to

1209
01:20:16,660 --> 01:20:19,330
spend time with them.
Spend time with them,

1210
01:20:19,330 --> 01:20:23,260
get to know them.
Uh, it's very,

1211
01:20:23,260 --> 01:20:27,640
very common for us to meet somebody,
underwrite a deal with them,

1212
01:20:28,360 --> 01:20:32,800
and not transact because we don't
like the deal or we don't like them,

1213
01:20:32,800 --> 01:20:36,010
but we're just still getting to
know them a bit.

1214
01:20:36,010 --> 01:20:40,300
And I do tell new partners this a
lot. I said, I want you to know.

1215
01:20:40,300 --> 01:20:44,890
And the partner that I mentioned that
I met in 1998, that we transacted

1216
01:20:44,890 --> 01:20:48,730
with for 25 years, we didn't do
their first their first deal.

1217
01:20:48,730 --> 01:20:51,730
I can remember I went out,
I underwrote it, I looked at it

1218
01:20:51,730 --> 01:20:55,060
and and we didn't do it.
We did the next deal.

1219
01:20:55,060 --> 01:21:01,270
So spending time with them is very,
very important in in an environment

1220
01:21:01,270 --> 01:21:05,650
where we can interact by, uh,
zoom a lot.

1221
01:21:06,340 --> 01:21:13,390
Um, I have to remind the acquisition
officers and others that don't let

1222
01:21:13,390 --> 01:21:16,600
that don't let that be a crutch,
like get out and meet people,

1223
01:21:16,600 --> 01:21:20,560
go out and hang out with them.
Um, go to a baseball game with them.

1224
01:21:20,560 --> 01:21:24,970
Just spend time with them.
And I think that's that's the

1225
01:21:24,970 --> 01:21:29,140
best way.
We almost always have folks come

1226
01:21:29,140 --> 01:21:32,770
here. So, uh, just just this week.
Yes. Yesterday.

1227
01:21:32,770 --> 01:21:39,190
Now, yesterday we had a group here,
uh, presenting an opportunity to us.

1228
01:21:39,190 --> 01:21:41,830
They said the whole team came
down and they met us,

1229
01:21:41,830 --> 01:21:45,670
and they and they get the chance
to meet our team as well.

1230
01:21:46,120 --> 01:21:54,370
So we're we're very confident that
our successes are more correlated to

1231
01:21:54,370 --> 01:21:57,190
the people we've been in business
with and the things we've acquired.

1232
01:21:57,190 --> 01:22:00,490
In fact, years ago, around the time
of the great financial crisis,

1233
01:22:00,490 --> 01:22:03,160
there was a student at the
Wharton School getting his MBA.

1234
01:22:03,160 --> 01:22:07,540
And it's like, it must have been
2009 and nobody could get a summer

1235
01:22:07,540 --> 01:22:10,870
internship. So we hired them.
I didn't really have a need for him,

1236
01:22:10,870 --> 01:22:13,540
but he was a very bright guy.
And I said, look,

1237
01:22:13,540 --> 01:22:16,360
here's what I want you to do,
go through the entire portfolio.

1238
01:22:16,900 --> 01:22:21,970
And at that time, maybe 140
transactions, I can't remember what.

1239
01:22:22,270 --> 01:22:24,910
Well, the whole the whole portfolio
there were, you know, that we had

1240
01:22:24,910 --> 01:22:30,340
bought and sold, um, by that time.
And I said, I want you to tease

1241
01:22:30,340 --> 01:22:37,300
out what were our better results.
Is it geography? Is it property type?

1242
01:22:37,960 --> 01:22:42,520
Um, is it short pole, long hold?
Um, development.

1243
01:22:42,520 --> 01:22:44,710
We do a little bit of development.
Acquisition?

1244
01:22:44,940 --> 01:22:47,790
So he goes through this whole
exercise.

1245
01:22:47,790 --> 01:22:50,580
And one of the things he did is
he looked at, um,

1246
01:22:51,180 --> 01:22:56,220
at repeat partner and the,
the only thing that came out of this,

1247
01:22:56,220 --> 01:23:00,090
because we looked across the whole
portfolio, it was there was no strong

1248
01:23:00,090 --> 01:23:05,490
correlation between property type,
geography, investment style.

1249
01:23:05,490 --> 01:23:12,300
But if you sorted by repeat partner,
it was a bit binary either.

1250
01:23:13,050 --> 01:23:17,460
Either we we had a very good
outcome or we didn't like there

1251
01:23:17,460 --> 01:23:21,990
was like like like there was no
there's no middle road.

1252
01:23:22,170 --> 01:23:25,650
Just sort of reminding you that
like who you're partners with is

1253
01:23:25,650 --> 01:23:31,320
really important.
It was it was more correlated to,

1254
01:23:31,590 --> 01:23:36,630
to partner than to property type
or geography or other or other

1255
01:23:36,630 --> 01:23:39,930
characteristics.
So your question about getting

1256
01:23:39,930 --> 01:23:44,640
to know people, we it's really
important and it's and we're not

1257
01:23:44,640 --> 01:23:47,550
going to do it over zoom. Yeah.
We got to hang out with them get

1258
01:23:47,550 --> 01:23:49,680
to know them.
I mean because you're in the

1259
01:23:49,680 --> 01:23:54,780
opportunistic real estate investment
business, it seems to me that if

1260
01:23:54,780 --> 01:23:58,290
you were walking a site, whatever
investment you're going to make

1261
01:23:58,290 --> 01:24:03,420
with them and just ask questions,
I mean, this is what I would do.

1262
01:24:03,540 --> 01:24:07,110
I mean, I would just walk the
site and say, oh, your business

1263
01:24:07,110 --> 01:24:09,030
plan says that. A lot of that.
Yeah,

1264
01:24:09,030 --> 01:24:12,900
let's how are you going to do that?
And then listen to their answers

1265
01:24:12,900 --> 01:24:15,930
very carefully.
How their how they thought it through

1266
01:24:15,930 --> 01:24:19,680
and what, you know, not only what
they're going to do immediately,

1267
01:24:19,680 --> 01:24:23,280
but what are the repercussions
of what that decision is going

1268
01:24:23,280 --> 01:24:26,580
to make going on in the future?
And what does that do long term to

1269
01:24:26,580 --> 01:24:31,440
the value of the property in your
mind? And then assess from that.

1270
01:24:31,650 --> 01:24:36,840
And then those responses are, to me,
very critical in deciding whether

1271
01:24:36,840 --> 01:24:40,440
to go forward with with somebody
on their plan or what just their

1272
01:24:40,440 --> 01:24:44,550
character about, you know, did they
really think this through or not?

1273
01:24:44,550 --> 01:24:47,070
You know, I mean, I don't know,
am I? No. No, I.

1274
01:24:47,070 --> 01:24:52,680
Think you're I think you're right on.
Uh, I when somebody sends us an

1275
01:24:52,890 --> 01:24:57,780
investment opportunity,
the acquisition officer almost

1276
01:24:57,780 --> 01:25:01,380
always ends up reviewing it and
sending a long list of questions.

1277
01:25:01,560 --> 01:25:02,970
You've seen me.
I've probably done it to you.

1278
01:25:03,390 --> 01:25:05,070
Yes. Right.
There's a long list of questions,

1279
01:25:05,070 --> 01:25:06,840
of course.
How that person responds to

1280
01:25:06,840 --> 01:25:10,590
those questions. Yes.
And whether they sound rational,

1281
01:25:10,590 --> 01:25:14,550
sincere, like, like a full answer or
whether. They know what they're.

1282
01:25:14,550 --> 01:25:19,710
Doing right is is really important.
The other thing that's telling

1283
01:25:19,710 --> 01:25:22,980
is you start to negotiate a term
sheet with somebody.

1284
01:25:23,880 --> 01:25:27,960
Now, I do respect that people
are entitled to self-interest.

1285
01:25:27,960 --> 01:25:35,310
So if you want to negotiate hard for
your self-interest, I respect that.

1286
01:25:35,700 --> 01:25:40,530
But how you go about that and
how you make your case is, is,

1287
01:25:40,530 --> 01:25:43,950
I think, really, really important.
And then there are just things

1288
01:25:43,950 --> 01:25:48,720
that we just think are not fair.
And we're we're very accustomed

1289
01:25:48,720 --> 01:25:53,160
to explaining to somebody why we
think they're not fair and just see,

1290
01:25:53,190 --> 01:25:55,890
see how they react.
And there have certainly been

1291
01:25:55,890 --> 01:26:00,600
transactions where, you know,
the myself or an acquisition officer

1292
01:26:00,600 --> 01:26:04,230
would just say, I just don't see
being in business with them.

1293
01:26:04,680 --> 01:26:08,580
And yet we, you know,
we're investing in the middle market.

1294
01:26:09,690 --> 01:26:13,710
Typical total deal size is 35
million or less.

1295
01:26:14,280 --> 01:26:18,810
If you look in any given year, 8,085%
of all transactions in the United

1296
01:26:18,810 --> 01:26:23,160
States are 35 million or less. Right?
We're in the largest part of the

1297
01:26:23,160 --> 01:26:27,780
market.
So if something doesn't feel great or

1298
01:26:27,780 --> 01:26:30,750
isn't just like, we'll just move on
to something else, we'll just pivot.

1299
01:26:30,750 --> 01:26:34,560
This is one of the great
advantages of our strategy is

1300
01:26:35,190 --> 01:26:38,310
just going to do something else.
We will find another opportunity.

1301
01:26:38,580 --> 01:26:41,460
We're not we're not desperate to
get this done.

1302
01:26:41,460 --> 01:26:43,860
We don't we don't have to be.
We'll just move on to something else.

1303
01:26:43,860 --> 01:26:46,290
Your investors know that too,
I assume.

1304
01:26:46,500 --> 01:26:51,210
So when you're doing an investment
pitch for for raising capital,

1305
01:26:51,960 --> 01:26:56,550
we're we're somewhat discerning.
And that's they want to know that.

1306
01:26:56,550 --> 01:26:59,670
And you know,
we may not get all your money out

1307
01:26:59,670 --> 01:27:04,710
right away but we will eventually.
But but you know, we want to make

1308
01:27:04,710 --> 01:27:10,260
sure because of the market we're in,
what we do is, you know,

1309
01:27:10,260 --> 01:27:14,580
requires a discernment that it's
not a it's not a slam dunk.

1310
01:27:14,790 --> 01:27:17,610
It's not a core investment,
which, you know, you can look at.

1311
01:27:17,610 --> 01:27:21,120
Oh, yeah. Well, I get this.
This is this takes a little more

1312
01:27:21,120 --> 01:27:22,920
time.
There's a business plan that takes

1313
01:27:22,920 --> 01:27:27,180
a little bit more thought, right,
to make an investment. Right? I mean.

1314
01:27:27,180 --> 01:27:33,570
And having a wide choice of
opportunities in our experience,

1315
01:27:33,570 --> 01:27:39,240
in my opinion, is one of the
greatest ways to be a good investor.

1316
01:27:39,240 --> 01:27:42,750
Just a lot to select from. Right.
And you just select the ones that

1317
01:27:42,750 --> 01:27:46,240
are seem like the most ordered.
For us to give you the outcomes

1318
01:27:46,240 --> 01:27:48,670
you're looking for way off the
others. It's.

1319
01:27:49,060 --> 01:27:52,990
But imagine we could only buy,
you know, red buildings on a

1320
01:27:52,990 --> 01:27:55,840
certain street. Yeah.
I mean, then you're sort of stuck

1321
01:27:55,840 --> 01:27:59,170
buying a bunch of red buildings
on a certain street. It's not.

1322
01:27:59,170 --> 01:28:02,320
It's it's not as much opportunity.
Well.

1323
01:28:02,620 --> 01:28:05,860
Two of the classic investors in
the United States,

1324
01:28:05,860 --> 01:28:10,090
Charlie Munger and Warren Buffett,
have a saying about investing.

1325
01:28:10,270 --> 01:28:14,950
And they just say, you know,
I just wait for my fat pitch and I'm

1326
01:28:14,950 --> 01:28:18,730
not going to swing on anything else.
So I'm just going to wait. Yeah.

1327
01:28:19,270 --> 01:28:22,690
You know, if I see an opportunity,
I'm going to take it.

1328
01:28:22,690 --> 01:28:26,620
But I'm not going to let that
opportunity has to be just right

1329
01:28:26,620 --> 01:28:29,770
there in front of me.
Um, that's their approach.

1330
01:28:29,770 --> 01:28:34,120
You might be a little more not
quite as discerning as that, but,

1331
01:28:34,120 --> 01:28:37,600
you know, it's it's interesting.
You want to avoid mistakes as

1332
01:28:37,600 --> 01:28:41,470
much as possible. And we're.
Out, uh, looking for the pitch.

1333
01:28:41,710 --> 01:28:43,420
Maybe. Think of it that way.
We're right.

1334
01:28:43,420 --> 01:28:47,710
We're out trying to find people
to pitch us or.

1335
01:28:47,710 --> 01:28:54,640
And we'll be discerning. Yeah.
Um, in addition to looking at,

1336
01:28:55,240 --> 01:28:59,140
uh, well, let's say assuming you
look at diverse property types,

1337
01:28:59,350 --> 01:29:02,920
you come into, uh,
you come into a capital stack in

1338
01:29:02,920 --> 01:29:06,130
a variety of ways, right?
You don't you're just not always

1339
01:29:06,130 --> 01:29:09,970
the same way on every deal.
So you might come in at a co-op,

1340
01:29:10,270 --> 01:29:15,580
an LP position, you might come in as,
you know, maybe your preferred

1341
01:29:15,580 --> 01:29:21,400
equity situation. We do.
Uh, so early on I mentioned there

1342
01:29:21,400 --> 01:29:24,700
are some things that we do today
that are very consistent with

1343
01:29:25,480 --> 01:29:29,350
certainly when I came here in 92 and,
and even before that, and there

1344
01:29:29,350 --> 01:29:33,070
were things that have evolved.
So when I came here in 92, really all

1345
01:29:33,070 --> 01:29:37,630
we did was joint venture equity.
That that was LP as an LP. Yes.

1346
01:29:37,630 --> 01:29:39,520
Thank you.
That was basically what we did.

1347
01:29:39,910 --> 01:29:46,630
Uh, and in a, in a wide variety of
property sectors today we're in

1348
01:29:47,110 --> 01:29:51,970
really just three property sectors.
Uh, in fact, we think of as two

1349
01:29:51,970 --> 01:29:56,800
verticals shelter and logistics.
So shelter meaning uh, hospitality

1350
01:29:56,800 --> 01:30:00,880
or rental, housing and logistics,
meaning anything that's industrial.

1351
01:30:01,870 --> 01:30:05,800
And we have, uh,
different approaches to that,

1352
01:30:05,800 --> 01:30:10,060
meaning not just LP equity,
but as you mentioned,

1353
01:30:10,060 --> 01:30:14,170
we will do preferred equity.
We actually have a programmatic

1354
01:30:14,170 --> 01:30:18,130
joint venture with a group to deploy
Small balance preferred equity.

1355
01:30:19,120 --> 01:30:24,790
And these the investments have
been virtually all industrial or

1356
01:30:24,790 --> 01:30:28,210
or rental housing.
So small balance meaning an equity

1357
01:30:28,210 --> 01:30:33,910
check of 2 to 5 or $6 million.
And then more recently we launched

1358
01:30:33,910 --> 01:30:39,010
a GP investment program that that
will allow us to invest as a co

1359
01:30:39,010 --> 01:30:44,110
investor with the with the GP.
So if a GP has a $50 million equity

1360
01:30:44,110 --> 01:30:47,800
requirement and they've got to come
up with 10% of that, say 5 million,

1361
01:30:48,160 --> 01:30:54,610
we can help them with, you know, 50,
60, 70% of of the of the GP position.

1362
01:30:54,610 --> 01:30:57,250
But it's all equity. There's no debt.
You don't make a debt.

1363
01:30:57,400 --> 01:31:00,580
So so far we have not deployed
anything as debt.

1364
01:31:00,580 --> 01:31:03,280
We haven't set up a debt.
We don't do meds.

1365
01:31:03,280 --> 01:31:07,900
Then we you might in lieu of
preferred equity with, you know,

1366
01:31:07,900 --> 01:31:10,930
preferred equity and mezz or
kind of cousins.

1367
01:31:10,930 --> 01:31:16,030
Uh, we could do meds but um, uh,
but more often it's been structured

1368
01:31:16,270 --> 01:31:23,260
as preferred equity. Um. Okay.
Um, similar to the time when you

1369
01:31:23,260 --> 01:31:28,330
began your career, we're now in a
market of great uncertainty, um,

1370
01:31:28,600 --> 01:31:32,440
with interest rates up significantly
over the past two years,

1371
01:31:32,800 --> 01:31:35,560
and the office space demand
market still reeling from

1372
01:31:35,560 --> 01:31:40,030
repercussions of the pandemic.
With appropriate investment strategy,

1373
01:31:40,030 --> 01:31:43,660
however, the market may actually
provide opportunities.

1374
01:31:44,140 --> 01:31:48,040
Um, how do you see ABR taking
advantage of this market if you do?

1375
01:31:49,390 --> 01:31:53,710
Well, I don't think we'll, uh,
participate on the office side.

1376
01:31:53,710 --> 01:31:57,460
Right?
We we have not bought an office

1377
01:31:57,460 --> 01:32:00,910
asset since 2016.
We do own some medical office,

1378
01:32:00,910 --> 01:32:03,970
which we think is, uh,
a fundamentally different

1379
01:32:04,330 --> 01:32:08,860
investment or different business.
But what we found through most

1380
01:32:08,860 --> 01:32:12,760
of my career here is that, uh,
you know, we're not a big.

1381
01:32:12,760 --> 01:32:18,400
And we were never we were never
big enough to invest in a CBD.

1382
01:32:19,210 --> 01:32:24,010
And and we we couldn't buy a a
$100 million office building.

1383
01:32:24,010 --> 01:32:27,340
We were always basically buying
suburban office buildings, which,

1384
01:32:27,340 --> 01:32:31,630
as you know, are a commodity.
And they become even more of a

1385
01:32:31,630 --> 01:32:37,630
commodity so long before the pandemic
and work at home and zoom meetings,

1386
01:32:38,080 --> 01:32:44,020
uh, upended the demand for office.
We had just waved it off and.

1387
01:32:44,130 --> 01:32:47,550
Today in our portfolio in two office
buildings. And that's that's it.

1388
01:32:48,180 --> 01:32:52,530
Um, on the other hand, I do think
there will be there will be.

1389
01:32:52,530 --> 01:32:56,250
And we're already seeing
opportunities in other asset classes,

1390
01:32:56,430 --> 01:32:59,280
particularly the ones that we're
focused on logistics,

1391
01:32:59,640 --> 01:33:05,250
rental housing and hospitality.
And, and our our niche in

1392
01:33:05,250 --> 01:33:09,330
hospitality is pretty narrow.
So it's select service extended

1393
01:33:09,330 --> 01:33:13,590
say limited service hotels almost
always flagged by Marriott Hilton.

1394
01:33:14,130 --> 01:33:16,980
By the way those are middle
market size, maybe lower middle

1395
01:33:16,980 --> 01:33:22,380
market sized, uh, hotels.
But I, I do think we're going to see

1396
01:33:22,380 --> 01:33:27,630
opportunities there. We already are.
We're seeing it's at the moment

1397
01:33:27,630 --> 01:33:30,540
it's anecdotal.
I don't know how big of a trend this

1398
01:33:30,540 --> 01:33:35,730
is or will become, but anecdotally
we're seeing assets that, you know,

1399
01:33:35,730 --> 01:33:38,790
somebody bought for 100 a couple
of years ago and now trades it,

1400
01:33:39,300 --> 01:33:44,820
you know, 85 or 90.
Um, and some of these assets are

1401
01:33:44,820 --> 01:33:49,530
going to have to trade because they
won't be able to refinance the loan.

1402
01:33:49,650 --> 01:33:52,410
So they have a loan,
maybe they have a fixed rate loan,

1403
01:33:52,410 --> 01:33:56,040
but it's not into perpetuity.
Or maybe they have, uh,

1404
01:33:56,310 --> 01:34:01,260
they bought a hedge or bought a
cap or entered into a swap,

1405
01:34:01,920 --> 01:34:05,190
but it's not in the perpetuity.
And when you have to refinance the

1406
01:34:05,190 --> 01:34:10,350
loan or deal with with the expiring
hedge, they're either going to

1407
01:34:10,350 --> 01:34:13,770
have to bring some new capital or
they're going to have to to sell,

1408
01:34:13,770 --> 01:34:17,730
sell the asset.
So we're already beginning to see

1409
01:34:17,730 --> 01:34:22,710
that again, I call it anecdotally.
The other thing that's happened is

1410
01:34:23,700 --> 01:34:29,760
while transaction volume is way,
way down, the things that are trading

1411
01:34:29,760 --> 01:34:36,810
are not getting much attention.
And sellers know that the that were

1412
01:34:36,810 --> 01:34:41,280
they to sell, they almost certainly
have to acknowledge through pricing,

1413
01:34:41,460 --> 01:34:47,340
acknowledge that the next buyer is
not going to be able to borrow 75%

1414
01:34:47,340 --> 01:34:54,450
of the total cost, um, and finance
it at 3.5% or five or even 4%.

1415
01:34:54,960 --> 01:34:59,850
So those owners that are
prepared to acknowledge that

1416
01:35:00,480 --> 01:35:03,870
have to let their assets be sold
at a lower price point.

1417
01:35:03,870 --> 01:35:08,460
And most of our competition over
the years in this sort of middle

1418
01:35:08,460 --> 01:35:11,400
market or lower middle market,
most of it is private investors.

1419
01:35:11,400 --> 01:35:15,900
We we really don't compete with
the largest well-capitalized,

1420
01:35:17,130 --> 01:35:21,570
uh, operators.
So those smaller entrepreneurial

1421
01:35:21,570 --> 01:35:26,220
investors have relied on,
as you know, very high leverage.

1422
01:35:26,820 --> 01:35:29,940
And they can't get that anymore.
They need more equity.

1423
01:35:30,120 --> 01:35:36,630
And we have capital to deploy.
And so we're we're expecting to see

1424
01:35:36,630 --> 01:35:42,000
a lot of opportunities that that
are priced appropriately, that give

1425
01:35:42,000 --> 01:35:44,760
us a chance to deploy our capital.
I just think there'll be less.

1426
01:35:44,760 --> 01:35:46,830
So back to we're in a part of
the market where they're the

1427
01:35:46,830 --> 01:35:50,670
most transactions.
And now that part of the market has

1428
01:35:50,670 --> 01:35:55,800
even fewer bidders because they
they can't get the leverage right.

1429
01:35:55,800 --> 01:36:00,570
They're used to 70, 75% leverage.
Your negotiating position is

1430
01:36:00,570 --> 01:36:05,070
stronger, too right now because
there's less equity out there to do

1431
01:36:05,070 --> 01:36:09,180
these kinds of things. Right? Right.
Um, so we're just going to wait

1432
01:36:09,180 --> 01:36:14,340
around for our pitch. There it is.
And we're and and not passively

1433
01:36:14,340 --> 01:36:20,040
like we are actively in the market,
uh, connecting with all of our

1434
01:36:20,040 --> 01:36:24,270
friends and, and colleagues in
the marketplace who are bringing

1435
01:36:24,270 --> 01:36:29,040
us opportunities all the time.
So, Tom,

1436
01:36:29,040 --> 01:36:34,440
tell me a little bit about, uh,
use a fund model to make investments.

1437
01:36:34,560 --> 01:36:38,010
Has that been the methodology from
the beginning, or did you brutally

1438
01:36:38,010 --> 01:36:42,420
have or initially have, uh,
corporate capital to invest and then

1439
01:36:42,420 --> 01:36:45,870
shift it to third party fundraising?
Have you considered other ways

1440
01:36:45,870 --> 01:36:47,730
of raising capital,
like starting an operating

1441
01:36:47,730 --> 01:36:53,010
company and or going public?
So it's always been client capital.

1442
01:36:53,160 --> 01:36:57,780
Right now, the firm co-invest in
every transaction.

1443
01:36:57,900 --> 01:36:59,640
When it was single asset
syndications,

1444
01:36:59,640 --> 01:37:04,380
we would invest in every transaction
and we co-invest in the funds.

1445
01:37:04,380 --> 01:37:07,350
But it's always it's always been
a business based on, uh,

1446
01:37:07,350 --> 01:37:10,680
on client capital.
When I came here in the early 90s,

1447
01:37:10,680 --> 01:37:13,350
as I mentioned,
virtually everything we did was

1448
01:37:13,350 --> 01:37:16,020
a single asset syndication.
We did have this,

1449
01:37:16,020 --> 01:37:20,100
these public limited partnerships
that were buying parking and, uh,

1450
01:37:20,100 --> 01:37:23,790
and nursing homes, but otherwise,
which kind of hints of a fund.

1451
01:37:23,790 --> 01:37:27,150
You raise capital,
it's dedicated for one strategy and

1452
01:37:27,150 --> 01:37:32,940
you deploy it into a portfolio.
But but more recently it's been

1453
01:37:33,480 --> 01:37:38,130
virtually all fund oriented.
So we raised funds, we raised capital

1454
01:37:38,130 --> 01:37:43,890
from investors that, uh, range
from large institutional pension.

1455
01:37:43,980 --> 01:37:47,760
Plans to high net worth individuals
and endowments and foundations

1456
01:37:47,760 --> 01:37:51,840
and insurance companies.
Um, and we aggregate all of their

1457
01:37:51,840 --> 01:37:57,780
capital and deploy that across
usually a three year period into

1458
01:37:57,780 --> 01:38:05,220
a portfolio, uh, of assets.
We we have not really given any

1459
01:38:05,220 --> 01:38:11,130
consideration to, to, uh, to being a
fully integrated operating company.

1460
01:38:11,130 --> 01:38:15,960
We, we really like this strategy of
being able to pivot around to where

1461
01:38:15,960 --> 01:38:20,820
we think the best opportunities are.
And while we're not a fully

1462
01:38:20,820 --> 01:38:23,430
operational, you know, vertically
integrated operating company,

1463
01:38:23,430 --> 01:38:27,360
our asset managers are very,
very hands on.

1464
01:38:27,870 --> 01:38:33,990
Uh, so they have they have experience
in property management, uh, sometimes

1465
01:38:33,990 --> 01:38:37,680
because that's where they came from.
But we have had examples,

1466
01:38:37,680 --> 01:38:39,570
particularly during the great
financial crisis,

1467
01:38:39,570 --> 01:38:43,380
where we had operating partners who
just couldn't stay in business.

1468
01:38:43,380 --> 01:38:45,570
They just couldn't sustain
themselves.

1469
01:38:45,840 --> 01:38:51,810
And so now our asset manager becomes
the sole person responsible for,

1470
01:38:52,110 --> 01:38:56,160
uh, for a property and, uh,
and responsible for finding a

1471
01:38:56,160 --> 01:39:00,600
property manager and, uh, deciding
about every single lease and so forth

1472
01:39:00,600 --> 01:39:03,540
doesn't happen very often, and.
You have to unwind that partnership.

1473
01:39:03,540 --> 01:39:05,850
Then at that point.
You don't really unwind it.

1474
01:39:05,850 --> 01:39:09,270
You just run it without the
participation of your,

1475
01:39:09,570 --> 01:39:12,450
of your of your partner.
And it didn't happen again.

1476
01:39:12,450 --> 01:39:16,380
I think at the time of the great
financial crisis might have had

1477
01:39:16,380 --> 01:39:19,110
80 assets and maybe that
happened in three.

1478
01:39:19,110 --> 01:39:23,130
So it doesn't it doesn't happen
very often. They're still friends.

1479
01:39:23,280 --> 01:39:27,180
One of them, one of them commented
on the same LinkedIn page, uh,

1480
01:39:27,180 --> 01:39:29,850
announcement that you did, John.
Okay.

1481
01:39:29,970 --> 01:39:32,520
So they're, you know,
they just they just couldn't

1482
01:39:32,520 --> 01:39:35,850
support themselves during a very,
you know, distressful time.

1483
01:39:36,000 --> 01:39:40,740
But my point is that our asset
managers, while they're not, uh,

1484
01:39:41,220 --> 01:39:45,840
day to day roll up your sleeves
sort of, uh, operators,

1485
01:39:45,840 --> 01:39:48,510
they have they actually have
that skill set and can think,

1486
01:39:48,510 --> 01:39:52,050
think that way on on behalf of
us and our and our clients.

1487
01:39:52,050 --> 01:39:54,990
So how many funds have you
raised and what scale.

1488
01:39:55,410 --> 01:40:01,770
So we're we're actually investing
today for the ninth fund. Really.

1489
01:40:01,770 --> 01:40:05,130
Again, the first funds were tiny.
They were the first funds were

1490
01:40:05,130 --> 01:40:09,330
actually raised as a
co-investment vehicle for a

1491
01:40:09,330 --> 01:40:12,480
bunch of other investors.
So we might raise $20 million,

1492
01:40:12,480 --> 01:40:16,050
and then that 20 million would
be invested across, say,

1493
01:40:16,050 --> 01:40:21,510
5 or 6 assets that in each deal
there was both fund and a

1494
01:40:21,510 --> 01:40:24,060
handful of individual investors.
So think of it as almost like a

1495
01:40:24,060 --> 01:40:28,110
co-investment vehicle.
And we grew that over the years.

1496
01:40:28,170 --> 01:40:34,620
Uh, in 2001, we launched what we
refer to as the Chesapeake series.

1497
01:40:34,620 --> 01:40:38,310
So we call that Fund one.
And today we're investing for

1498
01:40:38,310 --> 01:40:39,660
fund six.
But there were three funds

1499
01:40:39,660 --> 01:40:41,520
before that.
So while it's while you're

1500
01:40:41,520 --> 01:40:45,090
investing today for fund six,
we actually have nine funds. Got it.

1501
01:40:45,090 --> 01:40:47,580
That we've operated over over
all these years.

1502
01:40:47,610 --> 01:40:50,700
And are these closed end funds?
They've always been closed end funds.

1503
01:40:50,850 --> 01:40:54,390
Right. Okay.
So what life typically did you

1504
01:40:54,390 --> 01:41:00,360
structure them to be or ideally
like five, seven eight, ten what.

1505
01:41:00,360 --> 01:41:03,720
Well the earlier funds to it's an
interesting question because the

1506
01:41:03,720 --> 01:41:10,080
earlier funds were dominated by
high net worth individuals who were

1507
01:41:10,080 --> 01:41:15,210
much more inclined to a longer term
investment and not as IRR driven.

1508
01:41:15,990 --> 01:41:18,900
When we started to raise capital
from institutional investors,

1509
01:41:18,900 --> 01:41:23,430
as you know, they are much more
internal rate of return driven.

1510
01:41:23,430 --> 01:41:27,750
And so the earliest funds.
Had why would they be just tell

1511
01:41:27,750 --> 01:41:31,620
me why.
I think I think that, uh,

1512
01:41:31,740 --> 01:41:39,000
that they they have an ability to
they have so many investment choices.

1513
01:41:39,000 --> 01:41:41,400
And while what that means is
that they probably get their

1514
01:41:41,400 --> 01:41:45,090
capital back sooner, but they
have the ability to reinvest it

1515
01:41:45,090 --> 01:41:49,890
as quickly as they possibly can.
Um, and so I think they, you know,

1516
01:41:49,890 --> 01:41:54,810
they tend to be more internally
rated in IRR, say, IRR driven

1517
01:41:54,810 --> 01:41:59,220
than the typical high net worth.
Well, my experience tells me that

1518
01:41:59,220 --> 01:42:04,020
they have they're looking at bonds
stocks other investments quite more

1519
01:42:04,020 --> 01:42:08,820
frequently and saying okay which you
know what bucket do we need to put.

1520
01:42:08,940 --> 01:42:13,290
You know how do we allocate all these
different investment choices. Right.

1521
01:42:13,290 --> 01:42:15,450
This this sort of like point
like they have other things they

1522
01:42:15,450 --> 01:42:17,880
could invest in.
So to get the capital back in a

1523
01:42:17,880 --> 01:42:22,620
reasonable period of time is uh,
becomes really important to them.

1524
01:42:22,890 --> 01:42:25,050
Mhm.
Um, so,

1525
01:42:25,050 --> 01:42:31,620
so today the funds we're raising
today are 2 to 300 million in size.

1526
01:42:32,190 --> 01:42:35,340
Uh, again, if we were to raise $1
billion, you might ask, how do you

1527
01:42:35,340 --> 01:42:39,720
invest in the middle market, Tom,
if how do you deploy 10 million?

1528
01:42:40,020 --> 01:42:42,960
An equity check at $1 billion
would be 100 transactions.

1529
01:42:42,960 --> 01:42:46,630
Right. So. We like.
I mean, we we we know for sure we

1530
01:42:46,630 --> 01:42:50,800
could scale it beyond 300 million,
but a billion would be would be a

1531
01:42:50,800 --> 01:42:55,450
challenge in, in our in our opinion.
What's the largest single equity

1532
01:42:55,450 --> 01:42:59,770
check the firm's ever written?
Instead of curiosity we.

1533
01:42:59,770 --> 01:43:07,870
Have we had one equity check for
23 million, but it was two assets.

1534
01:43:07,870 --> 01:43:11,890
So in a single asset,
the largest single asset invest

1535
01:43:11,890 --> 01:43:17,080
check is probably 15 or 18 million.
It's always been in that kind of

1536
01:43:17,080 --> 01:43:20,350
8 to 12 range.
As you know, John,

1537
01:43:20,350 --> 01:43:23,950
if I came to you and said,
hey John, we deploy equity checks

1538
01:43:23,950 --> 01:43:28,870
of 20 million or above, you would
have a lot of ideas for that.

1539
01:43:28,870 --> 01:43:32,230
But if I told you we'd like to write
equity checks of like 5 to 10,

1540
01:43:32,830 --> 01:43:37,240
I'm going to guess you have
fewer ideas for 5 to 10,

1541
01:43:37,240 --> 01:43:40,750
which goes back to we just a little
bit less competition. Right?

1542
01:43:40,750 --> 01:43:45,010
Well, it's interesting and this
is what I think is intriguing.

1543
01:43:45,010 --> 01:43:49,180
As your Co Jeep program,
which you're now offering, allows

1544
01:43:49,180 --> 01:43:54,820
you to make a $10 million equity
investment and $100 million deal

1545
01:43:54,820 --> 01:43:58,660
potentially. Of course. Right. Right.
And that's one of the reasons that

1546
01:43:58,660 --> 01:44:08,170
we that we implemented the gap
investment program is over all of the

1547
01:44:08,170 --> 01:44:13,510
firm's life and my career for sure.
We've had operating partners who

1548
01:44:13,510 --> 01:44:16,660
would come to us.
And they're trying to raise 50,

1549
01:44:16,660 --> 01:44:21,430
70, 80 million of equity for a
transaction that we think is

1550
01:44:21,430 --> 01:44:23,860
fantastic.
We know them really well,

1551
01:44:23,860 --> 01:44:27,910
we think they're fantastic,
and yet we can't participate.

1552
01:44:27,910 --> 01:44:33,160
I have no way of participating,
but we also know that they're going

1553
01:44:33,160 --> 01:44:36,130
to have to come up with probably
about 10% of that total equity.

1554
01:44:36,130 --> 01:44:38,170
So let's just say $80 million of
equity.

1555
01:44:38,170 --> 01:44:42,400
They need to come up with $8 million.
So maybe we could be helpful there.

1556
01:44:42,400 --> 01:44:48,140
Maybe we would give them 50, 60,
70% of the of the of of that $8

1557
01:44:48,140 --> 01:44:52,180
million check.
And that's really the that's if you

1558
01:44:52,180 --> 01:44:56,800
look at the pipeline today for the GP
investment program, that's basically

1559
01:44:56,800 --> 01:45:00,880
what it looks like is those kinds
of those kinds of transactions.

1560
01:45:01,420 --> 01:45:04,840
Uh, the other thing that we found
is we would have partners who

1561
01:45:04,840 --> 01:45:10,630
would bring us a strategy that
that while the the deal by deal

1562
01:45:10,630 --> 01:45:16,960
was not that large, if you add up
all of the transactions that they

1563
01:45:16,960 --> 01:45:20,800
hope to do within this strategy,
which we might think is a

1564
01:45:20,800 --> 01:45:24,310
fantastic strategy, they're going
to quickly outstrip their own

1565
01:45:24,310 --> 01:45:28,780
personal resources to, you know,
to be 10% co investor in every deal.

1566
01:45:28,780 --> 01:45:33,550
So again, as a code GP, we could
we could be a resource to them.

1567
01:45:33,550 --> 01:45:37,150
So to some extent you're setting
up in that regard an equity line

1568
01:45:37,150 --> 01:45:41,740
of credit in essence for a for a
strategy to some extent or a

1569
01:45:41,740 --> 01:45:45,250
programmatic pro. Like a pro.
Yeah. Like a programmatic right.

1570
01:45:45,250 --> 01:45:50,140
We would be a programmatic joint
venture partner on the code GP side.

1571
01:45:50,140 --> 01:45:53,020
Absolutely.
That's exactly how how we we think

1572
01:45:53,020 --> 01:45:56,710
of and we've written term sheets
that look just like that. Um. Yeah.

1573
01:45:56,710 --> 01:46:02,290
So they have a certain period of time
to, you know, get this allocated.

1574
01:46:02,410 --> 01:46:04,690
Otherwise if they don't get in
that time, yeah,

1575
01:46:04,690 --> 01:46:07,540
you're not going to get there.
So we're going to kind of pull back.

1576
01:46:07,540 --> 01:46:10,450
Is that what you might do.
And that happens I mean we have

1577
01:46:11,050 --> 01:46:15,730
we have done in our in our value
add funds when we're the LP,

1578
01:46:15,760 --> 01:46:20,860
we've created programmatic joint
ventures around strategies that we

1579
01:46:20,860 --> 01:46:24,010
think are wonderful with partners
that we've known for a long time.

1580
01:46:25,030 --> 01:46:27,760
And it turns out that by the
time we get started,

1581
01:46:28,000 --> 01:46:32,770
it becomes hard to find opportunities
for that particular strategy.

1582
01:46:32,770 --> 01:46:38,320
The the market becomes too
competitive, and we kind of mutually

1583
01:46:38,320 --> 01:46:44,380
agree that we probably should
just drop this strategy and we'll

1584
01:46:44,380 --> 01:46:47,770
deploy the capital somewhere else.
But it's all very amicable.

1585
01:46:47,770 --> 01:46:53,500
And sure, you know, again,
we we have a we have a portfolio of

1586
01:46:53,500 --> 01:46:57,640
operating partners who were very
close to and we consider them,

1587
01:46:57,670 --> 01:47:01,120
you know, friends and they're very
understanding and we're understanding

1588
01:47:01,120 --> 01:47:06,340
of their circumstances as well. Um.
Um, I'm going to I didn't ask this

1589
01:47:06,340 --> 01:47:10,690
earlier. I'm going to get flip back.
I wanted to bring up that when we

1590
01:47:10,690 --> 01:47:13,330
met. And the first relationship, of.
Course, you're right.

1591
01:47:13,330 --> 01:47:18,610
I introduced you to and. Right.
Uh, the strategy there was was

1592
01:47:18,610 --> 01:47:22,780
buying opportunistic industrial
properties in Mississippi.

1593
01:47:22,780 --> 01:47:26,920
And, you know,
there were very few institutional

1594
01:47:26,920 --> 01:47:31,150
investors willing a to invest,
even in the state of Mississippi,

1595
01:47:31,150 --> 01:47:33,820
much less the size of the deals
that we were looking at,

1596
01:47:33,820 --> 01:47:37,150
because I think we were the largest
deal was about 8 or $10 million.

1597
01:47:37,150 --> 01:47:40,750
That's true. That's right. Yeah.
Total total size of the deal. Right.

1598
01:47:40,750 --> 01:47:46,410
So, um, it was a little unusual.
Talk about this.

1599
01:47:46,710 --> 01:47:49,740
Would you consider that kind of
an investment today,

1600
01:47:49,740 --> 01:47:53,580
or is that have you moved beyond
that kind of thought process today?

1601
01:47:53,580 --> 01:47:57,600
You know, you know, tertiary
market investing like that? Yeah.

1602
01:47:58,050 --> 01:48:02,430
I don't think we have an aversion
necessarily, tertiary markets.

1603
01:48:02,430 --> 01:48:08,370
The key is that you can be
confident that when you execute,

1604
01:48:08,370 --> 01:48:11,520
when you're finished executing
the business plan, there will be

1605
01:48:11,520 --> 01:48:15,870
a buyer for that property, right.
Is there is there a pool of

1606
01:48:15,870 --> 01:48:20,250
buyers looking right to for that
asset and that asset type.

1607
01:48:20,250 --> 01:48:23,610
So you may recall. All right.
So our strategy with with Murray's

1608
01:48:23,610 --> 01:48:28,050
name was Murray Michael. Great guy.
Um our strategy with Murray was

1609
01:48:28,050 --> 01:48:32,160
to acquire industrial assets
around the state of Mississippi.

1610
01:48:32,160 --> 01:48:34,800
This was right after Katrina.
Right to recall.

1611
01:48:34,800 --> 01:48:40,110
And Murray, who was from Michigan,
had been active in Mississippi

1612
01:48:40,110 --> 01:48:45,060
because a lot of his his tenants,
which were mostly auto manufacturing

1613
01:48:45,060 --> 01:48:48,960
and related companies, had moved
to Mississippi, where it was, uh,

1614
01:48:48,960 --> 01:48:53,400
cheaper and a very welcoming, right,
very welcoming environment to,

1615
01:48:53,730 --> 01:48:58,140
uh, to to run a, you know,
run a manufacturing of business.

1616
01:48:58,140 --> 01:49:02,670
So he had incredible connections
to the state of Mississippi and,

1617
01:49:02,670 --> 01:49:08,160
and in virtually every market
and was able to, if you recall,

1618
01:49:08,160 --> 01:49:11,790
was able to get us, effectively,
a list of virtually every industrial

1619
01:49:11,790 --> 01:49:15,510
building in the state of Mississippi
that might been available for sale.

1620
01:49:15,540 --> 01:49:18,180
Because CBRE and JLL didn't have
this list.

1621
01:49:18,180 --> 01:49:20,190
He was working with the economic
development. Right.

1622
01:49:20,460 --> 01:49:24,930
Uh, departments. That's right.
And we went around and toward a

1623
01:49:24,930 --> 01:49:27,510
lot of the state and you could
buy things.

1624
01:49:27,510 --> 01:49:31,050
So as a value investor,
you know, you're looking for,

1625
01:49:31,110 --> 01:49:33,750
you know, attractive,
yielding things or things that when

1626
01:49:33,750 --> 01:49:37,800
you add value will be, you know,
yielding well above where it might

1627
01:49:37,800 --> 01:49:42,000
trade. Um, and it's not unusual.
In fact, it's super common that

1628
01:49:42,000 --> 01:49:46,440
you're looking for a great value
relative to replacement costs.

1629
01:49:46,680 --> 01:49:50,820
And you at that time, you could
buy these industrial buildings,

1630
01:49:50,820 --> 01:49:53,280
some of them tenanted,
some of them not. Yeah.

1631
01:49:53,910 --> 01:49:57,960
Um, and then just an incredible
value relative to the price.

1632
01:49:57,960 --> 01:50:01,590
Our strategy was let's go build
a portfolio will be diversified

1633
01:50:01,590 --> 01:50:05,340
by market.
And, um, and then fill in with

1634
01:50:05,340 --> 01:50:08,550
tenants and take it back, uh,
back to the market for a sale.

1635
01:50:08,640 --> 01:50:11,190
As it turns out,
we only bought two things.

1636
01:50:11,460 --> 01:50:13,980
Uh,
one in Jackson and one in Natchez.

1637
01:50:13,980 --> 01:50:19,230
And, uh, by the time we closed
on both, we had tenants.

1638
01:50:19,260 --> 01:50:21,990
If you recall, the one in Natchez,
we sold very quickly.

1639
01:50:22,530 --> 01:50:27,120
Um, probably a year and a day,
uh, and had a very good outcome.

1640
01:50:27,120 --> 01:50:31,410
And the Jackson building, we, uh,
we kept for many, actually, many

1641
01:50:31,410 --> 01:50:35,820
years, had perfectly good cash flow,
changed tenants from time to time,

1642
01:50:35,820 --> 01:50:41,520
and eventually eventually sold it.
Yeah, well, those types of assets

1643
01:50:41,520 --> 01:50:45,540
to a user could be your best buyer
sometimes instead of an investor,

1644
01:50:45,540 --> 01:50:49,530
depending on the situation.
I think Nissan ended up they may have

1645
01:50:49,530 --> 01:50:52,530
bought the Net Jackson building.
I know they were the they were

1646
01:50:52,530 --> 01:50:54,990
the last tenant.
I mean, in my experience with

1647
01:50:54,990 --> 01:50:59,580
industrial, the user is if you find
a user buyer, there's no investor

1648
01:50:59,580 --> 01:51:02,370
that's going to ever pay as much
as a user does for an asset.

1649
01:51:03,030 --> 01:51:05,310
You know,
typically because they're going to

1650
01:51:05,340 --> 01:51:09,570
they own it forever and they'll
use it as a company. So. Right.

1651
01:51:10,050 --> 01:51:13,350
Um,
when I was in that industry that we

1652
01:51:13,350 --> 01:51:19,620
look for that as often as possible.
Um, so talk a little bit about

1653
01:51:19,620 --> 01:51:23,250
your company structure.
Uh, you co-lead the firm with Ed

1654
01:51:23,250 --> 01:51:26,670
Norberg, you mentioned. Right.
How does EDS and your roles,

1655
01:51:26,940 --> 01:51:30,180
your roles complementing each other,
talk about your other senior

1656
01:51:30,180 --> 01:51:33,390
team members, Lee Collins,
David Wolfe and Dan Blake.

1657
01:51:33,390 --> 01:51:36,150
Behind them,
you have quite a team of investment,

1658
01:51:36,150 --> 01:51:39,570
asset management and fundraising
professionals, it appears.

1659
01:51:39,570 --> 01:51:42,090
Talk a little bit about your company.
Do we have about 30 people in

1660
01:51:42,090 --> 01:51:44,790
the company?
Uh, we have three acquisition

1661
01:51:44,790 --> 01:51:47,880
officers, three asset managers,
and we have some people that

1662
01:51:47,880 --> 01:51:51,900
support the acquisition team.
We have a team of accountants,

1663
01:51:52,260 --> 01:51:56,040
uh, and we have a fun fundraising
team and investor relations team.

1664
01:51:56,370 --> 01:52:01,740
Ed and I run the company for,
uh, as I, as I mentioned, and,

1665
01:52:02,430 --> 01:52:05,640
uh, Ed actually joined the
company around 2018.

1666
01:52:05,640 --> 01:52:10,440
So I knew Ed, uh, we shared an
operating partner that we've twice

1667
01:52:10,440 --> 01:52:15,180
now shared an operating partner.
And at that time, the,

1668
01:52:15,180 --> 01:52:19,710
the the gentleman who ran the firm,
John Prew, was beginning to

1669
01:52:19,710 --> 01:52:24,480
think about retirement.
And, uh, and I thought it would

1670
01:52:24,480 --> 01:52:29,520
be great were I to, uh,
take on his responsibilities.

1671
01:52:29,550 --> 01:52:32,940
I was, uh, chief investment officer,
and I thought it'd be great to

1672
01:52:32,940 --> 01:52:37,050
have somebody, uh, kind of partner
with to help me with fundraising.

1673
01:52:37,050 --> 01:52:40,440
John and another colleague really did
all the fundraising at that time.

1674
01:52:40,530 --> 01:52:44,950
She is also retired. And so.
And I started to talk.

1675
01:52:45,460 --> 01:52:50,050
Ed was very close to two of our
board members that he had known

1676
01:52:50,050 --> 01:52:51,850
for many years, so it actually
worked out really well.

1677
01:52:51,850 --> 01:52:57,280
So Ed Balsam shares in the company,
uh, joined our board and then came on

1678
01:52:57,280 --> 01:53:02,740
full time to run the business with
with me, uh, I'd say day to day and

1679
01:53:02,740 --> 01:53:07,360
spends the bulk of his time on new
business development and fundraising.

1680
01:53:07,360 --> 01:53:11,140
And I spend most of my time on
sort of running the portfolio,

1681
01:53:11,140 --> 01:53:13,630
the chief investment officer and,
uh, working with,

1682
01:53:13,630 --> 01:53:18,820
with the with the asset side, we
both do a bit of the other person's

1683
01:53:18,820 --> 01:53:23,200
role as well and is, you know,
very, very active in all of our,

1684
01:53:23,560 --> 01:53:27,310
uh, all of our new investment,
uh, opportunities and,

1685
01:53:27,310 --> 01:53:31,150
and how we're managing the portfolio.
And I'm very active in, uh,

1686
01:53:31,150 --> 01:53:33,490
in fundraising,
but it's actually turned out to be

1687
01:53:33,490 --> 01:53:39,220
just a terrific kind of balance of,
uh, of of working, working,

1688
01:53:39,220 --> 01:53:42,880
sharing working responsibilities and,
and working together. Are you.

1689
01:53:42,880 --> 01:53:45,940
Structured as an LLC. Or.
We are an LLC?

1690
01:53:45,940 --> 01:53:50,620
So one of the things that Ed helped
us do, uh, for almost 50 years,

1691
01:53:50,620 --> 01:53:56,500
we were a C Corp R.
So one of the earliest ideas was

1692
01:53:56,500 --> 01:54:01,120
let's transition to an LLC.
And it was an enormous undertaking.

1693
01:54:01,630 --> 01:54:04,990
Um, y well,
you have to have the company value.

1694
01:54:05,020 --> 01:54:09,190
You have to, uh, kind of you have
to structure in a way that's,

1695
01:54:09,640 --> 01:54:14,110
uh, that's sort of tax smart,
um, to avoid, um, you know,

1696
01:54:14,110 --> 01:54:17,890
the tax implications that you might
incur if you didn't think it all,

1697
01:54:18,220 --> 01:54:21,550
think it all through.
Um, so it was just, it was, it was

1698
01:54:21,550 --> 01:54:24,040
a fair amount of work, actually.
I mean, I guess the question is

1699
01:54:24,040 --> 01:54:27,460
the relation in my mind the
biggest change for that?

1700
01:54:27,460 --> 01:54:30,610
And again, you're an accountant,
so I'll defer to you on that on

1701
01:54:30,610 --> 01:54:33,580
the structural side.
But it seems to me that an LLC is

1702
01:54:34,330 --> 01:54:39,100
it it's more like a partnership
where things flow through direct

1703
01:54:39,100 --> 01:54:43,420
as opposed to a corporate entity,
which you have this structure of

1704
01:54:43,420 --> 01:54:47,140
reporting from a corporation
standpoint with an LLC is more

1705
01:54:47,140 --> 01:54:49,480
of a flow through entity.
Is that that's right.

1706
01:54:49,480 --> 01:54:53,950
Is that the right way to look at it?
And whereas senior management

1707
01:54:53,950 --> 01:54:57,730
then have rights to, you know,
the share allocations,

1708
01:54:58,090 --> 01:55:01,420
it's a direct pass instead of
going through the corporate entity

1709
01:55:01,420 --> 01:55:06,460
itself and distributed that way
and then having the dividends as

1710
01:55:06,460 --> 01:55:10,420
opposed to having a direct
ownership structure pass through.

1711
01:55:10,480 --> 01:55:14,200
That's right. Is that about.
And and it's substantially more

1712
01:55:14,200 --> 01:55:18,370
tax efficient. Right. Right.
And and to your point,

1713
01:55:19,000 --> 01:55:21,460
the members of the team that end
up owning an interest in the

1714
01:55:21,460 --> 01:55:25,810
firm own it more directly.
Um, so it's it's it's a,

1715
01:55:25,810 --> 01:55:27,400
it's a really.
And you don't have double

1716
01:55:27,400 --> 01:55:31,810
taxation to which that's a.
Very it's a very smart way to

1717
01:55:31,810 --> 01:55:36,130
run our kind of business.
Uh, you could have done a sub s

1718
01:55:36,130 --> 01:55:38,650
corporation too, right?
I think we probably could have

1719
01:55:38,650 --> 01:55:42,190
done that as well.
This turned out to be more, uh,

1720
01:55:42,460 --> 01:55:46,270
more efficient.
Um, uh, and then, uh,

1721
01:55:46,750 --> 01:55:51,820
and then we do have a team, uh,
besides, at an I, we have a, uh,

1722
01:55:52,120 --> 01:55:55,210
Lee Collins who you mentioned,
and Dan Blake and David Wolfe.

1723
01:55:55,210 --> 01:56:00,460
So Lee runs our asset management
team, and also is what we refer

1724
01:56:00,460 --> 01:56:07,750
to is a disposition officer.
So years ago, probably 2010 or 11,

1725
01:56:09,010 --> 01:56:10,930
we were coming out of the great
financial crisis.

1726
01:56:10,930 --> 01:56:13,630
We had a lot of assets that we
did not sell, of course,

1727
01:56:13,630 --> 01:56:18,130
in 2008, nine and ten, but it
was becoming time to sell them.

1728
01:56:18,130 --> 01:56:23,380
And we had these terrific,
well understood protocols for

1729
01:56:23,380 --> 01:56:27,130
how we acquired assets.
What do we do? What's our process?

1730
01:56:27,130 --> 01:56:30,970
We have a preliminary review.
We have a for a final approval.

1731
01:56:31,000 --> 01:56:35,020
We have a due diligence checklist.
We're very, very organized on

1732
01:56:35,020 --> 01:56:37,780
the disposition side,
which as you know, is the second,

1733
01:56:37,990 --> 01:56:42,280
perhaps the second most important
moment in the life of an investment.

1734
01:56:42,520 --> 01:56:47,740
We were a bit more casual.
We had great outcomes, but we didn't

1735
01:56:47,740 --> 01:56:51,730
have a script for how do we do it?
Um, and then we had an

1736
01:56:51,730 --> 01:56:54,340
acquisition officer who had been
here for a very long time.

1737
01:56:54,340 --> 01:57:00,340
He was an asset manager before that
and knew everybody in the market, and

1738
01:57:00,340 --> 01:57:03,850
we thought maybe his name was Craig.
So maybe we have Craig Bower be

1739
01:57:03,850 --> 01:57:07,300
a disposition officer.
We crafted a job description.

1740
01:57:07,750 --> 01:57:10,690
Uh, Craig and I crafted a script
for how do we do it?

1741
01:57:10,690 --> 01:57:14,260
What's our policy, our protocol
for how do we sell an asset?

1742
01:57:14,260 --> 01:57:18,220
We write a memo to the investment
committee. I recommend we sell.

1743
01:57:18,220 --> 01:57:22,030
This is why I recommend it.
Uh, here's a whole sell analysis.

1744
01:57:22,630 --> 01:57:25,750
And if they approve it,
they are effectively approve a

1745
01:57:25,750 --> 01:57:29,080
minimum minimum acceptable price.
So we're not going to just sell

1746
01:57:29,080 --> 01:57:31,780
it because there may we may go
to market and find it.

1747
01:57:32,350 --> 01:57:35,410
What we think is worth 100 is
only gets bids at 70.

1748
01:57:35,560 --> 01:57:37,720
We may or may not want to trade
at 70.

1749
01:57:37,870 --> 01:57:43,090
So we got very organized and uh,
and Craig went on to sell a lot

1750
01:57:43,090 --> 01:57:45,160
of assets.
For us again, coming out of the

1751
01:57:45,160 --> 01:57:49,660
great financial crisis when values
were beginning to to recover.

1752
01:57:49,930 --> 01:57:53,710
When Craig retired, we asked Lee,
who by then was already the head

1753
01:57:53,710 --> 01:57:58,150
of asset management, to take on
this role as disposition officers.

1754
01:57:58,180 --> 01:58:01,240
What are, you know,
probably go through like seven

1755
01:58:01,240 --> 01:58:03,790
smartest things we ever did.
That's on the list of seven was

1756
01:58:03,790 --> 01:58:08,410
create a position called a
disposition officer a company by you

1757
01:58:08,410 --> 01:58:12,460
know, these these these protocols.
And Lee is Lee is excellent.

1758
01:58:12,610 --> 01:58:16,270
So looking portfolio wide.
What's your typical hold.

1759
01:58:17,020 --> 01:58:20,710
The typical hold today is about
4 to 6 years.

1760
01:58:21,280 --> 01:58:26,350
And in fact if I were to build a
a bar chart for you showing over

1761
01:58:26,350 --> 01:58:31,420
the years by vintage, you know,
but you know, you know, early 90s,

1762
01:58:31,420 --> 01:58:35,710
mid 90s, early thousands,
you'll see that that whole period

1763
01:58:35,710 --> 01:58:39,730
has come down over the years.
I think the last time I did this,

1764
01:58:39,730 --> 01:58:43,540
the average hold period for
things that we had sold was like

1765
01:58:43,540 --> 01:58:46,900
four and a half to five years.
So it's definitely come down back

1766
01:58:46,900 --> 01:58:52,270
to your your question about IRR,
right, that as soon as an asset

1767
01:58:52,270 --> 01:58:56,170
has stabilized, you know,
you're probably not going to get

1768
01:58:56,170 --> 01:59:00,280
a lot of additional IRR from
holding it longer unless there's an

1769
01:59:00,280 --> 01:59:04,840
event in the future that's going
to create substantially more NOI,

1770
01:59:05,260 --> 01:59:09,730
or you're in a season where it's just
silly to to to try to sell assets.

1771
01:59:10,570 --> 01:59:13,660
Um, so yes, it's it's come down
over over the years,

1772
01:59:13,660 --> 01:59:17,740
which is allowed us to produce just
fantastic outcomes for our, uh,

1773
01:59:17,740 --> 01:59:20,740
for our clients and for the funds.
Mhm, mhm.

1774
01:59:21,310 --> 01:59:24,520
Um, and David Wolff is our
general counsel.

1775
01:59:24,520 --> 01:59:29,530
So David joined us from uh,
uh a large law firm called

1776
01:59:29,530 --> 01:59:33,130
Vincent and Elkins.
He was living in Dallas and uh,

1777
01:59:34,390 --> 01:59:37,930
had come to us at the time.
We had a general counsel who had

1778
01:59:37,930 --> 01:59:40,720
gotten ill and had to leave,
leave the company.

1779
01:59:40,990 --> 01:59:47,620
So we hired hired David and the
former general counsel really

1780
01:59:47,620 --> 01:59:52,270
was just a just a terrific real
estate lawyer.

1781
01:59:52,750 --> 01:59:55,090
Uh, and David is a terrific real
estate lawyer.

1782
01:59:55,090 --> 01:59:56,620
In fact,
he may be the best real estate

1783
01:59:56,620 --> 02:00:00,910
lawyer I've ever I've ever met.
But just like a lot of things,

1784
02:00:00,910 --> 02:00:03,280
you bring somebody new,
they have all these new ideas.

1785
02:00:03,280 --> 02:00:07,780
And he had a lot of fantastic new
ideas, just how to be more organized.

1786
02:00:07,780 --> 02:00:12,550
And the way we transact, the way we,
uh, the way we structure our

1787
02:00:12,550 --> 02:00:16,840
agreements, things that we might
put in there to kind of protect us.

1788
02:00:17,500 --> 02:00:21,370
Um, around that time or soon after
he joined us, which is probably

1789
02:00:21,370 --> 02:00:26,410
about 2004, although everyone's
worked here for like a long time,

1790
02:00:26,410 --> 02:00:30,850
I think the average tenure is 17
or 18 years for these 30 people.

1791
02:00:31,390 --> 02:00:36,190
Um, but we, uh, we became a
registered investment advisor.

1792
02:00:36,490 --> 02:00:39,430
So you ever have any clients
that have done that?

1793
02:00:39,580 --> 02:00:45,790
You got to create a whole a
whole portfolio of policies and

1794
02:00:45,790 --> 02:00:48,670
the ways you manage yourself.
And you need a chief compliance

1795
02:00:48,670 --> 02:00:50,830
officer.
And David is our chief

1796
02:00:50,830 --> 02:00:55,060
compliance officer.
So in addition to being a fantastic

1797
02:00:55,060 --> 02:00:59,770
real estate lawyer, he's now become a
very well informed and an excellent

1798
02:00:59,770 --> 02:01:05,380
chief compliance officer for us.
Yeah, well, institutional investment

1799
02:01:05,380 --> 02:01:11,170
requires a lot of things today that
it didn't say ten years ago with ESG

1800
02:01:11,170 --> 02:01:15,100
and all these different requirements
now. And you know, it's right.

1801
02:01:15,100 --> 02:01:18,430
You know, there's more questions
asked by investors than ever

1802
02:01:18,430 --> 02:01:22,150
before I assume. Right.
Well, there is and and you know,

1803
02:01:22,150 --> 02:01:26,650
the SEC continues to implement
new rules. Right.

1804
02:01:26,650 --> 02:01:29,920
So just last year there's the
new marketing rule.

1805
02:01:29,920 --> 02:01:31,210
So what's the new marketing rule
meaning.

1806
02:01:31,210 --> 02:01:37,960
Well, everything that you push out to
the public, that kind of sort of

1807
02:01:37,960 --> 02:01:44,410
looks like marketing and most things
do has to meet certain standards.

1808
02:01:44,410 --> 02:01:49,360
So for example, I might have given
you a list, uh, you know, pitch book.

1809
02:01:49,360 --> 02:01:53,860
I might have listed all of our assets
that we've sold in the last 20 years,

1810
02:01:53,860 --> 02:01:57,460
and the internal rate of return
for each of those assets.

1811
02:01:57,580 --> 02:02:02,770
Well, now I'm obligated to give you
not just the gross, but the net.

1812
02:02:04,000 --> 02:02:07,210
Well, the net is a function of what?
That fund that owns that

1813
02:02:07,210 --> 02:02:11,440
investment achieved as a net IRR.
And we've got to figure out a way

1814
02:02:11,440 --> 02:02:17,860
to develop a net for every asset
based on the outcomes of each of

1815
02:02:17,860 --> 02:02:21,340
those investments and, of course,
the fees and expenses for running the

1816
02:02:21,340 --> 02:02:24,190
portfolio. We have a methodology.
I'm very pleased with the

1817
02:02:24,190 --> 02:02:26,320
methodology.
David and I and some others

1818
02:02:26,320 --> 02:02:29,530
worked up the methodologies.
And there were there was guidance

1819
02:02:29,530 --> 02:02:32,920
from the SEC on how to do this,
and we just followed that guidance.

1820
02:02:32,920 --> 02:02:38,980
But, um, it's just an example of
like, like some extra work. Uh.

1821
02:02:39,460 --> 02:02:41,530
So you wonder why you need
in-house counsel.

1822
02:02:41,530 --> 02:02:45,360
There's a lot of reasons why you.
Either. Right?

1823
02:02:45,360 --> 02:02:50,430
I find having in-house counsel one
of the greatest advantages is.

1824
02:02:50,430 --> 02:02:53,970
And I just had this conversation
with an operating partner recently

1825
02:02:53,970 --> 02:02:56,640
who's thinking about bringing,
you know, in-house counsel.

1826
02:02:57,270 --> 02:03:00,990
I told him, I said, you know,
one of the greatest things is you're

1827
02:03:01,470 --> 02:03:07,380
you're young acquisition officers
and asset managers, if they're if

1828
02:03:07,380 --> 02:03:11,430
they're willing, they can learn.
They can go down to the general

1829
02:03:11,430 --> 02:03:15,180
counsel or attorney's office,
like down the hall and sit in

1830
02:03:15,180 --> 02:03:18,180
their office and and talk to
them and not worry about a meter

1831
02:03:18,180 --> 02:03:23,220
running while they learn about,
you know, the difference between,

1832
02:03:23,550 --> 02:03:27,360
you know, malfeasance.
And I'll never forget my first

1833
02:03:27,360 --> 02:03:31,800
day in in real estate investing
with Prudential Insurance.

1834
02:03:32,400 --> 02:03:37,830
I was handed five leases and
they said, okay, read these.

1835
02:03:37,830 --> 02:03:40,440
And if there's terminology you
don't understand, there's a guy

1836
02:03:40,440 --> 02:03:44,430
down the hall and you go see and
sit down with and that's I did.

1837
02:03:45,060 --> 02:03:48,360
And he became the best man in my
wedding. Oh, terrific. Yeah.

1838
02:03:50,700 --> 02:03:54,360
So Jack was just great.
And he's probably one of the most

1839
02:03:54,360 --> 02:03:58,230
prolific writers in real estate law
in the country. Or he was. Oh, wow.

1840
02:03:58,230 --> 02:04:03,630
He's retired now. But anyway, well.
I, uh, I tell David from time to

1841
02:04:03,630 --> 02:04:07,290
time, like, don't forget,
part of your job description is

1842
02:04:07,290 --> 02:04:09,930
teaching. That's right.
You need to teach people.

1843
02:04:09,930 --> 02:04:13,740
That's right.
And I tell new acquisition folks here

1844
02:04:13,890 --> 02:04:17,700
do not just let David and we have a
he has a colleague, Morrie Tucker,

1845
02:04:17,700 --> 02:04:22,350
who is associate, uh, counsel.
And she's also a fantastic real

1846
02:04:22,350 --> 02:04:26,610
estate attorney.
Do not let them, um,

1847
02:04:27,060 --> 02:04:31,530
pass on the loan document with
waiting for your comments like they

1848
02:04:31,530 --> 02:04:36,360
have to read this and they do.
Um, but you could hire somebody new

1849
02:04:36,360 --> 02:04:38,160
and they might not think that way.
Well,

1850
02:04:38,160 --> 02:04:41,610
I'll just let the lawyers read it.
So, you know, for a lot of your

1851
02:04:41,610 --> 02:04:46,470
younger listeners, I really can't
emphasize enough how important it

1852
02:04:46,470 --> 02:04:50,370
is and really how valuable it is
to just teach yourself to read.

1853
02:04:50,400 --> 02:04:55,140
You got to learn how to read contract
because it's all over our industry.

1854
02:04:55,140 --> 02:04:59,610
It's like it's what we do every day.
If you're an investing,

1855
02:04:59,610 --> 02:05:02,910
you're looking at legal documents,
right? Every single day, right?

1856
02:05:02,910 --> 02:05:06,510
And you know. You can't leave it.
You can't just rely on the

1857
02:05:06,510 --> 02:05:08,850
attorneys to tell you what they
what they think.

1858
02:05:08,850 --> 02:05:12,780
And eventually you're going to
be asked to write something like

1859
02:05:12,780 --> 02:05:15,420
a term sheet or something.
You need to be able to write the

1860
02:05:15,420 --> 02:05:19,230
way you need to mimic their
writing in plain language.

1861
02:05:19,680 --> 02:05:22,230
Um,
it's it's a really important skill.

1862
02:05:22,230 --> 02:05:26,790
And I learned all that from
Terry Hall before, uh,

1863
02:05:26,790 --> 02:05:29,940
David joined us and from from David.
And they both were extremely

1864
02:05:29,940 --> 02:05:37,740
patient teaching me. Mhm. Yeah.
Um, so talk about the composition

1865
02:05:37,740 --> 02:05:41,310
of your fund investments.
Uh, where where are you more willing

1866
02:05:41,340 --> 02:05:46,470
to take risk and where you very
conservative in staying the course.

1867
02:05:46,470 --> 02:05:52,620
Well, you know, we, we um, we tend to
be pretty conservative, uh, investors

1868
02:05:52,620 --> 02:05:58,260
and I would say over the years,
the number one place that we were

1869
02:05:58,260 --> 02:06:03,870
conservative is in exit valuations.
And, and in particular,

1870
02:06:03,990 --> 02:06:06,780
you know, since we come out of
the great financial crisis and

1871
02:06:06,780 --> 02:06:11,610
interest rates have declined and
cap rates have declined, um,

1872
02:06:11,610 --> 02:06:18,900
we have been very reluctant to,
to use the exit cap rate that was

1873
02:06:18,900 --> 02:06:21,510
projected, that was projected,
or the exit cap rate that

1874
02:06:21,510 --> 02:06:26,610
somebody achieved last month.
Um, and in fact, we have a look back

1875
02:06:26,850 --> 02:06:32,220
testing that we do where we once
we sell something, we look back.

1876
02:06:32,220 --> 02:06:34,440
What did we originally
underwrite as an exit cap?

1877
02:06:34,440 --> 02:06:37,020
And what did we just get as a,
as an exit cap.

1878
02:06:37,200 --> 02:06:41,610
And last year,
what do we value this this asset at.

1879
02:06:41,610 --> 02:06:44,550
What do we value the equity at and
what do we value about it now.

1880
02:06:44,550 --> 02:06:50,100
And uh, and we have a long track
record of being conservative.

1881
02:06:50,100 --> 02:06:53,490
I'm sure that we missed out on
opportunities over the years,

1882
02:06:53,820 --> 02:06:58,950
although I do think now, as you know,
cap rates have moved up.

1883
02:06:59,400 --> 02:07:04,080
Uh, so we might now be right.
We've been wrong on the good side,

1884
02:07:04,380 --> 02:07:07,050
uh, for a long time.
And it's I think capris have

1885
02:07:07,050 --> 02:07:09,750
moved to kind of where we
thought they would be.

1886
02:07:09,750 --> 02:07:12,180
Not that we predicted they would
move here.

1887
02:07:12,240 --> 02:07:16,680
We just didn't understand how they
could stay that low for so long.

1888
02:07:16,680 --> 02:07:21,300
And we were we were just too
cautious or nervous.

1889
02:07:21,300 --> 02:07:25,350
Call what you will, uh,
you know, to to keep that

1890
02:07:25,350 --> 02:07:28,680
assumption in our underwriting.
So that's I mean, that's the main

1891
02:07:28,680 --> 02:07:34,410
place where we and we tend to be
very, very cautious, I'd say

1892
02:07:34,410 --> 02:07:38,190
where we're more likely to be.
I don't use the word aggressive,

1893
02:07:38,190 --> 02:07:43,200
but, uh, you know, we we will bet on
operating partners we have operating.

1894
02:07:43,300 --> 02:07:45,430
Partners that we've been in
business for a very long time.

1895
02:07:45,430 --> 02:07:51,400
We've had excellent outcomes with
them. And, uh, if you see us.

1896
02:07:53,080 --> 02:08:00,340
Approving an investment that seems
to have an underwriting that is.

1897
02:08:00,460 --> 02:08:05,800
Is just a just a little more
aggressive is probably because

1898
02:08:05,800 --> 02:08:08,620
we just had great experience
with them and we trust them.

1899
02:08:09,010 --> 02:08:11,350
Um, we've seen them again.
We've had partners that we've

1900
02:08:11,350 --> 02:08:15,160
invested with for for decades,
many of which we came through

1901
02:08:15,160 --> 02:08:18,040
the great financial crisis with.
So if things get bad,

1902
02:08:18,040 --> 02:08:24,640
we see how how they form. Yeah.
Um, so we, we are more apt to,

1903
02:08:25,030 --> 02:08:29,260
to reach, if you will,
with an operating partner that

1904
02:08:29,260 --> 02:08:32,560
we've had excellent experience
with that we, that we trust.

1905
02:08:32,980 --> 02:08:36,520
Um, then somebody new, I mean
somebody new, we, I mean many times.

1906
02:08:38,530 --> 02:08:40,180
Honestly,
we've never transacted with them.

1907
02:08:40,180 --> 02:08:44,350
I don't think this is a place where
we want to we want to stretch. Um.

1908
02:08:45,610 --> 02:08:49,360
So as you said earlier,
your funds are closed end.

1909
02:08:49,390 --> 02:08:53,200
Is it your intention to keep ABR
going indefinitely as a rolling

1910
02:08:53,200 --> 02:08:55,060
fund manager?
Do you have other goals for the

1911
02:08:55,060 --> 02:09:00,640
company? Well, it's a great business.
So yes, we we would be delighted

1912
02:09:00,640 --> 02:09:05,260
to to stick with this model.
Well, we would like to do and what

1913
02:09:05,260 --> 02:09:09,160
we are doing is, as you can tell,
just with the the GP investment

1914
02:09:09,160 --> 02:09:13,210
program and we are adding some,
some opportunities or some

1915
02:09:13,210 --> 02:09:16,690
offerings that that we think are
complementary to what we do.

1916
02:09:17,050 --> 02:09:21,610
Uh, they're not that different.
Um, we have today, we actually

1917
02:09:21,610 --> 02:09:27,280
have a separate, separate manage
account assignment or an, uh,

1918
02:09:27,280 --> 02:09:31,390
for one investor who, uh, that has
taken the form of co-investment,

1919
02:09:31,390 --> 02:09:35,920
but they are asking us to find, uh,
investments just for them under a

1920
02:09:35,920 --> 02:09:40,750
specific strategy, which we're,
we're, like, perfectly suited to,

1921
02:09:41,320 --> 02:09:44,290
uh, to to do that.
So, you know what Ed and I and,

1922
02:09:44,290 --> 02:09:49,090
and the rest of the management team
intend to do is, is like every,

1923
02:09:49,240 --> 02:09:51,640
every other business,
one of your competitive advantages,

1924
02:09:51,640 --> 02:09:55,360
right. Competitive advantages.
We have a super broad network of

1925
02:09:55,360 --> 02:09:59,140
resourcing.
We have been in the market for a very

1926
02:09:59,140 --> 02:10:04,060
long time. Like we're cycle tested.
Um, we we have an excellent

1927
02:10:04,060 --> 02:10:09,490
track record and we have a, uh,
like a skill set in this middle

1928
02:10:09,490 --> 02:10:13,840
market or lower middle market.
I'm not saying it's it's it's

1929
02:10:13,840 --> 02:10:16,510
unmatched,
but it's very it's very good.

1930
02:10:16,510 --> 02:10:18,820
And it's and we've done it for a
long time.

1931
02:10:18,820 --> 02:10:22,840
So we'd like to leverage those
competitive advantages and be a

1932
02:10:22,840 --> 02:10:26,560
resource to other other investors.
And we sort of sit in the middle.

1933
02:10:26,560 --> 02:10:29,680
We're a resource to investors
and we're a resource to the

1934
02:10:29,680 --> 02:10:35,950
users of that of that capital.
And and I think, I think we we've

1935
02:10:35,950 --> 02:10:39,910
kind of built a platform that's
tailor made to, uh, to do that.

1936
02:10:39,910 --> 02:10:42,580
So yeah, that's,
that's our that's our plan.

1937
02:10:42,910 --> 02:10:46,750
Um, uh, we're excited about it.
And you can innovate within that

1938
02:10:46,750 --> 02:10:50,620
plan. Exactly, exactly.
And we have experience with

1939
02:10:50,620 --> 02:10:54,820
different property sectors.
So over the years we decided office

1940
02:10:54,820 --> 02:10:58,990
was just not a good investment.
It's not for us. Right?

1941
02:10:59,470 --> 02:11:02,380
We didn't go out of business.
We just pivoted to to other,

1942
02:11:02,380 --> 02:11:06,820
other sectors where we
concentrated in in other sectors.

1943
02:11:07,720 --> 02:11:12,400
Um, your your website sites
responsibility is a core value.

1944
02:11:13,210 --> 02:11:16,690
Talk about your philosophy behind the
company initiatives and giving back

1945
02:11:16,690 --> 02:11:19,990
and ESG and how they affect your
company's investment strategies.

1946
02:11:20,440 --> 02:11:24,040
Well.
You know, long before there were

1947
02:11:24,040 --> 02:11:30,160
the letters ESG, um,
we were running a business with,

1948
02:11:31,330 --> 02:11:35,230
uh, a bunch of people who were
very committed to the community

1949
02:11:35,680 --> 02:11:39,340
individually as well as, uh,
as well as corporate.

1950
02:11:39,340 --> 02:11:45,880
So we have for I think since I've
come here, we've had community

1951
02:11:45,880 --> 02:11:49,870
service things that we've just done
as a team that we enjoy doing.

1952
02:11:49,870 --> 02:11:54,280
We, uh, we help the Salvation Army
every year, uh, here in Baltimore,

1953
02:11:54,280 --> 02:11:58,600
they have a gift giving program.
The gifts come in, uh,

1954
02:11:58,600 --> 02:12:03,070
and then they sort them for, uh,
for families who have a, you know,

1955
02:12:03,070 --> 02:12:05,230
I, I have these three kids,
and these are what they're

1956
02:12:05,230 --> 02:12:07,540
looking for as a gift.
So we have we it's like a

1957
02:12:07,540 --> 02:12:10,420
logistics thing.
Uh, so we've helped them with that

1958
02:12:10,420 --> 02:12:12,790
for many years, and we love doing it.
There's a day we do it.

1959
02:12:12,790 --> 02:12:16,450
We have a we have a great time,
uh, helping the Salvation Army

1960
02:12:16,450 --> 02:12:19,540
doing that.
My colleagues have always been active

1961
02:12:19,540 --> 02:12:25,420
in the community doing things.
And then more recently,

1962
02:12:25,420 --> 02:12:31,450
I'd say in the last ten years,
we've adopted some programs that

1963
02:12:31,450 --> 02:12:35,770
kind of leverage the areas that
we're interested in and where we

1964
02:12:35,770 --> 02:12:39,160
think we could, we could be helpful.
So, for example, uh,

1965
02:12:39,160 --> 02:12:43,870
we have a program we call the
Chesapeake Scholars Program where,

1966
02:12:43,990 --> 02:12:50,230
um, we, uh, we mentor, uh,
sort of students that are kind

1967
02:12:50,230 --> 02:12:53,370
of underrepresented part of.
Our of our profession.

1968
02:12:53,370 --> 02:12:56,370
So, you know, you, you and I go
to a real estate conference.

1969
02:12:56,490 --> 02:13:00,420
Look around the room. Right.
It's mostly men.

1970
02:13:01,410 --> 02:13:04,200
Women are making some inroads,
but it's mostly men,

1971
02:13:04,200 --> 02:13:08,670
and they're mostly white.
So there's an enormous population

1972
02:13:08,670 --> 02:13:10,710
of students and others,
young people who are just

1973
02:13:10,710 --> 02:13:15,510
underrepresented in our industry.
And we think we can give them.

1974
02:13:16,320 --> 02:13:20,790
We can get them exposure to our
industry by just mentoring them, just

1975
02:13:20,790 --> 02:13:25,770
having them be a part of what we do.
So we invite them to participate in

1976
02:13:25,770 --> 02:13:29,010
all of our acquisition meetings, all
of our investment committee meetings.

1977
02:13:29,010 --> 02:13:31,590
Now, today it's easier, right?
Because you might have a student at

1978
02:13:31,590 --> 02:13:36,270
Emory and she can just participate by
zoom because you're holding a meeting

1979
02:13:36,270 --> 02:13:42,210
with the teams. Meeting or zoom.
Um, and then we we invite them

1980
02:13:42,240 --> 02:13:45,150
when we have a service day.
We have them join us if they want to.

1981
02:13:45,480 --> 02:13:49,530
Uh, but we keep kind of integrate
them to what we're doing if we go on

1982
02:13:49,530 --> 02:13:52,710
a field trip. Uh, we'll invite them.
You know,

1983
02:13:52,710 --> 02:13:56,940
they usually go into Tuesday at 2:00,
but maybe it's Friday, and, uh,

1984
02:13:56,940 --> 02:14:00,150
and maybe it's in D.C. and the
students at American University,

1985
02:14:00,150 --> 02:14:03,210
they just join us. It's really.
It's been great.

1986
02:14:03,210 --> 02:14:06,350
It's been a ton of fun.
Uh, we end up with usually 2 to

1987
02:14:06,350 --> 02:14:10,350
4 students a school year,
and that's been great.

1988
02:14:10,380 --> 02:14:15,060
The other thing that we're we're
doing is we have a program for

1989
02:14:15,060 --> 02:14:19,920
veterans at Wharton who are getting
their MBA, who work with us, um,

1990
02:14:19,920 --> 02:14:23,670
in the spring as a, as an intern.
Uh,

1991
02:14:23,670 --> 02:14:27,210
so they work usually Fridays because
that's their day off of school.

1992
02:14:27,210 --> 02:14:31,560
This actually got it started at a,
um, a friend whose son was

1993
02:14:31,560 --> 02:14:36,210
getting his MBA at Wharton.
He had spent we've gone to Harvard

1994
02:14:36,210 --> 02:14:39,870
and then he was in the Marines,
I think six years.

1995
02:14:40,110 --> 02:14:46,440
And he knew a lot about, uh, uh, risk
managing risk, like personal risk.

1996
02:14:46,440 --> 02:14:48,360
But he knew anything about risk
capital.

1997
02:14:48,360 --> 02:14:52,680
He had never put an Excel
spreadsheet together to forecast,

1998
02:14:52,680 --> 02:14:57,090
uh, projections and, um,
really didn't understand,

1999
02:14:57,090 --> 02:15:00,270
you know, didn't know, you know,
it had no exposure to capital markets

2000
02:15:00,630 --> 02:15:05,910
and investment decision making.
So we needed somebody that spring,

2001
02:15:05,910 --> 02:15:09,180
and he, uh,
he joined us as an intern.

2002
02:15:09,180 --> 02:15:12,360
He worked exclusively with one
of our acquisition officers.

2003
02:15:12,360 --> 02:15:15,000
So the sort of side by side,
which has worked out really well.

2004
02:15:15,000 --> 02:15:18,840
So Phil Benvenuto was effectively
his mentor that spring,

2005
02:15:19,020 --> 02:15:22,710
and he joined us for all of our
investment committee meetings and all

2006
02:15:22,710 --> 02:15:25,920
of our acquisition meetings by zoom.
And at the end of the term,

2007
02:15:25,920 --> 02:15:27,810
he said to me, he said,
you know, this was great.

2008
02:15:27,810 --> 02:15:30,390
He said, I mean, we did it
because we needed some help.

2009
02:15:30,390 --> 02:15:35,490
And I just happened to know, um,
but he said this was fantastic.

2010
02:15:35,820 --> 02:15:38,310
I mean,
I had no exposure to any of this,

2011
02:15:38,310 --> 02:15:41,100
and now I completely understand.
Now, of course, he's at Morgan

2012
02:15:41,100 --> 02:15:45,840
Stanley. Uh, doing great.
Um, and so I thought,

2013
02:15:45,840 --> 02:15:50,340
why don't we just replicate it is
we're replicating in the spring,

2014
02:15:50,340 --> 02:15:53,880
you get a first year you don't want
to grab in the fall because they're

2015
02:15:54,300 --> 02:15:58,110
they're just, you know, they're
just bombarded with new things.

2016
02:15:58,110 --> 02:16:05,980
So we grab them in the spring and.
Someone named Aaron Gordon. You are.

2017
02:16:06,430 --> 02:16:11,380
So we we have, uh,
the the intern who said Wharton

2018
02:16:11,380 --> 02:16:15,640
getting getting their MBA, uh,
work with us in the spring.

2019
02:16:15,640 --> 02:16:19,750
We tagged them to an acquisition
officer, and that that's been a

2020
02:16:19,750 --> 02:16:23,050
terrific experience.
And then the last thing that,

2021
02:16:23,140 --> 02:16:28,720
um, that we're doing, um,
actually a bit takes me back to,

2022
02:16:28,720 --> 02:16:32,950
uh, to Peter Lindemann.
You probably know Peter has a charity

2023
02:16:32,950 --> 02:16:38,410
that he and his wife, Kathy support
called Sam Alemu. Uh, charities.

2024
02:16:38,410 --> 02:16:43,060
This is a these are these are
students in Kenya that he basically

2025
02:16:43,060 --> 02:16:46,570
sponsors and helps them all the
way through, through college.

2026
02:16:46,570 --> 02:16:51,160
So similarly,
I have a I have an old friend who

2027
02:16:51,160 --> 02:16:56,980
spent his career in international
relief services and ends up, uh,

2028
02:16:56,980 --> 02:17:01,210
he married a woman from Malawi
and she has started a charity.

2029
02:17:01,210 --> 02:17:04,300
So they're both sort of retired
from their professional careers.

2030
02:17:04,300 --> 02:17:10,330
They live in Malawi, in Africa.
And her charity, uh, helps.

2031
02:17:10,330 --> 02:17:14,350
They have a they have a school,
they have a food program where they,

2032
02:17:14,770 --> 02:17:18,760
um, where they basically process
honey and sell it around the

2033
02:17:18,760 --> 02:17:22,030
country as a way to earn money
to support the charity.

2034
02:17:22,480 --> 02:17:28,120
Uh, and they have a health clinic.
So we have, uh, basically

2035
02:17:28,120 --> 02:17:31,180
adopted it's called mulatto.
We've adopted them.

2036
02:17:31,180 --> 02:17:35,740
And what we're doing is helping them.
Because I talked to my friend,

2037
02:17:35,740 --> 02:17:38,650
I told him we wanted to, you know,
see if we could work with them.

2038
02:17:38,650 --> 02:17:40,210
He said,
what I need more than anything else.

2039
02:17:40,210 --> 02:17:42,730
I need someone to help me with
financial forecasting and

2040
02:17:42,730 --> 02:17:46,120
financial management.
I said, well, I think I have 30

2041
02:17:46,120 --> 02:17:51,400
people that can help you.
Uh, so we're helping them do the

2042
02:17:51,400 --> 02:17:54,610
things that I did at Ernst and
Winnie for Frank Turetsky write,

2043
02:17:54,610 --> 02:17:58,390
build out financial projections,
create financial models,

2044
02:17:58,390 --> 02:18:02,020
really teach them how to do it.
That's our that's our goal.

2045
02:18:02,020 --> 02:18:06,880
That's great. So it's, uh.
So those are things I think even

2046
02:18:06,880 --> 02:18:09,400
without ESG, we like,
we would just do this.

2047
02:18:09,400 --> 02:18:16,270
This is just our kind of our DNA.
The, um, the e part of E of ESG is,

2048
02:18:16,270 --> 02:18:19,690
is interesting.
You know, we are like others.

2049
02:18:19,690 --> 02:18:24,040
We're, uh, we're making sure and
kind of always have that, you know,

2050
02:18:24,040 --> 02:18:28,540
buildings we acquire are being,
um, you know, being renovated in a

2051
02:18:28,540 --> 02:18:32,860
way that takes into consideration,
uh, you know, reducing, uh,

2052
02:18:32,860 --> 02:18:36,880
reducing energy and,
but but what's interesting about our,

2053
02:18:36,880 --> 02:18:42,370
our strategy is if you think about we
buy buildings, we put capital into

2054
02:18:42,370 --> 02:18:46,360
it, we bring it back to life and
give them a longer, useful life.

2055
02:18:46,540 --> 02:18:49,810
That would be in lieu of,
let's just say it's a 200 unit

2056
02:18:49,810 --> 02:18:53,770
apartment project that would be in
lieu of just building 200 new units.

2057
02:18:55,240 --> 02:19:03,100
And we we wondered whether what
we did have resulted in lower

2058
02:19:03,100 --> 02:19:08,890
carbon emissions over the life of
the building, then building anew.

2059
02:19:09,040 --> 02:19:12,880
And if you Google that question,
you'll find there's some writing

2060
02:19:12,880 --> 02:19:18,250
around it. And it appears to be true.
But we've actually partnered with

2061
02:19:18,250 --> 02:19:23,500
Johns Hopkins to do a research
study around our portfolio,

2062
02:19:23,500 --> 02:19:27,160
our assets, what we do like do the
math around whether we're right.

2063
02:19:27,700 --> 02:19:30,940
Um, and, uh,
and so I hope to as you know,

2064
02:19:30,940 --> 02:19:35,200
we have a, we have a, a director
of research that we put out, uh,

2065
02:19:35,200 --> 02:19:38,200
research materials from time to time.
And so he's working with Johns

2066
02:19:38,200 --> 02:19:42,100
Hopkins, uh, on that.
So I hope to have an opportunity

2067
02:19:42,100 --> 02:19:45,280
to share that with you soon.
Understanding the measurement of

2068
02:19:45,280 --> 02:19:50,320
that and how how that's measured,
how specifically you can look at

2069
02:19:50,320 --> 02:19:54,640
the comparison of what the use
the the carbon emissions from new

2070
02:19:54,640 --> 02:19:59,320
construction and new activities
vis a vis the keeping the

2071
02:19:59,320 --> 02:20:02,380
existing and retaining all that.
It would be an interesting thing

2072
02:20:02,380 --> 02:20:06,220
to understand, I think.
I think the math is going to be

2073
02:20:06,760 --> 02:20:11,920
the new building will have lower
carbon emissions year to year

2074
02:20:11,920 --> 02:20:17,530
than the old building,
but the cost to build the the carbon

2075
02:20:17,530 --> 02:20:22,240
emission associated with transporting
the the materials there. Right.

2076
02:20:22,240 --> 02:20:27,040
Uh, rebuilding the site, all of that
activity offsets the savings that

2077
02:20:27,040 --> 02:20:32,530
you might have otherwise expected.
So I hope to be able to have a

2078
02:20:32,530 --> 02:20:36,520
document or a research paper that
documents that for you soon.

2079
02:20:36,880 --> 02:20:41,530
Uh, but but from our perspective,
this is what we've always done.

2080
02:20:41,800 --> 02:20:44,800
Um, and we'll, we'll see.
See what Johns Hopkins thinks

2081
02:20:44,800 --> 02:20:48,100
about it. That's great.
When you hire, what do you look

2082
02:20:48,100 --> 02:20:50,920
for in prospective employees?
Well, you know,

2083
02:20:51,070 --> 02:20:54,910
we're looking for a couple of things.
One is, uh,

2084
02:20:54,910 --> 02:20:58,660
someone who's willing to work hard.
So we talked before about a work

2085
02:20:58,660 --> 02:21:01,540
ethic and.
What you grew up with. Right?

2086
02:21:01,630 --> 02:21:05,520
Uh, just just have a strong work
ethic. Just be willing to. Work.

2087
02:21:05,700 --> 02:21:09,690
Work hard. We want.
We want to make sure that they

2088
02:21:09,720 --> 02:21:13,110
are a team player.
So no one here is a superstar.

2089
02:21:13,110 --> 02:21:16,650
Everybody works in a team environment
and that's really important.

2090
02:21:16,650 --> 02:21:20,340
That's a kind of legacy from the
Alex Brown and Sons days.

2091
02:21:20,340 --> 02:21:24,030
This um, and then the second really
important legacy from the Alex Brown

2092
02:21:24,030 --> 02:21:27,510
Associates, this notion of fiduciary.
Are you going to conduct yourself

2093
02:21:27,960 --> 02:21:31,500
as a fiduciary for our clients
and our clients? Capital.

2094
02:21:31,500 --> 02:21:35,490
It's really, really important.
It's like a core thing for us.

2095
02:21:35,910 --> 02:21:39,900
Um, and then the last thing is
just for people that are curious,

2096
02:21:39,900 --> 02:21:44,580
they just have a sense of
curiosity and, uh, just we just

2097
02:21:44,580 --> 02:21:49,440
think that's so important that
when you see something, you get a

2098
02:21:49,440 --> 02:21:52,080
financial statement that comes in.
They compare, you know,

2099
02:21:52,080 --> 02:21:54,990
this quarter to last quarter or
this quarter to the budget.

2100
02:21:54,990 --> 02:21:58,170
And there are variances.
Aren't you curious?

2101
02:21:58,170 --> 02:22:02,310
Why are you curious about why?
Just just be curious.

2102
02:22:02,310 --> 02:22:05,940
Just just have a sense of curiosity.
I think is so valued,

2103
02:22:05,940 --> 02:22:09,780
we think is so valuable.
I think it's a core competency

2104
02:22:09,780 --> 02:22:16,110
of anybody should to live.
It's a core competency. That's great.

2105
02:22:16,530 --> 02:22:19,230
So what are your life priorities
among family work and giving

2106
02:22:19,230 --> 02:22:23,400
back top?
Well, I'm sure like a lot of your

2107
02:22:23,580 --> 02:22:27,450
listeners, I mean, the priorities
are to to balance them,

2108
02:22:27,690 --> 02:22:32,160
to balance those priorities. Right.
Um, and to find a way that, um,

2109
02:22:32,160 --> 02:22:39,720
that you, you, you can give back, uh,
and have, have a, you know, a stable,

2110
02:22:39,720 --> 02:22:43,050
happy family that you enjoy being
with and then do things at work

2111
02:22:43,050 --> 02:22:48,570
that are productive that, you know,
the, the, the key for me has been

2112
02:22:48,810 --> 02:22:53,700
probably to not say three things.
One is I have found myself in a

2113
02:22:53,700 --> 02:23:00,090
career that I just absolutely love.
I really, really love what we do.

2114
02:23:00,090 --> 02:23:04,830
I really love our my colleagues
and I'm working with them.

2115
02:23:04,830 --> 02:23:08,670
It's just enriching and I've never
come to work kind of dreading,

2116
02:23:09,150 --> 02:23:15,840
dreading, opening the door, uh, ever.
Um, the second is, um, you know,

2117
02:23:15,840 --> 02:23:19,950
the very, very early age, I, I found
a life partner, my wife, Christine,

2118
02:23:20,100 --> 02:23:26,130
who, um. Just is very supportive.
It had the same sort of shared

2119
02:23:26,130 --> 02:23:31,080
goals as I did was.
Was delighted and happy to raise

2120
02:23:31,080 --> 02:23:34,710
our family. Take care of.
She ran the house while I went to

2121
02:23:34,710 --> 02:23:41,100
work and I traveled a lot, and we
just never had any conversation

2122
02:23:41,100 --> 02:23:44,850
around whether there was a
difficulty with that or, uh, or not.

2123
02:23:44,850 --> 02:23:48,750
And when I'm not here and we're
together and we hang out

2124
02:23:48,750 --> 02:23:52,950
together and we don't,
we don't let work kind of overwhelm.

2125
02:23:52,950 --> 02:23:55,530
What she's curious what's going on
and work. She knows everybody, right?

2126
02:23:55,530 --> 02:23:57,840
We're both very young when I
came here.

2127
02:23:58,440 --> 02:24:02,520
Um, but, uh,
but that has been really a blessing.

2128
02:24:02,520 --> 02:24:07,950
And then I say the third thing I
mean, I do I do, uh, a lot outside of

2129
02:24:07,950 --> 02:24:13,050
the, the office community things.
I'm on a couple of boards and, uh,

2130
02:24:13,050 --> 02:24:17,130
and I do like working around, uh,
you know, different charities.

2131
02:24:17,130 --> 02:24:19,860
The key for me has always been I
only do stuff that's fun.

2132
02:24:20,100 --> 02:24:22,320
I really do like all the things
I'm involved in.

2133
02:24:22,320 --> 02:24:27,360
I really enjoy, and I,
I don't like I don't join boards

2134
02:24:27,360 --> 02:24:29,970
and just sit around,
and I'm not even very good at that.

2135
02:24:29,970 --> 02:24:35,190
But if I join something, you give me,
give me a project fantastic at that.

2136
02:24:35,190 --> 02:24:39,000
So I just do things that I,
that I like and so far it's

2137
02:24:39,000 --> 02:24:44,550
worked out really well.
So, uh, what advice would you give

2138
02:24:44,550 --> 02:24:51,100
your 25 year old self to daytime?
Well, at 25, I was getting ready to

2139
02:24:51,100 --> 02:24:54,580
go to Wharton and the first thing I
would do is if you get into Wharton,

2140
02:24:54,580 --> 02:25:00,070
take Jeremy Segal's class because he
teaches or taught macroeconomics.

2141
02:25:00,070 --> 02:25:03,730
I was a business school student
at Maryland, and, uh,

2142
02:25:04,090 --> 02:25:08,140
I could wave out of macroeconomics.
Turns out to be a mistake because

2143
02:25:08,140 --> 02:25:11,350
he's, you know, the most prominent
teacher in the school at that

2144
02:25:11,350 --> 02:25:15,490
time and, you know, remains one
of the most prominent economists.

2145
02:25:15,580 --> 02:25:19,840
He was just on Squawk Box yesterday.
Um, you know, in the world.

2146
02:25:19,840 --> 02:25:23,170
So, uh. Yeah.
Tom, take Jeremy Siegel's class.

2147
02:25:23,170 --> 02:25:27,400
I just didn't I didn't know that.
Um, the other thing I think I would,

2148
02:25:27,400 --> 02:25:31,720
I would do is figure out a way to
work overseas for a period of time.

2149
02:25:31,720 --> 02:25:36,790
Really? Yeah.
I just think in hindsight, I, um,

2150
02:25:37,300 --> 02:25:40,360
I didn't really try hard to do that.
I know I would have loved it.

2151
02:25:40,360 --> 02:25:44,710
My wife would have happily gone with
me. Um, I should have done that.

2152
02:25:44,710 --> 02:25:47,470
I think you get my my friends
and colleagues that I've met

2153
02:25:47,470 --> 02:25:51,520
that have had that experience,
and then maybe it's 2 to 5 years.

2154
02:25:51,520 --> 02:25:54,070
It's really valuable.
It gives them a to tell.

2155
02:25:54,070 --> 02:25:57,700
Your children today. Yeah.
I have told them. Yeah. Um.

2156
02:25:58,450 --> 02:26:02,980
My son worked in the in London for
three years and he enjoyed it a lot.

2157
02:26:03,040 --> 02:26:08,710
In fact, he regretted having to come
home. But that's another story. Yeah.

2158
02:26:09,280 --> 02:26:12,940
Um, if you could post a statement
on a billboard on a major

2159
02:26:12,940 --> 02:26:16,870
freeway for millions to see,
what would it say? Tom?

2160
02:26:17,140 --> 02:26:20,170
Well, I've listened to many of
your podcasts and your, uh,

2161
02:26:20,470 --> 02:26:24,610
the folks you interview have great,
uh, great responses to this question.

2162
02:26:24,610 --> 02:26:27,850
So, um, I'm just going to share mine.
I'm going to add it.

2163
02:26:27,850 --> 02:26:32,830
And that is just be curious.
I just can't emphasize how

2164
02:26:32,830 --> 02:26:36,850
important that is and how
valuable it is and how much

2165
02:26:36,850 --> 02:26:41,410
you'll enjoy learning new things.
Just be curious. That's great.

2166
02:26:41,440 --> 02:26:46,210
Tom, thank you very much for
your insightful, uh,

2167
02:26:46,210 --> 02:26:49,750
and thoughtful commentary today,
and I really appreciate it.

2168
02:26:49,870 --> 02:26:52,690
Well, thank you, John.
Thanks for your your, uh,

2169
02:26:52,690 --> 02:26:56,200
your programming here and everything
you're doing is it's just terrific.

2170
02:26:56,200 --> 02:26:57,340
Thank you so much.