1
00:00:00,720 --> 00:00:04,680
So Charlie Hewlett,
welcome to Icons of Real Estate.

2
00:00:04,680 --> 00:00:08,250
Thank you for joining me today.
As you know, I've interviewed

3
00:00:08,250 --> 00:00:12,120
your your current CEO,
Adam Ducker, last year.

4
00:00:12,240 --> 00:00:14,700
And we discussed the company and
its growth.

5
00:00:14,820 --> 00:00:18,930
You and I met several years ago, through Gadi Kaufman,

6
00:00:18,930 --> 00:00:24,630
our Cocos chairman, via Uli,
which we all belong to and

7
00:00:24,630 --> 00:00:29,220
subsequent engaged you to help my
employer at the time with a market

8
00:00:29,220 --> 00:00:34,740
feasibility study that we worked on.
Since then, I read the first edition.

9
00:00:34,740 --> 00:00:38,460
Well, maybe the second edition of
your book, this strategy for real

10
00:00:38,460 --> 00:00:42,930
estate companies, and used it as a
guide to assist my advisory clients,

11
00:00:42,930 --> 00:00:48,210
which I found very helpful.
Before going into the discussing

12
00:00:48,210 --> 00:00:52,200
the third edition of the book in
some detail, I'd like to understand

13
00:00:52,320 --> 00:00:57,240
your current role at RCL Co,
the high level backstory of how

14
00:00:57,240 --> 00:01:01,320
and why you wrote the book,
and then we'll go into your origin

15
00:01:01,320 --> 00:01:04,860
story. So go right ahead. Sure.
Well, yeah. It's good to see John.

16
00:01:05,100 --> 00:01:08,040
Thank you Charlie.
Appreciate the opportunity here.

17
00:01:08,490 --> 00:01:14,670, so yeah, my my current role here, I'm a managing director and,

18
00:01:14,670 --> 00:01:22,830
one of the five owners of RCL Co, our, our history goes back

19
00:01:22,830 --> 00:01:28,560
to Bob Loesser, who was the
Robert Charles Lesser of the RCL Co

20
00:01:28,560 --> 00:01:31,080
that we now call ourselves,

21
00:01:31,080 --> 00:01:36,450
started the firm back in the mid 60s.
And so I'm one of those odd,

22
00:01:36,450 --> 00:01:40,890
dinosaurs even for my generation,
been with the company for 35 years,

23
00:01:40,890 --> 00:01:45,900
which is sort of odd to say out loud,
but yeah, so I spend half of my

24
00:01:45,900 --> 00:01:48,900
time in what we call our real
estate economics group,

25
00:01:48,900 --> 00:01:52,110
and that is marketing financial
feasibility for real estate

26
00:01:52,110 --> 00:01:56,640
projects all over the country.
So we work on probably 3400

27
00:01:56,640 --> 00:02:00,570
engagements all over the
continental United States,

28
00:02:00,570 --> 00:02:04,980
do some work globally, but most of
our work is in in the United States.

29
00:02:05,430 --> 00:02:10,440, and, the other half of my
time is, is concentrated in

30
00:02:10,440 --> 00:02:14,280
our management consulting group.
And so that is strategy planning.

31
00:02:14,280 --> 00:02:18,780
But, just for companies in the
real estate space, I think that is

32
00:02:18,780 --> 00:02:23,700
one of the unique advantages that we
bring to the table as management

33
00:02:23,700 --> 00:02:27,930
consulting company to, to real estate
companies is that we are first

34
00:02:27,930 --> 00:02:30,330
and foremost market participants.
We understand the business,

35
00:02:30,330 --> 00:02:32,730
we understand the language,
some of the unique challenges,

36
00:02:32,730 --> 00:02:36,240
and we think that we can bring
that experience to bear in our

37
00:02:36,240 --> 00:02:38,820
strategic planning engagements
with real estate companies.

38
00:02:40,290 --> 00:02:45,510
And so that is the foundation of
the book. It is it is indeed. Yeah.

39
00:02:45,510 --> 00:02:50,130
And I think that, I'm pretty
sure because I've, I've searched,

40
00:02:50,130 --> 00:02:54,180
this is a fairly unique body of work.
I haven't run across anything else

41
00:02:54,180 --> 00:02:58,170
that talks about strategic planning,
and certainly not for real estate

42
00:02:58,170 --> 00:03:02,280
companies at this level of detail.
And, you know, the book is intended

43
00:03:02,280 --> 00:03:08,520
to be a a primer and a guide for
companies to think about,

44
00:03:08,760 --> 00:03:14,070
you know, how to design a
well-rounded strategic plan that will

45
00:03:14,070 --> 00:03:17,970
stand them in good stead through all
phases of the real estate cycle.

46
00:03:17,970 --> 00:03:22,590
And I think the the reason why
strategy planning is so important

47
00:03:22,590 --> 00:03:25,710
in this industry is the extreme
cyclicality of the business.

48
00:03:25,710 --> 00:03:29,940
So, you know, we I'm sure your
audience here isn't going to be

49
00:03:29,940 --> 00:03:33,090
surprised to hear me say that,
you know, real estate remains

50
00:03:33,090 --> 00:03:36,270
one of the most cyclical
businesses in the US economy.

51
00:03:36,270 --> 00:03:40,200
It's has higher highs and lower
lows than energy and technology

52
00:03:40,200 --> 00:03:43,410
and all of these things.
And so making sure that you have

53
00:03:43,410 --> 00:03:46,410
a well-rounded and articulated
strategy that helps you deal with

54
00:03:46,410 --> 00:03:50,400
all the different phases of the
real estate cycle, is is critical

55
00:03:50,400 --> 00:03:53,790
for real estate companies.
So that was really what compelled me

56
00:03:53,790 --> 00:03:59,190
to write the the second edition back
in 2008 and then refresh that,

57
00:03:59,190 --> 00:04:03,750
just this, this January in 2024.
What I'd like to do, Charlie,

58
00:04:03,750 --> 00:04:06,900
is go back to the origins of the
thought process.

59
00:04:06,900 --> 00:04:10,290
When you originally wrote the
book and and even when the first

60
00:04:10,290 --> 00:04:13,320
edition was written by your mentor,
Chris Weinberger. Yes.

61
00:04:13,320 --> 00:04:16,440
To really understand, you know,
why it even came about.

62
00:04:16,440 --> 00:04:20,550
I mean, we had management consulting
going back 50 some years and then

63
00:04:20,550 --> 00:04:23,820
other companies strategy, of course,
and we have management consulting

64
00:04:23,820 --> 00:04:27,180
firms that do that all the time.
Been around longer than your firm,

65
00:04:27,390 --> 00:04:31,170
but I'd like to really get it dive
into, you know, the real estate.

66
00:04:31,170 --> 00:04:34,110
You talked about cyclicality.
But I want to get into kind of

67
00:04:34,110 --> 00:04:36,210
where that all came.
I'm sure clients came to you and

68
00:04:36,210 --> 00:04:39,570
said, God, we're struggling and
we need some help with this

69
00:04:39,570 --> 00:04:42,270
thought process. Can you help us?
And then that's maybe how it

70
00:04:42,270 --> 00:04:43,110
came out.
I don't know,

71
00:04:43,110 --> 00:04:45,360
but we'll find out. Yeah, sure.
Well,

72
00:04:45,360 --> 00:04:49,050
you mentioned Chris Ellenberger, my, my, my colleague,

73
00:04:49,050 --> 00:04:52,470
former colleague at RCL Cohen
and still my good friend today,

74
00:04:52,470 --> 00:04:55,530
and, Chris was a Harvard
Business School graduate with a

75
00:04:55,530 --> 00:05:00,030
concentration in strategic planning.
So when he joined RCL Co in.

76
00:05:00,160 --> 00:05:04,930
The late 1970s, he brought
strategic planning to the business.

77
00:05:04,930 --> 00:05:09,220
So he really was the originator
and creator of strategy for real

78
00:05:09,220 --> 00:05:12,400
estate companies, as I knew it.
And I had the privilege of

79
00:05:12,610 --> 00:05:15,760
apprenticing with him.
And, you know, like most things

80
00:05:15,760 --> 00:05:19,750
in life, stuff happens and and
life takes twists and turns.

81
00:05:19,750 --> 00:05:25,210
And so I became his right hand
person in the management consulting

82
00:05:25,210 --> 00:05:30,070
practice and then learned and
working with Gary Kaufman.

83
00:05:30,070 --> 00:05:32,650
Then thereafter,
after Chris left the firm and,

84
00:05:32,860 --> 00:05:36,970
and went on to do other things,
you know, continued to take Chris's

85
00:05:36,970 --> 00:05:41,860
foundational work and improve
upon it, I hope I've asked Chris.

86
00:05:41,860 --> 00:05:44,860
I think he thinks so, and and bring it current.

87
00:05:44,860 --> 00:05:49,450
And, so again,
it was really the Genesis was,

88
00:05:49,450 --> 00:05:53,290, Chris's original work.
And then seeing the need in the

89
00:05:53,290 --> 00:05:57,790
business, nobody was talking
about the unique aspects of real

90
00:05:57,790 --> 00:06:00,400
estate and why strategy for real
estate is different.

91
00:06:00,400 --> 00:06:03,460
I mean, you know, Michael Porter
and all of these, you know,

92
00:06:03,460 --> 00:06:06,970
great, you know, deep thinkers
about strategy in general.

93
00:06:06,970 --> 00:06:10,720
But no one was talking about
real estate and how different

94
00:06:10,870 --> 00:06:13,960
that business is.
You could dive into that in much

95
00:06:13,960 --> 00:06:17,260
more detail later.
But let's now go back to your

96
00:06:17,260 --> 00:06:20,080
origin story, Charlie.
So where did you, where'd you

97
00:06:20,080 --> 00:06:23,830
grow up? Good boy, good boy. Right.
So first the earth cooled and

98
00:06:23,830 --> 00:06:27,820
the dinosaurs running out, I grew up outside of Boston.

99
00:06:27,970 --> 00:06:33,730, and, I was in private
schools and in the Boston area.

100
00:06:33,730 --> 00:06:36,100
I went to Brown University down
in Providence, Rhode Island.

101
00:06:36,100 --> 00:06:40,360
So decidedly a New Englander.
What does your parents do?

102
00:06:40,540 --> 00:06:44,200, my father was involved in the
stock market. That was his career.

103
00:06:44,200 --> 00:06:48,340
He was actually one of the early
adopters of the mutual fund concept.

104
00:06:48,340 --> 00:06:51,550
Oh, really, yeah.
And see, with. Fidelity. Or.

105
00:06:51,550 --> 00:06:54,130
Well, no,
he was with Paine Webber originally,

106
00:06:54,220 --> 00:06:57,220
and Webber branched out on his
own with a Paine Webber partner.

107
00:06:57,670 --> 00:07:00,940, the story that I was told
from my father is that, you know,

108
00:07:00,940 --> 00:07:03,940
the that he and the partner who was
paying whoever. They flipped a coin.

109
00:07:03,940 --> 00:07:06,670
And one person stayed at Paine
Webber to trade the accounts,

110
00:07:06,670 --> 00:07:09,790
and the other person who went
outside to, to to raise the funds,

111
00:07:09,790 --> 00:07:12,100
and, and really,
it was kind of like a first mutual

112
00:07:12,100 --> 00:07:16,930
fund giving small investors access
to institutional investing in the

113
00:07:16,930 --> 00:07:19,180
stock market that wasn't available.
And, of course, you know,

114
00:07:19,210 --> 00:07:21,460
fidelity and others.
I'm not saying they copied it,

115
00:07:21,460 --> 00:07:25,300
but, you know, so came up
with the idea concurrently and,

116
00:07:25,300 --> 00:07:28,600
you know, the history anyways.
And, and my mother,

117
00:07:28,630 --> 00:07:32,650
we like to describe her as a
professional volunteer.

118
00:07:32,650 --> 00:07:37,360
She could have been a CEO,
in the 1950s and 60s if women

119
00:07:37,360 --> 00:07:40,210
were invited to be so.
But she was a first and foremost

120
00:07:40,210 --> 00:07:43,420
a homemaker.
But she was the chair of the board

121
00:07:43,420 --> 00:07:47,950
and president of a number of
important, philanthropic and

122
00:07:47,950 --> 00:07:51,100
charitable organizations Boston
Children's Service Association,

123
00:07:51,100 --> 00:07:53,140
the Lyric Opera of Boston,
and blah, blah, blah.

124
00:07:53,140 --> 00:07:56,350
So, she had a full time.
She had two full time jobs.

125
00:07:56,350 --> 00:07:59,410
How did they influence you as
far as your thought process?

126
00:07:59,590 --> 00:08:03,400
Oh, well, I think the most
important influence they had on

127
00:08:03,400 --> 00:08:07,600
me was in was in real estate.
So they were small time investors.

128
00:08:07,600 --> 00:08:10,030
Oh, really? Okay, owned,

129
00:08:10,030 --> 00:08:15,430
30 or 40 multifamily units in a,
pretty then sketchy neighborhood

130
00:08:15,430 --> 00:08:19,120
called Mission Hill in Boston.
And my sister and I, as,

131
00:08:19,120 --> 00:08:22,750
as tweens and teenagers,
were sent to the properties to

132
00:08:22,780 --> 00:08:27,580
do renovations and construction.
Okay. And, you know, vacant units.

133
00:08:27,580 --> 00:08:31,690
And the deal was we would hire
professional plumbers and carpenters

134
00:08:31,690 --> 00:08:36,160
and, and electricians,
under the the guy under the condition

135
00:08:36,160 --> 00:08:40,210
that we could be their helper.
So we would watch them do 1 or 2

136
00:08:40,210 --> 00:08:42,670
bathrooms,
and then we would do the next one.

137
00:08:42,790 --> 00:08:46,960
So I kind of learned learn by doing.
But, when I,

138
00:08:46,960 --> 00:08:49,570
when I graduated from Brown,
I figured I probably should get a

139
00:08:49,570 --> 00:08:53,410
job that didn't involve wearing a
tool belt or having a name tag.

140
00:08:53,410 --> 00:09:00,220
And so, I dabbled in, retail
originally, here in Washington.

141
00:09:00,220 --> 00:09:03,370
I moved here in 1985,
with May Department Stores,

142
00:09:03,370 --> 00:09:07,090
which was hex before it was subsumed
into the Macy's conglomerate.

143
00:09:07,180 --> 00:09:09,730
What attracted you to me,

144
00:09:09,730 --> 00:09:17,710
they paid me an ungodly sum of money.
They paid me $22,500 to move to

145
00:09:17,710 --> 00:09:20,020
Washington, DC, and.
Okay, a,

146
00:09:20,020 --> 00:09:23,290
an intern in their buying department.
Anyways,

147
00:09:23,320 --> 00:09:26,050
fascinating experience I ran.
I helped run the men's store at

148
00:09:26,080 --> 00:09:28,900
Tysons Corner.
It was a great experience for a

149
00:09:28,900 --> 00:09:33,070
22 year old kid running up,
you know, $5 million business.

150
00:09:33,550 --> 00:09:36,850, but, you know,
I think retail is like hospitality

151
00:09:36,850 --> 00:09:40,270
or the restaurant business.
You either love it and it's in

152
00:09:40,270 --> 00:09:44,350
your blood or it's not for you.
And my dad was a 30 year retailer.

153
00:09:44,350 --> 00:09:48,040
Yes.
So, you know, and so after,

154
00:09:48,040 --> 00:09:50,920
you know, a couple of years of that,
I decided that that wasn't for me.

155
00:09:50,920 --> 00:09:54,310
And I started looking for things
to do that I wanted to get back

156
00:09:54,310 --> 00:09:56,950
into real estate because that's
where I had some experience.

157
00:09:56,950 --> 00:09:58,870
And so I reached out to a
classmate of mine,

158
00:09:58,870 --> 00:10:03,100
they and he said. Oh. Well, I.
I just heard that they opened up

159
00:10:03,100 --> 00:10:06,190
this office of Robert Charles Lesser
and Company in Washington, D.C..

160
00:10:06,220 --> 00:10:10,600
You should go talk to, damn
Manfred, who was then the partner

161
00:10:10,720 --> 00:10:13,990
who had moved out from California.
So I was the second full time

162
00:10:13,990 --> 00:10:19,030
hire in the Washington,
DC office of RCL Co back in 1987.

163
00:10:19,360 --> 00:10:22,420
Who was the was Chris running
the office then? No, Chris.

164
00:10:22,480 --> 00:10:27,550
Chris had migrated to Santa Fe, he had been in Los Angeles for

165
00:10:27,550 --> 00:10:32,170
a long period of time, but he,
Kaufman actually had moved,

166
00:10:32,170 --> 00:10:35,860
out to the East Coast for some, you know, some period of time,

167
00:10:35,860 --> 00:10:37,270
I don't know,
about six months or a year to

168
00:10:37,270 --> 00:10:41,260
sort of get the office started.
And then Pam was the partner and

169
00:10:41,260 --> 00:10:44,920
still a dear friend of mine to
this day, who moved from,

170
00:10:44,920 --> 00:10:49,690
our Newport Beach office to then be
the full time partner in Washington,

171
00:10:49,690 --> 00:10:52,090
D.C.. And I think that was 1987.
Yeah.

172
00:10:52,300 --> 00:10:56,140
What was RCL Co doing at that
point in 1987? Back in the.

173
00:10:56,140 --> 00:11:00,910
80s, information was hard to come by.
It's very different than today

174
00:11:00,910 --> 00:11:04,000
where you can go on and log on
and get all kinds of data.

175
00:11:04,000 --> 00:11:08,770
So we were often being hired by, real estate developers and

176
00:11:08,770 --> 00:11:11,500
homebuilders simply to get
information on what was happening

177
00:11:11,500 --> 00:11:14,050
in their competitive market,
because it just wasn't available.

178
00:11:14,830 --> 00:11:17,410, and then the business
evolved over time.

179
00:11:17,830 --> 00:11:20,500, so primary research is what
you were doing then basically,

180
00:11:20,500 --> 00:11:22,390
you're kicking.
The dirt and talking to homebuilders

181
00:11:22,390 --> 00:11:26,080
and sales agents and gathering
information, compiling. Yeah.

182
00:11:26,080 --> 00:11:28,690
And then, of course, helping them
think about what to do with that.

183
00:11:28,690 --> 00:11:32,440
And as the business evolved and
data became much more ubiquitous,

184
00:11:32,680 --> 00:11:36,490
our model changed.
And and we did have a we did come to

185
00:11:36,490 --> 00:11:39,730
a fork in the road where we had to
make a decision whether we wanted to

186
00:11:39,730 --> 00:11:45,670
be costar, like, or, you know, and be in the data business.

187
00:11:45,670 --> 00:11:49,570
And we decided, no, we don't want to
be in the commodity data business.

188
00:11:49,570 --> 00:11:53,410
We want to be able to access the
best information available in

189
00:11:53,410 --> 00:11:56,110
the marketplace and apply that
to our client situation.

190
00:11:56,110 --> 00:12:00,880
So we we stayed above above the
data collection and aggregation.

191
00:12:00,970 --> 00:12:04,570, and that has served us well.
You jumped over one piece of

192
00:12:04,570 --> 00:12:07,030
experience that I read about.
Maybe you can tell me about it.

193
00:12:07,030 --> 00:12:09,820
You were apparently one point at
a home builder in Boston.

194
00:12:09,820 --> 00:12:13,060
Well, that's what that goes back
to my days in Boston and working

195
00:12:13,060 --> 00:12:14,410
in Mission Hill.
And then,

196
00:12:14,410 --> 00:12:18,100
through high school and college,
I, I ran construction crews.

197
00:12:18,100 --> 00:12:21,730
I, I didn't know it at the time, but
I was a value add general contractor.

198
00:12:21,730 --> 00:12:25,300
Oh, okay. That's interesting.
I had family connections who were

199
00:12:25,300 --> 00:12:27,670
buying homes in the Boston suburbs.
Got it.

200
00:12:27,670 --> 00:12:31,630
I would hire a crew of 10 or 12,
and over the three months we would.

201
00:12:31,960 --> 00:12:35,530
Just right after Brown.
It was during high school.

202
00:12:35,530 --> 00:12:38,200
And through high school.
Through college. Yeah. Oh, okay.

203
00:12:38,200 --> 00:12:39,610
I didn't realize it was that early.
Yeah.

204
00:12:39,610 --> 00:12:44,260
That was that was my real estate. Orientation basically.

205
00:12:44,470 --> 00:12:47,620
Yeah, yeah.
So what made you pivot from being

206
00:12:47,620 --> 00:12:50,560
out in sticks and bricks and
wanting to sit behind the computer?

207
00:12:50,560 --> 00:12:53,350
Or at that time,
maybe it was computers were early

208
00:12:53,350 --> 00:12:57,790
at that point when 1987. But yeah.
Well, you have to remember back to

209
00:12:57,790 --> 00:13:04,060
the back to the mid 1980s, I mean, real estate wasn't wasn't a

210
00:13:04,060 --> 00:13:09,640
true investment class and,
wasn't a, no professional

211
00:13:09,640 --> 00:13:12,610
the way that it is today.
I mean, now we have global capital

212
00:13:12,610 --> 00:13:17,710
and massive companies that have
billions and billions of of real

213
00:13:17,710 --> 00:13:20,590
estate investments under management.
Back then, it was, you know,

214
00:13:20,590 --> 00:13:23,470
it was a bunch of,
moms and pops and it was a bunch of

215
00:13:23,470 --> 00:13:28,120
entrepreneurs and, developers
and builders and, well, it was.

216
00:13:28,120 --> 00:13:31,630
The early phase, you know,
the reed industry existed, but it

217
00:13:31,630 --> 00:13:35,680
was very limited at that point.
So we had a, you know, and there

218
00:13:35,680 --> 00:13:38,680
was institutional investment.
I work for Prudential back in the

219
00:13:38,680 --> 00:13:43,570
late 70s, early 80s, you know,
there was an institutional market,

220
00:13:43,570 --> 00:13:46,960
but it wasn't anywhere close to
where it happened in the 90s,

221
00:13:46,960 --> 00:13:50,680
obviously, after the the crisis
of the early 90s.

222
00:13:50,680 --> 00:13:56,020
And still talk about that time a
little bit 87 through 91, that that

223
00:13:56,020 --> 00:13:59,230
period of time and what you guys
were working on at that time? Sure.

224
00:13:59,320 --> 00:14:03,640
Well, I mean, the, the, the late 80s
were, were go, go period. Of course.

225
00:14:03,730 --> 00:14:08,800, you know, people who haven't
been through the, the 91,

226
00:14:08,800 --> 00:14:13,450
you know, downturn that was,
that was one of the most severe

227
00:14:13,450 --> 00:14:16,510
downturns in real estate,
not necessarily the economy.

228
00:14:16,990 --> 00:14:23,140, I think in many ways it was
probably more painful than the great

229
00:14:23,140 --> 00:14:25,390
financial crisis for real estate.
And people don't remember.

230
00:14:25,390 --> 00:14:28,000
And the. Pandemic even for. Sure.
Yeah,

231
00:14:28,000 --> 00:14:31,750
the pandemic at the end of the day
turned out to be a slight hesitation.

232
00:14:31,750 --> 00:14:35,140
And then a real boom period, at
least for many segments, right.

233
00:14:35,140 --> 00:14:37,180
You didn't want to be in the
office market, of course.

234
00:14:37,330 --> 00:14:40,810, but if you were in multifamily,
if you were an industrial,

235
00:14:40,810 --> 00:14:43,990
if you were in data centers,
if you were in. Yeah, exactly.

236
00:14:44,080 --> 00:14:47,170, it was it was actually a boom
time, which is odd given the,

237
00:14:47,170 --> 00:14:50,410
you know, the the terrible
experience that we all went through.

238
00:14:50,410 --> 00:14:55,150
But, you know, back to 90,
99.1 and that was awful.

239
00:14:55,150 --> 00:14:57,880
And we were we were all sitting
on our hands wondering if we

240
00:14:57,880 --> 00:15:01,190
were going to have jobs. So.
It was a it was a tough time.

241
00:15:01,310 --> 00:15:03,410
How did RCA can make it through
that time?

242
00:15:03,440 --> 00:15:06,890
Well, I do remember that those of us
in the Washington office said, well,

243
00:15:06,890 --> 00:15:11,570
instead of firing one of us, why
don't all of us take a 30% haircut?

244
00:15:11,570 --> 00:15:14,780
And if we do, okay,
we'll earn that money back first.

245
00:15:14,780 --> 00:15:18,680
And, so you know that that's
how we actually kept the team

246
00:15:18,680 --> 00:15:20,600
that we had at the time,
which was still small, and it was

247
00:15:20,600 --> 00:15:26,120
5 or 6 people, but nevertheless, and I remember my, my,

248
00:15:26,120 --> 00:15:30,380
my former colleague Len Bogart, who,
you know, and is no longer with us,

249
00:15:30,380 --> 00:15:35,810
unfortunately. Wonderful guy, he had signed on,

250
00:15:36,530 --> 00:15:39,980
to the company, I think 6 or 8
months before the downturn happened,

251
00:15:39,980 --> 00:15:41,570
you know, and Chris,
linebacker at the time said,

252
00:15:41,570 --> 00:15:44,750
you know, oh, we've done great as a
company through lots of downturns.

253
00:15:44,750 --> 00:15:46,940
You know, you shouldn't worry.
And it's like, oh my God.

254
00:15:46,940 --> 00:15:49,820
Six months later we were all
wondering whether we were going

255
00:15:49,820 --> 00:15:53,120
to fold.
But it was it was very difficult.

256
00:15:53,120 --> 00:16:01,580
And so let's translate that time to, this corporate advisory business.

257
00:16:01,580 --> 00:16:03,350
Yeah.
So you're looking at companies

258
00:16:03,350 --> 00:16:06,350
in distress,
and they were in deep distress.

259
00:16:06,350 --> 00:16:14,330
So I was with the Sol Company in
1990, from 1986 85 through 92.

260
00:16:14,720 --> 00:16:20,510
So in 1990, Frank saw was in
desperate shape because he had a

261
00:16:20,510 --> 00:16:23,840
lot of land investments out in
Northern Virginia with Bob Kettler.

262
00:16:24,500 --> 00:16:26,660,
the bank was struggling because they

263
00:16:26,660 --> 00:16:31,160
were they were a savings and loan.
And so the SNL industry was

264
00:16:31,160 --> 00:16:35,570
dying basically.
30 and 50% loan to values. Exactly.

265
00:16:35,570 --> 00:16:38,480
I mean, they were not as
aggressive as other SNL's.

266
00:16:38,480 --> 00:16:41,660
The Chevy Chase bank was a
little bit more conservative.

267
00:16:41,870 --> 00:16:43,880
Frank looked at every deal and
all that.

268
00:16:43,880 --> 00:16:47,510
But he, you know, got caught up
with the land play, and that was

269
00:16:47,510 --> 00:16:52,280
what almost took him down.
We had to sell shopping centers,

270
00:16:52,280 --> 00:16:55,850
two centers at the end of 91,
giant food to survive. Right.

271
00:16:55,910 --> 00:16:59,210
And, we were on straight.
I was on straight commission.

272
00:16:59,210 --> 00:17:02,780
It was a very tough time.
But to me, at that time,

273
00:17:02,780 --> 00:17:04,700
that was probably the biggest
jolt to our industry.

274
00:17:04,700 --> 00:17:10,070
So to me, it would be a huge stimulus
for the corporate advisory practice

275
00:17:10,070 --> 00:17:13,340
to maybe kick in at that point.
So I'm going to leave it at that.

276
00:17:13,340 --> 00:17:17,900
Well, and I guess I would say that, you know, thinking back that far,

277
00:17:17,900 --> 00:17:21,350
I don't think our I don't think our
management consulting practice was as

278
00:17:21,350 --> 00:17:27,920
mature as it is today, of course.
And, and what I experienced in

279
00:17:27,920 --> 00:17:34,280
that downturn and then again in 2008
and nine, is lots of real estate

280
00:17:34,280 --> 00:17:38,600
companies and financial institutions
really needed to revisit their

281
00:17:38,600 --> 00:17:42,200
strategies at that point in time.
But the reality is that they

282
00:17:42,200 --> 00:17:44,000
were hanging on for survival.
That's right.

283
00:17:44,000 --> 00:17:47,300
And so stopping to engage a
consultant. Yeah.

284
00:17:47,300 --> 00:17:51,200
And pay good money for a strategy
planning exercise at that point in

285
00:17:51,200 --> 00:17:53,660
time was just playing off the table.
Well.

286
00:17:53,960 --> 00:17:56,450
That's not really what I'm asking.
Basically.

287
00:17:56,450 --> 00:18:02,060
Was the thought process developed
as a result of the pain that

288
00:18:02,060 --> 00:18:05,510
everyone went through at that time?
Well, well, sure.

289
00:18:05,510 --> 00:18:09,740
And and Chris, in his original
edition of the strategy book,

290
00:18:09,740 --> 00:18:12,770
you know, really talked about
the cycle, exactly how.

291
00:18:12,770 --> 00:18:15,890
That's what I'm getting at most.
You know, the important thing to

292
00:18:15,890 --> 00:18:19,550
be thinking about.
And if it wasn't clear to people

293
00:18:19,550 --> 00:18:24,470
in 91, 92, you know,
it became clear in 2008 and 2009,

294
00:18:24,500 --> 00:18:27,650
of course, my point was by that
point it may be a little late.

295
00:18:27,650 --> 00:18:31,970
So certainly the thinking evolves
and our pitch has been you need

296
00:18:31,970 --> 00:18:37,310
to think of your strategy that, has contingency plans for

297
00:18:37,310 --> 00:18:41,630
different phases of the real
estate cycle and have strategies

298
00:18:41,630 --> 00:18:47,120
that may be dormant but ready to
be deployed when the proverbial

299
00:18:47,120 --> 00:18:50,900
you know what hits the fan and not
think about it at the time. Right.

300
00:18:50,900 --> 00:18:53,480
The notion of like changing the
tires when you're driving down

301
00:18:53,480 --> 00:18:56,930
the highway. Impossible.
So, you know, thinking about

302
00:18:56,930 --> 00:19:01,940
your strategy, you know,
having guardrails so that you don't

303
00:19:01,940 --> 00:19:06,020
get too far over your skis. Sure, are all of the things and

304
00:19:06,020 --> 00:19:09,980
lessons learned over the last,
you know, 20 or 30 years that

305
00:19:09,980 --> 00:19:12,380
I've applied to all of our
strategy planning engagements.

306
00:19:12,380 --> 00:19:16,310
And so, yeah,
thinking about the cycle,

307
00:19:16,310 --> 00:19:20,240
remembering past downturns,
I think 2008, 2009, the great

308
00:19:20,240 --> 00:19:23,480
financial crisis really changed the
behavior of a lot of companies.

309
00:19:23,480 --> 00:19:27,440
Prior to that, there was a kind of a
cowboy mentality in real estate.

310
00:19:27,440 --> 00:19:29,570
It was like, well, you know,
there's going to be a downturn,

311
00:19:29,570 --> 00:19:31,100
but we can't predict it.
And so, you know,

312
00:19:31,100 --> 00:19:33,230
we're going to make an investment
and maybe the last will hurt,

313
00:19:33,230 --> 00:19:36,830
but we'll be okay and we'll make lots
of money before that, after that.

314
00:19:36,830 --> 00:19:41,270
And people went through, you know,
multiple rounds of rifts and really,

315
00:19:41,480 --> 00:19:45,740
you know, stretched, you know,
the survival of their companies.

316
00:19:45,740 --> 00:19:48,500
I think a lot of companies got a
little bit more sophisticated,

317
00:19:49,040 --> 00:19:52,370, and more careful about
thinking about strategy. Right?

318
00:19:52,430 --> 00:19:54,440
Like,
so here's the growth opportunity.

319
00:19:54,440 --> 00:19:57,500
You know, it may be,
1.5 x of our run rate.

320
00:19:57,710 --> 00:20:00,320
Do we really want to sign on for
that point? Five?

321
00:20:00,320 --> 00:20:04,190
Or do we let some of it go or
outsource some of the execution

322
00:20:04,190 --> 00:20:07,700
capability, because we know that
the cycle is going to turn on us.

323
00:20:07,700 --> 00:20:11,180
And if we go from 50 people to
100 people, we're going to have

324
00:20:11,180 --> 00:20:13,790
to fire 50 people.
And that was terrible in 2008.

325
00:20:13,790 --> 00:20:16,700
We never want to do that again.
So a lot of companies really

326
00:20:16,700 --> 00:20:19,880
kind of modulated their strategy
and thought about how to how to

327
00:20:19,880 --> 00:20:25,160
manage growth better,
and how to put in place guardrails

328
00:20:25,160 --> 00:20:27,830
in a risk management, you know,
from a risk management standpoint

329
00:20:27,830 --> 00:20:31,220
and make sure that they're sure,
you know, debt covenants and,

330
00:20:31,220 --> 00:20:34,850
you know, discount, you know,
you know, cash flow ratios

331
00:20:34,850 --> 00:20:37,730
and and so on and so forth.
Didn't get out of whack.

332
00:20:37,730 --> 00:20:41,480
So when the cycle did turn, they
were facing an existential threat.

333
00:20:41,930 --> 00:20:46,130
Well, what I want to do is
explore those two crises.

334
00:20:46,130 --> 00:20:49,490
And then, of course, the most
recent crisis with the pandemic.

335
00:20:49,490 --> 00:20:53,180
But that's a totally different
type of crisis.

336
00:20:53,180 --> 00:20:55,190
And I want to get into that a
little bit later.

337
00:20:55,370 --> 00:20:59,810
The difference I see the first two
being financial, this one being a

338
00:20:59,810 --> 00:21:04,670
use a user situation, a completely
different crisis, but had similar

339
00:21:04,670 --> 00:21:08,450
implications to it to some extent.
But what I want to get to is your

340
00:21:08,450 --> 00:21:14,930
career paralleling the growth,
looking at both the the management

341
00:21:14,930 --> 00:21:19,550
consulting side of the business
and the the the real estate side,

342
00:21:19,550 --> 00:21:23,780
how did you learn the business?
Basically, what did you have a

343
00:21:23,780 --> 00:21:27,380
parallel track on that, or did you go
down one track and then the other?

344
00:21:27,560 --> 00:21:30,380
I mean, you were doing both.
So how did you how did you grow your,

345
00:21:30,380 --> 00:21:34,160
your, your knowledge base?
Yeah, I would say early on for,

346
00:21:34,160 --> 00:21:37,040
for me personally, it was really
the real estate economics.

347
00:21:37,040 --> 00:21:40,580
It was about it was about the dirt
and the bricks and the sticks.

348
00:21:40,580 --> 00:21:45,350
That's what I learned first, and, and early in my career,

349
00:21:45,350 --> 00:21:49,220
70, 80% of what I did was real
estate economics and market and

350
00:21:49,220 --> 00:21:51,500
financial feasibility.
And I was traveling all over the

351
00:21:51,500 --> 00:21:55,730
country and doing industrial.
And so this is OJT, OJT,

352
00:21:55,820 --> 00:21:58,040
or did you do a lot of reading
and understanding?

353
00:21:58,040 --> 00:22:01,250
Oh, no, it was mostly on the job.
Absolutely. Yeah.

354
00:22:01,250 --> 00:22:04,250
And just learning and
experiencing it and getting more,

355
00:22:04,250 --> 00:22:07,070
you know, learning markets,
learning product types. Got it.

356
00:22:07,190 --> 00:22:12,740, early on in my career, I
worked on two industrial jobs. Okay.

357
00:22:12,740 --> 00:22:17,270
And so I became the company's
industrial expert as a consequence.

358
00:22:17,570 --> 00:22:21,110
Sure.
And so I went around the country,

359
00:22:21,380 --> 00:22:24,800, teaching Trammell Crow
Company seminars on.

360
00:22:24,800 --> 00:22:27,590
Was it mostly distribution?
Was it manufacturing?

361
00:22:27,590 --> 00:22:30,890
Was it everything?
It was mostly, logistics and

362
00:22:30,890 --> 00:22:34,100
manufacturing, some R&D,
flex and warehouse. But yeah.

363
00:22:34,100 --> 00:22:37,760
No, I had to I had to learn the
industrial lexicon. Sure.

364
00:22:37,760 --> 00:22:41,360
Kind of understand. Yeah. That.
Well, so one of the things that,

365
00:22:41,360 --> 00:22:46,130
and this again, I credit to Chris
Weinberger in part, you know,

366
00:22:46,130 --> 00:22:49,790
he he was thinking deeply about
metropolitan areas and how they

367
00:22:49,790 --> 00:22:53,750
evolve over time from a real estate
standpoint and, and came up with a,

368
00:22:53,750 --> 00:22:57,890
a paradigm of urban cores and
generations that really kind of

369
00:22:58,130 --> 00:23:01,640
described very well what happens
in one metropolitan area,

370
00:23:01,640 --> 00:23:06,020
you can see evolve in another area.
And so if you understand how the

371
00:23:06,020 --> 00:23:09,440
generations of real estate cores
evolve over time, you can go into

372
00:23:09,440 --> 00:23:12,260
a new marketplace and say, okay,
well, it hasn't happened yet,

373
00:23:12,260 --> 00:23:17,090
but we've seen this pattern occur
in the favored corridor in ten,

374
00:23:17,090 --> 00:23:21,500
you know, major metropolitan areas.
This area is five, ten years behind

375
00:23:21,500 --> 00:23:24,620
that in terms of its evolution.
But here's how it's likely to go.

376
00:23:24,620 --> 00:23:28,730
I remember being hired by Trans
Western, out in Houston.

377
00:23:29,090 --> 00:23:31,190, and they said, you know,
Chris Weinberger in the,

378
00:23:31,220 --> 00:23:36,650
in the late 70s and early 1980s, came in and told us,

379
00:23:36,650 --> 00:23:39,710
here's where Houston's going.
And he was dead on.

380
00:23:39,710 --> 00:23:42,980
So they hired me ten years later
and said, okay,

381
00:23:42,980 --> 00:23:47,840
tell us where Houston's going for
the next 20 years, which I did.

382
00:23:47,840 --> 00:23:50,660
And, and I think we were
pretty much dead on.

383
00:23:50,660 --> 00:23:53,750
So using that paradigm,
understanding metropolitan

384
00:23:53,750 --> 00:23:58,100
development trends and applying that
to how these areas evolve over time

385
00:23:58,100 --> 00:24:02,510
really worked out as an organizing
principle to think about real estate.

386
00:24:02,510 --> 00:24:05,870
So that was what I was really
focusing my time on.

387
00:24:05,960 --> 00:24:09,500
But every time I did one of those
engagements on an individual

388
00:24:09,500 --> 00:24:12,830
property or with a company,
what I didn't realize is I was

389
00:24:12,830 --> 00:24:15,440
helping them with their strategy
and I just didn't know it.

390
00:24:16,190 --> 00:24:20,180
And maybe they didn't know it either.
So by osmosis, I was really working

391
00:24:20,180 --> 00:24:23,450
on hundreds and hundreds of strategy
engagements every time I was doing

392
00:24:23,450 --> 00:24:26,990
illustration. That's interesting.
So again, that that was sort of a

393
00:24:26,990 --> 00:24:31,580
virtuous and self-reinforcing cycle.
And then later on,

394
00:24:31,790 --> 00:24:36,440
the the focus began to shift to
more intentional strategy.

395
00:24:37,070 --> 00:24:42,140, and my experience in metropolitan
development trends in the real estate

396
00:24:42,140 --> 00:24:47,660
economic world really, you know,
paid dividends when I was helping

397
00:24:47,660 --> 00:24:50,600
companies think about their strategy.
What are the product types?

398
00:24:50,600 --> 00:24:54,140
What are the investment strategies?
What is the geographic footprint,

399
00:24:54,140 --> 00:24:57,020
and then how do you organize?
How do you capitalize?

400
00:24:57,020 --> 00:24:59,570
How do you manage risk.
So when did the light bulb.

401
00:25:00,040 --> 00:25:02,950
Come on. I mean, which project?
Which particular assignment?

402
00:25:02,950 --> 00:25:04,360
Still waiting for the light bulb.
Come on.

403
00:25:04,360 --> 00:25:08,440
No, but I mean, which assignment.
Is getting dimmer? What?

404
00:25:08,800 --> 00:25:11,680, let's just say you were doing an
industrial assignment for Trance

405
00:25:11,680 --> 00:25:18,160
Western, and they said, hey, Charlie,
what about we need to step back as a

406
00:25:18,160 --> 00:25:20,980
company and think about what we're
doing next. How are we going to buy?

407
00:25:20,980 --> 00:25:24,250
What are we going to buy and where?
And what should we think about what?

408
00:25:24,280 --> 00:25:26,290
Was there a certain point in
time where the.

409
00:25:26,290 --> 00:25:30,130
Frustration was certainly one that
sort of sticks out in my mind? Okay.

410
00:25:30,130 --> 00:25:33,880
Helping a company, it was the
first time I had been asked,

411
00:25:33,880 --> 00:25:37,450
as a 30 something year old,
tell me what you think about where

412
00:25:37,450 --> 00:25:39,580
this market is. There you go.
Because we're going to bet the

413
00:25:39,580 --> 00:25:42,400
companies there you go.
You know, a future on this.

414
00:25:42,550 --> 00:25:46,990
And at one level you're like,
Holy shit, you're asking me? Yeah.

415
00:25:47,260 --> 00:25:51,280, but at another level, based on
all the experience I had had up to

416
00:25:51,280 --> 00:25:54,790
that point and with the training I
had had and the partnership with,

417
00:25:54,790 --> 00:25:57,910
with folks like God,
even with Chris, I realized,

418
00:25:57,910 --> 00:26:01,150
you know, I belong in the room.
I actually have value to add.

419
00:26:01,150 --> 00:26:03,820
And so that's kind of when the
light bulb started to click,

420
00:26:03,820 --> 00:26:07,570
when I knew that I could actually
contribute to a company's

421
00:26:07,570 --> 00:26:11,830
success and help them. Sure.
So it was it was from that point

422
00:26:11,830 --> 00:26:16,150
forward, and I think it was
probably in the in the mid 90s,

423
00:26:16,150 --> 00:26:22,450
I sort of viewed myself as a,
a partner with our clients and not as

424
00:26:22,450 --> 00:26:26,680
a transaction and a service. Sure.
Certainly where I would come in

425
00:26:26,680 --> 00:26:31,180
and do something and go away, but
rather be invested in their business,

426
00:26:31,180 --> 00:26:34,930
be invested in their in their in
their team and their success.

427
00:26:34,990 --> 00:26:39,730
I mean, I go,
I go around the country and,

428
00:26:39,730 --> 00:26:42,850
you know, I don't build anything.
I don't do anything.

429
00:26:42,850 --> 00:26:48,430
I sell ideas and, and, and concepts.
But I have the same kind of pride in

430
00:26:48,430 --> 00:26:51,370
looking down the street and saying,
oh, I consulted on that building

431
00:26:51,370 --> 00:26:55,060
as I, as I know the developer
said I built that building.

432
00:26:55,060 --> 00:26:58,990
I feel like I'm invested in that
process. Well, that's that's what.

433
00:26:58,990 --> 00:27:02,080
And I've asked this before,
actually. Gordy himself. Yeah.

434
00:27:02,260 --> 00:27:06,730, why didn't you just say,
hey, I know now how to do this.

435
00:27:06,730 --> 00:27:10,480
Why don't I do it myself? Well, sure.
And and lots of and lots of

436
00:27:10,480 --> 00:27:13,930
people do.
And, you know, real estate

437
00:27:13,930 --> 00:27:18,130
consulting is a weird place.
And it's not. It's not.

438
00:27:18,130 --> 00:27:20,440
It's suited for everybody's
personality.

439
00:27:20,980 --> 00:27:25,330, I am sure that I have
undiagnosed ADHD.

440
00:27:25,330 --> 00:27:30,670
And so, you know, the, the constantly
changing nature of the business,

441
00:27:30,670 --> 00:27:34,510
the multiple things that we do, I work on projects that are

442
00:27:34,510 --> 00:27:37,870
for six, maybe eight weeks long.
Come week seven,

443
00:27:37,870 --> 00:27:40,390
I'm getting a little itchy to do
the next thing, there you go.

444
00:27:40,420 --> 00:27:44,920, so I always describe Rococo,
and I think this probably applies to

445
00:27:44,920 --> 00:27:48,370
any management consulting business or
real estate consulting business.

446
00:27:48,370 --> 00:27:52,030
It's like real estate university.
You're going to get exposure to

447
00:27:52,030 --> 00:27:57,070
so many different products,
markets, strategies,

448
00:27:57,070 --> 00:27:59,650
investment strategies.
And even if you're working on

449
00:27:59,650 --> 00:28:03,550
multifamily in the same market,
it's a different phase of the cycle.

450
00:28:03,550 --> 00:28:06,250
It's a different, different
evolution of that metropolitan area

451
00:28:06,250 --> 00:28:08,980
from a development standpoint.
So for me, anyways,

452
00:28:08,980 --> 00:28:13,180
it was constantly changing,
always new, and different.

453
00:28:13,180 --> 00:28:16,450
I swore to myself that when I first
joined the firm in 1987, that I would

454
00:28:16,450 --> 00:28:18,670
probably be here for two years, and
then I would go to business school.

455
00:28:18,670 --> 00:28:21,580
That's what you did back then,
right? And probably still do.

456
00:28:21,580 --> 00:28:24,670
And I said, well, when the day comes,
when I don't feel like I'm being

457
00:28:24,670 --> 00:28:28,930
challenged or I'm learning something
new, I'll move on. That was 1987.

458
00:28:31,030 --> 00:28:34,630
You know, it's funny, as you were
talking, there are two other

459
00:28:34,630 --> 00:28:37,930
professions very similar to that.
One is real estate brokerage and

460
00:28:37,930 --> 00:28:40,750
the commercial.
Whereas you take on a listing and

461
00:28:40,750 --> 00:28:45,070
assignment or a financing or whatever
you're doing and you have a certain

462
00:28:45,070 --> 00:28:48,100
period of time to get it done,
and that's it. It's a deal.

463
00:28:48,100 --> 00:28:51,730
It's a short term cycle.
And then the other one is lending

464
00:28:51,730 --> 00:28:55,750
mortgage, you know, mortgage banking
and lending where you're investing,

465
00:28:55,750 --> 00:28:59,050
it's a deal. It's deal structure.
So it's transactional.

466
00:28:59,320 --> 00:29:02,380
It's a transactional.
Our business is driven a lot by

467
00:29:02,380 --> 00:29:05,590
transactions.
The big difference is development.

468
00:29:05,590 --> 00:29:10,000
And the development process can
be ten years or longer. Right.

469
00:29:10,000 --> 00:29:12,940
So that's to me the patience
side of the business. Yeah.

470
00:29:12,940 --> 00:29:18,700
And we consciously chose not to be in
the transaction business. Right.

471
00:29:18,700 --> 00:29:23,950
And and I think, I think that
has served us well in that,

472
00:29:23,950 --> 00:29:28,330
we have a I, I'm saying this, because I think,

473
00:29:28,330 --> 00:29:31,930
I think it's true, not because I'm,
I'm wishing it to be true that,

474
00:29:31,930 --> 00:29:34,840
you know, we have a sterling
reputation for our independence.

475
00:29:34,840 --> 00:29:39,340
We we are we are hired to tell
people what what they, you know,

476
00:29:39,700 --> 00:29:44,260, to give them input and advice.
If they knew what they wanted to do,

477
00:29:44,260 --> 00:29:46,090
they can hire someone they don't
need.

478
00:29:46,090 --> 00:29:49,270
RCL you're not going to tell them
what they want to hear. Correct.

479
00:29:49,270 --> 00:29:52,240
And we're willing to tell
someone if their baby is ugly.

480
00:29:52,570 --> 00:29:56,110
That sometimes is more difficult
than the telling them that that it's

481
00:29:56,110 --> 00:29:59,470
beautiful, but that they appreciate
all that we've carved out for our.

482
00:29:59,990 --> 00:30:02,810
And so I think that that has
that has served us well over the

483
00:30:02,810 --> 00:30:06,980
years and is something that is,
is core to to the way that I

484
00:30:07,010 --> 00:30:10,700
conduct my business, both on the
real estate economic side as well

485
00:30:10,700 --> 00:30:13,370
as the management consulting side.
So at the end of the day,

486
00:30:13,370 --> 00:30:18,470
I always tell people, look, I don't
I don't have a vested interest

487
00:30:18,470 --> 00:30:21,410
in this deal or your company.
At the end of the day, I don't

488
00:30:21,410 --> 00:30:26,510
really care, but I want you to do
well because that's my job.

489
00:30:26,870 --> 00:30:31,460
So now let's get into the the
depths a little bit more of your

490
00:30:31,640 --> 00:30:34,670
of the strategy thing the real estate industry has

491
00:30:34,670 --> 00:30:38,540
its own ebbs and flows that are
influenced by a multitude of forces.

492
00:30:38,990 --> 00:30:42,770
Nevertheless with appropriate
strategy companies can navigate

493
00:30:42,770 --> 00:30:45,650
those variabilities.
Talk in general about the industry

494
00:30:45,650 --> 00:30:49,160
and context with the rationale
behind the strategic thinking.

495
00:30:50,150 --> 00:30:54,470, please, please bring in
the framework you conceived.

496
00:30:54,470 --> 00:30:59,120
You call the strategy Parthenon.
Strategy Parthenon of a firm

497
00:30:59,120 --> 00:31:02,630
base of a firm base and nine
pillars of strategy. Yeah.

498
00:31:02,630 --> 00:31:07,460
If you could. Yeah, yeah. Yeah, I can't remember where the

499
00:31:07,460 --> 00:31:12,620
Parthenon, came from.
I think that, that I kind of

500
00:31:12,620 --> 00:31:16,010
invented that, as a way to.
I thought it was really cool

501
00:31:16,010 --> 00:31:18,650
when I first read it to.
Describe the strategy planning

502
00:31:18,650 --> 00:31:21,080
process that works for real
estate companies.

503
00:31:21,080 --> 00:31:23,570
And it is literally if you if
you see the book, I mean,

504
00:31:23,570 --> 00:31:27,050
it's it is the Parthenon.
And what I like to say is that,

505
00:31:27,050 --> 00:31:31,100
you know, a well-rounded strategy
is built on a foundation of

506
00:31:31,100 --> 00:31:34,010
mission and vision and values.
You have two foundations there.

507
00:31:34,010 --> 00:31:37,820
And then also, the next step
is determining what your goals

508
00:31:37,820 --> 00:31:40,610
and your objectives are, right?
The notion of, you know,

509
00:31:40,610 --> 00:31:43,940
tell me the mountain I'm taking, you know, and then I'll

510
00:31:43,940 --> 00:31:46,280
figure out the tools and the
strategies I need to get there.

511
00:31:46,280 --> 00:31:48,890
But first of all, what are we in
business for? What are we doing?

512
00:31:48,890 --> 00:31:51,320
What are we trying to achieve?
For whom are we doing this?

513
00:31:51,320 --> 00:31:53,720
Because we're not just doing it
to to employ people.

514
00:31:54,140 --> 00:31:58,130, we we have stakeholders, we have we have our own

515
00:31:58,130 --> 00:32:00,740
financial interest in the business, so on and so forth.

516
00:32:00,740 --> 00:32:04,550
So, so that is the that is the first
two steps that are the foundation and

517
00:32:04,550 --> 00:32:07,760
where you start with a strategy,
it should be informed over an

518
00:32:07,760 --> 00:32:10,550
umbrella or a roof.
This is the extended meme,

519
00:32:10,550 --> 00:32:13,610
right, of what's going on in the
external market environment.

520
00:32:13,610 --> 00:32:17,060
So doing a very detailed Swot
analysis and having a point of

521
00:32:17,060 --> 00:32:20,480
view of what's happening in the
overall economy and in the real

522
00:32:20,480 --> 00:32:24,050
estate economy that could have
an impact on your strategy helps

523
00:32:24,050 --> 00:32:27,590
inform what you do.
And then there are nine pillars and

524
00:32:27,590 --> 00:32:32,690
they're organized from left to right, in a purposeful way,

525
00:32:32,690 --> 00:32:36,170
starting with Industry Rule,
which talks about what you do both

526
00:32:36,170 --> 00:32:39,410
through an investment strategy
from a real estate sector and

527
00:32:39,410 --> 00:32:43,160
from a business standpoint,
it moves on into geographic

528
00:32:43,160 --> 00:32:47,150
deployment and how you grow, it then talks about what your

529
00:32:47,150 --> 00:32:50,570
competitive advantages in the
marketplace and how you differentiate

530
00:32:50,570 --> 00:32:54,470
yourself on, through and in the far.
You know, on the right hand side of

531
00:32:54,470 --> 00:32:58,610
of the the Parthenon, you finally
get to things like organization

532
00:32:58,850 --> 00:33:03,140
and capital and risk management.
And the reason that we are organizing

533
00:33:03,140 --> 00:33:05,870
things from left to right in that
manner is that you don't want to

534
00:33:05,870 --> 00:33:10,490
start with constraints when you are
doing strategy planning, so you don't

535
00:33:10,490 --> 00:33:14,270
want to have a conversation like,
well, we can't go to XYZ market

536
00:33:14,270 --> 00:33:17,480
because we don't have anybody
who knows that market know time

537
00:33:17,480 --> 00:33:21,020
out strategy faux pas, right?
The first of all,

538
00:33:21,020 --> 00:33:23,990
figure out what is the opportunity
to exist out in the marketplace.

539
00:33:24,140 --> 00:33:28,520
Can can you develop a critical core
competency in that business to get

540
00:33:28,520 --> 00:33:31,970
your share of the marketplace right
and then design the organization,

541
00:33:31,970 --> 00:33:35,630
acquire the human capital to go
exploit the opportunity? Same thing.

542
00:33:35,630 --> 00:33:39,650
Oh, we don't have the money to do
fill in the blank, time out.

543
00:33:39,650 --> 00:33:42,740
First of all, figure out what the
opportunity is, then determine

544
00:33:42,740 --> 00:33:45,560
how you can capitalize it.
So again, organizing those

545
00:33:45,560 --> 00:33:48,890
pillars very purposefully from
left to right in that Parthenon

546
00:33:48,890 --> 00:33:53,750
meme has been very helpful.
So we like to say that I like to

547
00:33:53,750 --> 00:33:57,620
say strategy planning is about what
a real estate company does and

548
00:33:57,620 --> 00:34:02,000
where it's a place based business,
how it does it, absolutely critical.

549
00:34:02,510 --> 00:34:05,750
But you got to do that after you
figure out what and where you're

550
00:34:05,750 --> 00:34:07,610
going to do it,
then you can figure out how.

551
00:34:08,540 --> 00:34:11,060
Well,
now I'm going to back up and say why.

552
00:34:11,060 --> 00:34:15,530
So at a high level,
discuss why companies should consider

553
00:34:15,530 --> 00:34:19,310
strategic planning and at what point
in their growth is it necessary?

554
00:34:19,310 --> 00:34:23,300
It seems that a company of 2 or
3 people raising friends and

555
00:34:23,300 --> 00:34:27,680
family money to buy a couple of
properties a year is too small.

556
00:34:27,680 --> 00:34:31,730
How large the company be to
qualify for strategic planning,

557
00:34:31,730 --> 00:34:36,500
in your view? Well.
Let's let's acknowledge that

558
00:34:36,860 --> 00:34:41,060
every company, whether it's two
people or a thousand people,

559
00:34:41,060 --> 00:34:44,750
has a strategy, right?
The question is whether it is

560
00:34:44,750 --> 00:34:49,670
something that is born out of a
conscious consensus from the people

561
00:34:49,670 --> 00:34:52,520
that are charged with executing
the plan, okay, or whether it's

562
00:34:52,520 --> 00:34:55,610
just an unconscious effort to keep
doing what you've always been doing

563
00:34:55,610 --> 00:34:59,180
and being open and opportunistic.
Now being completely.

564
00:34:59,570 --> 00:35:02,960
Gymnastic can be a strategy,
but that can be frustrating for

565
00:35:02,960 --> 00:35:06,050
a larger organization.
So of course say that, you know,

566
00:35:06,350 --> 00:35:10,280
there's a need for a strategy
regardless of where you are in your

567
00:35:10,280 --> 00:35:13,670
company's evolution or the size.
The question is,

568
00:35:13,670 --> 00:35:18,290
to what extent do you invest time
and resources in an, in external,

569
00:35:18,290 --> 00:35:19,580
you know, facilitation?
Well,

570
00:35:19,580 --> 00:35:23,840
the sophistication of it changes.
But you but but I had a,

571
00:35:23,870 --> 00:35:27,560
you know, in the in the,
in the great financial crisis when I

572
00:35:27,560 --> 00:35:31,070
was worried about whether, you know,
the company was going to make it,

573
00:35:31,070 --> 00:35:36,170
you know, I was doing some individual
investment in, you know,

574
00:35:36,260 --> 00:35:38,900
home renovations just to keep the
lights on and keep myself busy.

575
00:35:39,320 --> 00:35:41,930
I mean, I didn't write a formal
strategy document, but I had a

576
00:35:41,930 --> 00:35:45,710
strategy, I had an idea.
We here are the kinds of

577
00:35:45,710 --> 00:35:47,510
neighborhoods we're going after.
Here's the kind of properties

578
00:35:47,510 --> 00:35:50,120
that we're going after.
Here's here's the kind of investment

579
00:35:50,120 --> 00:35:52,460
that we're going to make.
Here's how we're going to capitalize

580
00:35:52,460 --> 00:35:55,730
it. I mean, that's all strategy.
It was just done at an individual

581
00:35:55,730 --> 00:35:59,180
home level, not at an enterprise
level for a corporation.

582
00:35:59,180 --> 00:36:02,720
So I would argue that a every
company has a strategy.

583
00:36:02,720 --> 00:36:07,910
But the real value of strategic
planning in my mind is,

584
00:36:07,910 --> 00:36:11,930
is getting everyone moving in a
common direction and having a

585
00:36:11,930 --> 00:36:13,310
common location.
I can't tell you how many times

586
00:36:13,310 --> 00:36:18,410
I go into an organization and
people will will in the discovery

587
00:36:18,410 --> 00:36:20,900
and confidential conversations,
right when you're doing

588
00:36:20,900 --> 00:36:23,210
discovery to find out what the
important issues will say.

589
00:36:23,210 --> 00:36:27,800
Like, I'm not sure we have a strategy
and that's probably not true.

590
00:36:27,800 --> 00:36:30,170
You have a strategy.
It just hasn't been well articulated.

591
00:36:30,170 --> 00:36:33,920
Or there may be people that have
different ideas about what the

592
00:36:33,920 --> 00:36:37,430
strategy is that you're exactly
getting getting the team in a room

593
00:36:37,430 --> 00:36:41,180
and saying, here's what we're
going to do purposefully, and

594
00:36:41,180 --> 00:36:45,140
here's what we're not going to do, has a lot of value in helping

595
00:36:45,140 --> 00:36:48,890
an organization move forward.
I assume that's probably the baseline

596
00:36:48,890 --> 00:36:52,580
of what you do when you first meet
with a client, figure out what

597
00:36:52,580 --> 00:36:56,480
they're doing now and what figure out
what works and what doesn't work,

598
00:36:56,480 --> 00:36:58,910
and then build from there.
Maybe. Exactly. Yeah.

599
00:36:58,910 --> 00:37:02,810
But the process of strategic
planning, every company is different,

600
00:37:02,810 --> 00:37:05,720
every situation different.
But the process that that I've

601
00:37:05,720 --> 00:37:09,290
designed with Chris and Gotti's
help over the years is the same

602
00:37:09,290 --> 00:37:11,870
no matter what.
So you start with a discovery,

603
00:37:11,870 --> 00:37:15,530
and some of the key elements that
you talk about in discovery are

604
00:37:15,530 --> 00:37:20,300
first and foremost, you know,
what are we doing and for whom?

605
00:37:20,720 --> 00:37:22,160
Like what are the goals and
objectives?

606
00:37:22,160 --> 00:37:23,570
What is the mountain we're
trying to take?

607
00:37:23,570 --> 00:37:28,220
So even if you're starting a company,
you should have a I mean, day one,

608
00:37:28,220 --> 00:37:32,390
you're okay. What do you know?
You meet some guy at a bar or a

609
00:37:32,390 --> 00:37:34,820
for lunch.
You know, let's just start a company.

610
00:37:34,970 --> 00:37:39,500
So what do we do, exactly.
And one of our strengths.

611
00:37:39,500 --> 00:37:43,280
So you have to look at each person's
strength, right? What am I good at?

612
00:37:43,280 --> 00:37:47,480
And in my view, and I,
after lending in my career,

613
00:37:48,620 --> 00:37:53,900
there was always a mr. outside and a
mr. inside or a mrs. outside or Mrs.

614
00:37:53,900 --> 00:38:00,500
inside that you know it somebody
a hunter and somebody a skinner.

615
00:38:00,500 --> 00:38:05,120
I mean you start with that that
framework and build from there am I,

616
00:38:05,120 --> 00:38:09,770
am I right with that or not. Yeah.
But but I, I'm sure again the two

617
00:38:09,770 --> 00:38:12,200
people meeting in a bar may be a
different situation if you're,

618
00:38:12,200 --> 00:38:14,600
you know, if you're going into a
company, I mean,

619
00:38:14,600 --> 00:38:18,020
one of the other strategy faux pas
that I often come at, you know,

620
00:38:18,020 --> 00:38:21,470
we'll call a time out on is, yeah,
you know, don't don't assume that

621
00:38:21,470 --> 00:38:25,520
you have to fight this battle with
the army that you have. Right.

622
00:38:25,610 --> 00:38:29,270
Channeling Rumsfeld,
which I don't like to hear. Right.

623
00:38:29,390 --> 00:38:32,660
The idea is it's it's it's
planning with constraints.

624
00:38:32,660 --> 00:38:35,210
Like, here's the team we got now.
What do we do with the team?

625
00:38:35,210 --> 00:38:38,900
Well that's backwards.
What's the opportunity? There you go.

626
00:38:38,900 --> 00:38:41,690
How well-suited is our team to
that opportunity.

627
00:38:41,690 --> 00:38:44,870
And do we need to change our team.
Do we need to supplement our team.

628
00:38:44,870 --> 00:38:48,770
Do we need to throw our team out and
start over. Which may be the case.

629
00:38:49,430 --> 00:38:53,990 so again I,
I start with a questions about okay

630
00:38:53,990 --> 00:38:57,920
what are we trying to accomplish, what are we good at today

631
00:38:57,920 --> 00:39:00,650
that we can leverage?
Don't ignore that. Of course.

632
00:39:00,710 --> 00:39:05,060, and then,
another absolutely critical question.

633
00:39:05,060 --> 00:39:08,030
Chris Lambert, who taught me this
early on is where do we make money?

634
00:39:08,750 --> 00:39:11,720
You'd be shocked how many times
I asked that question.

635
00:39:11,720 --> 00:39:15,830
And people may have a story, but
they do not have facts. Interesting.

636
00:39:15,830 --> 00:39:18,410
A great example,
and it's in the it's in the book.

637
00:39:18,410 --> 00:39:22,100
And in the course of the case study,
the classic example that I come back

638
00:39:22,100 --> 00:39:26,210
to Praslin, Charlotte based,
multi-generational,

639
00:39:26,210 --> 00:39:29,600
family run business that had its
tentacles in lots of different

640
00:39:29,600 --> 00:39:31,850
real estate sectors.
One of them was homebuilding,

641
00:39:31,850 --> 00:39:36,380
land development and homebuilding.
They did their homebuilding in a

642
00:39:36,380 --> 00:39:38,690
big Shamir. Right.
So they did land development and

643
00:39:38,690 --> 00:39:44,060
then they did vertical homebuilding.
So they looked really good on paper

644
00:39:44,060 --> 00:39:47,060
in their home building vertical.
When we asked them, it's like, okay,

645
00:39:47,060 --> 00:39:50,540
well, where do you make money?
Do you make money in developing lots

646
00:39:50,540 --> 00:39:52,610
or do you make money in building
homes? We're not going to lie.

647
00:39:52,610 --> 00:39:55,970
We don't know.
We just have one one pal for

648
00:39:55,970 --> 00:39:58,460
that business.
So when we force them to go

649
00:39:58,460 --> 00:40:01,390
through the exercise. What?
They realize is they were making

650
00:40:01,390 --> 00:40:04,120
150% of their profit every time
they developed a lot,

651
00:40:04,420 --> 00:40:07,630
and they were giving it all away
or giving a lot of it away every

652
00:40:07,630 --> 00:40:10,270
time they built a home because
they were a lousy homebuilder.

653
00:40:11,110 --> 00:40:13,810
So what was the strategy?
The strategy was to sell their

654
00:40:13,810 --> 00:40:16,570
home building business to a
public homebuilder who was happy

655
00:40:16,570 --> 00:40:19,450
to then have a long term contract
with their land development team

656
00:40:19,450 --> 00:40:23,890
to furnish some finish lines.
I'm going to throw a local,

657
00:40:23,890 --> 00:40:28,480
person into the mix based on that,
that case study and ask you,

658
00:40:28,480 --> 00:40:32,080
I know you know who he is, and I've
done business with him, probably.

659
00:40:32,080 --> 00:40:34,900
And that's David Flanagan at Elm
Street. Yes.

660
00:40:35,170 --> 00:40:38,350
And they are both land
developers and homebuilders.

661
00:40:38,620 --> 00:40:42,550
Right. And they figured it out.
They were able to be successful

662
00:40:42,550 --> 00:40:44,680
in both. Well, I'm.
Not saying that you can't do both.

663
00:40:44,950 --> 00:40:49,000
The point is in in the strategy
planning exercise it's really

664
00:40:49,000 --> 00:40:52,750
important to know and I mean
know in air quotes.

665
00:40:52,750 --> 00:40:54,910
You know,
where you're making money, right.

666
00:40:54,910 --> 00:40:57,340
What is contributing to your
profitability.

667
00:40:57,340 --> 00:41:00,640
Because if you don't know that
information, you can't make decisions

668
00:41:00,640 --> 00:41:04,360
about what to do or not to do.
So that's one of the most important

669
00:41:04,360 --> 00:41:08,830
things that you do early on in
the strategy planning process is

670
00:41:08,830 --> 00:41:13,510
make sure you you drive your
client company to understand

671
00:41:13,510 --> 00:41:16,930
what is contributing to their
success and what is not right.

672
00:41:17,170 --> 00:41:20,140
So, you know, going through and
doing a track record, where are we

673
00:41:20,140 --> 00:41:23,050
making money and where are we losing
money and is there a pattern there?

674
00:41:23,050 --> 00:41:25,960
And do we want to make different
decisions based on that?

675
00:41:26,140 --> 00:41:32,440
You know, we own rental apartments
in in Carmel, Indiana. Why?

676
00:41:33,730 --> 00:41:37,090
Yeah, does that make sense, you know,

677
00:41:37,090 --> 00:41:40,330
should we be doing land development
or vertical homebuilding? Right.

678
00:41:40,330 --> 00:41:45,250
And and really doing some forensic
financial analysis to understand

679
00:41:45,250 --> 00:41:49,420
where you making money is,
is one of the very early steps

680
00:41:49,420 --> 00:41:52,480
in strategic planning.
Well, I mean, your practice started

681
00:41:52,480 --> 00:41:56,500
in the homebuilding side and and
it to me is the most volatile

682
00:41:56,500 --> 00:42:01,060
maybe other than hotels, the most
volatile of all land development.

683
00:42:01,060 --> 00:42:04,960
I mean,
it's either gangbusters or dead.

684
00:42:05,470 --> 00:42:10,810
And so you have to plan for those
highs and lows right throughout that.

685
00:42:10,810 --> 00:42:14,740
No. Absolutely. Yeah. No lay land.
Is the thing that that can take

686
00:42:14,740 --> 00:42:17,290
companies down. Exactly.
Historically.

687
00:42:17,290 --> 00:42:21,670
And I've had lots of experience
with clients that are in the

688
00:42:21,670 --> 00:42:24,940
land development business.
And they will have as a risk

689
00:42:24,940 --> 00:42:28,630
management strategy, they will
have a zero debt strategy on land.

690
00:42:28,630 --> 00:42:31,000
Right,
because of what you just described.

691
00:42:31,000 --> 00:42:35,740
When, when, when the cycle turns,
the value of your land plummets.

692
00:42:35,740 --> 00:42:39,700
And if you've got a note on that and
it's an interest clock ticking, that

693
00:42:39,700 --> 00:42:43,030
is the thing that can kill you. Yeah.
So I'm not suggesting that everybody

694
00:42:43,030 --> 00:42:46,600
has to have zero debt on land,
but that is a that is a risk

695
00:42:46,600 --> 00:42:50,080
mitigation tool that a lot of
land developers use that are in

696
00:42:50,080 --> 00:42:53,680
other businesses as well.
So let's let's talk about

697
00:42:53,680 --> 00:42:57,400
walking through the path here.
And what I'm saying is could you

698
00:42:57,400 --> 00:43:01,330
translate your strategic framework
to a company growth timeline in a

699
00:43:01,330 --> 00:43:04,750
generic case study for instance.
So starting with two people who

700
00:43:04,750 --> 00:43:08,080
come together to acquire an asset,
then they hire an asset manager

701
00:43:08,080 --> 00:43:10,660
and continue to acquire assets
and self manage them.

702
00:43:10,660 --> 00:43:15,850
At some point they want to grow
the portfolio and diversify either

703
00:43:15,850 --> 00:43:20,080
geographically or by product type.
What milestones would you flag

704
00:43:20,080 --> 00:43:23,350
to start a new plan or
restructure an older one? Yeah.

705
00:43:23,920 --> 00:43:27,760
Well, you started that premise was
something odd, which it's unusual

706
00:43:27,760 --> 00:43:31,270
for a company to have an asset
manager earlier in their incarnation.

707
00:43:31,270 --> 00:43:34,870
That's usually something that a
company over time. Yeah. Over time.

708
00:43:34,870 --> 00:43:39,070
And it's, you know, more mature
realizes that that's a necessary

709
00:43:39,070 --> 00:43:42,190
component of their business.
But usually the milestones are,

710
00:43:42,190 --> 00:43:47,560
you know, you start with a fairly
entrepreneurial kind of ethos and

711
00:43:47,560 --> 00:43:52,330
people wearing multiple hats and
there's lots of, you know,

712
00:43:52,330 --> 00:43:56,380, fairly risky things,
with shoestring capital and

713
00:43:56,380 --> 00:43:59,800
friends and family money to
capitalize their business.

714
00:43:59,800 --> 00:44:05,590
And as that grows, over time, usually the company outgrows

715
00:44:05,590 --> 00:44:08,740
its rolodex of friends and family
and country club members and

716
00:44:08,740 --> 00:44:12,340
starts thinking about evolving
their capital base to,

717
00:44:12,340 --> 00:44:18,820
to either small family offices or
institutional capital providers,

718
00:44:18,820 --> 00:44:24,430
which begins to trigger a whole
cascade of needs and

719
00:44:24,430 --> 00:44:28,630
requirements and sophistication.
If you're going to start accessing

720
00:44:28,630 --> 00:44:31,090
institutional capital, you know,
first of all, they're not even

721
00:44:31,090 --> 00:44:33,940
going to give you they're not
even going to look at you today.

722
00:44:33,940 --> 00:44:38,080
If you don't have a strategy and
don't have a track record and

723
00:44:38,080 --> 00:44:42,220
don't have, you know, qualified
people who were going to be around

724
00:44:42,220 --> 00:44:44,950
for the next investment cycle,
who put the track record in place.

725
00:44:44,950 --> 00:44:48,130
So those are some of the foundational
things in terms of evolution.

726
00:44:48,130 --> 00:44:52,030
So yeah, a lot of companies sort
of smear together property and

727
00:44:52,030 --> 00:44:55,300
asset management early on in their
incarnation. And it works just fine.

728
00:44:55,300 --> 00:44:59,230
We own, we operate, we manage,
and you know, we.

729
00:44:59,330 --> 00:45:02,090
Charge yourself a 5% property
management fee.

730
00:45:02,450 --> 00:45:06,680
Well, the market's, you know,
275 three at the most maybe.

731
00:45:06,680 --> 00:45:08,420
And so you're actually kidding
yourself.

732
00:45:08,420 --> 00:45:10,760
You're doing asset management
and property management.

733
00:45:10,760 --> 00:45:12,680
You're just blurring the lines.
Right.

734
00:45:12,680 --> 00:45:17,480
And as as your portfolio grows,
as your span of control grows,

735
00:45:17,480 --> 00:45:21,110
as you start accessing more
sophisticated sources of capital,

736
00:45:21,260 --> 00:45:25,190
there is very different thing.
Property management and asset

737
00:45:25,190 --> 00:45:29,150
management are very different there.
And one of the interesting things

738
00:45:29,150 --> 00:45:31,430
that I think a lot of companies,
you know, particularly small and

739
00:45:31,430 --> 00:45:36,260
mid-sized companies,
go through these days is,

740
00:45:36,380 --> 00:45:39,710
you know, the extent to which
they should be self performing

741
00:45:39,710 --> 00:45:42,740
some of these activities.
Almost every company should

742
00:45:42,740 --> 00:45:47,030
probably have a robust asset
management function,

743
00:45:47,030 --> 00:45:50,900
either for their own stakeholders
or for external capital sources.

744
00:45:51,110 --> 00:45:54,560
Property management, I think,
is becoming much more of a commodity.

745
00:45:54,560 --> 00:45:59,690
There's there's lots of owners,
operators who feel that that's an

746
00:45:59,690 --> 00:46:02,240
important part of their secret sauce.
And I'm not trying to deny that.

747
00:46:02,450 --> 00:46:06,650
But a lot of companies are also
recognizing that the size and

748
00:46:06,650 --> 00:46:08,930
scale that you need to be
efficient and effective in that

749
00:46:08,930 --> 00:46:12,320
business is changing from a
technology standpoint,

750
00:46:12,320 --> 00:46:15,470
from a critical mass standpoint.
And some companies have made the

751
00:46:15,470 --> 00:46:19,820
decision to outsource property
management while retaining robust

752
00:46:19,820 --> 00:46:22,430
asset management functions for
their own portfolio.

753
00:46:22,430 --> 00:46:25,580
So that's those are a couple of the
things where companies start to

754
00:46:25,580 --> 00:46:28,850
evolve from a capital standpoint
and from an from an execution and,

755
00:46:28,850 --> 00:46:31,730
and property and asset
management standpoint.

756
00:46:32,150 --> 00:46:35,390
But then looking strategically,
you know,

757
00:46:35,480 --> 00:46:40,460
what what are the steps to to growth?
I mean, what how do they see growing.

758
00:46:40,460 --> 00:46:43,400
And so that can go a myriad of
ways I assume.

759
00:46:43,400 --> 00:46:47,150
And and it really I assume the
markets have a big part to do

760
00:46:47,150 --> 00:46:51,050
with it, but also the strengths
of the of the management team as

761
00:46:51,050 --> 00:46:53,840
far as what their, you know,
what they bring to the table.

762
00:46:53,840 --> 00:46:55,970
Well, there's, there's,
there's probably,

763
00:46:56,120 --> 00:46:59,450
there's probably 2 or 3 flavors of
real estate companies out there.

764
00:47:00,140 --> 00:47:05,030, on one end of the spectrum
are the companies that do one

765
00:47:05,030 --> 00:47:09,110
thing or one sector.
I mean, I'm a multifamily company,

766
00:47:09,110 --> 00:47:12,950
I'm a hotel company,
I'm a retail company, and I do that.

767
00:47:12,950 --> 00:47:16,640
I may do that in multiple markets.
On the other end of the spectrum

768
00:47:16,640 --> 00:47:18,980
are companies that maybe do lots
of different things, but they

769
00:47:18,980 --> 00:47:23,360
focus on one major metropolitan
area or one region, right?

770
00:47:23,360 --> 00:47:27,050
And so they understand that region,
but they may do three or 4 or 5

771
00:47:27,050 --> 00:47:29,990
different things.
I'll say two examples on the extreme,

772
00:47:30,140 --> 00:47:35,180
the Rappaport companies and retail
JBG companies, when they before

773
00:47:35,180 --> 00:47:39,290
they were in public on the on the
second side, would you say that's

774
00:47:39,290 --> 00:47:42,650
probably a good analogy, I.
Think about all the apartment,

775
00:47:42,650 --> 00:47:46,280
you know, both public and private, companies,

776
00:47:46,280 --> 00:47:49,760
they do multifamily, you know,
Wall Street has spoken avalonbay

777
00:47:49,760 --> 00:47:53,120
we want specialization. Right, and I've been involved with a

778
00:47:53,120 --> 00:47:57,980
couple of public companies that were, multi-sector that realized that

779
00:47:57,980 --> 00:48:01,040
in order to gain investor mindshare,
you really needed to focus.

780
00:48:01,040 --> 00:48:04,730
So I think of what I read out of
there in Minneapolis, Napa.

781
00:48:04,730 --> 00:48:06,350
They were out of North Dakota
originally.

782
00:48:06,350 --> 00:48:09,080
They had health,
they had health care and senior

783
00:48:09,080 --> 00:48:12,080
living in multifamily. Right.
And they never could get

784
00:48:12,080 --> 00:48:15,800
traction in Wall Street.
When they decided to focus

785
00:48:15,800 --> 00:48:19,430
exclusively on multifamily, you know,
it became a much more compelling.

786
00:48:19,430 --> 00:48:22,250
Well, there's a local example.
Just recently, Wall Street

787
00:48:22,250 --> 00:48:26,420
became Elm Communities, right?
They sold their entire retail and

788
00:48:26,420 --> 00:48:29,420
office portfolio. Exactly right.
And, you know,

789
00:48:29,600 --> 00:48:35,300
lots of companies are making that
decision to narrow their focus and to

790
00:48:35,300 --> 00:48:39,290
do fewer things in more markets,
because that is responding to

791
00:48:39,290 --> 00:48:43,130
where the market is headed.
So that's not to say that there

792
00:48:43,130 --> 00:48:46,160
aren't successful companies that are
doing I mean, look at the Peterson

793
00:48:46,550 --> 00:48:48,680
companies here in Washington.
I mean, they do lots of different

794
00:48:48,680 --> 00:48:52,010
things, but they are focused
exclusively on, you know,

795
00:48:52,010 --> 00:48:54,200
the Washington metro area, really.
They do some other things,

796
00:48:54,200 --> 00:48:58,310
but it's mostly and not only that,
it's mostly Northern Virginia,

797
00:48:59,210 --> 00:49:01,820
although they do have
investments in Maryland.

798
00:49:02,300 --> 00:49:06,380
But Silver Spring and National
Harbor, certainly. Yeah.

799
00:49:06,380 --> 00:49:10,280
Little things like that. Right. Yeah.
But there is a company that that

800
00:49:10,280 --> 00:49:14,330
is very diversified and that is
and I and I worked with,

801
00:49:14,330 --> 00:49:17,690
I work with Milt and now with
John and his management team,

802
00:49:17,840 --> 00:49:23,000
that is their strategy.
We are going to be a diversified

803
00:49:23,000 --> 00:49:27,800
real estate development investment
and in the region platform within

804
00:49:27,800 --> 00:49:32,570
this marketplace consciously.
And and the thinking behind it is,

805
00:49:32,750 --> 00:49:36,080
you know, office is going to be
down and apartments are going to

806
00:49:36,080 --> 00:49:38,750
be up and retail is going to be
good and hotels not so good,

807
00:49:38,750 --> 00:49:43,430
and large scale communities versus in
and that allows them to morph with

808
00:49:43,430 --> 00:49:47,120
the market and to, you know,
have more lines in the water,

809
00:49:47,120 --> 00:49:52,040
if you will. Interesting.
So the process takes upwards, what,

810
00:49:52,040 --> 00:49:56,030
six months to a year to build a
strategy, a strategic plan,

811
00:49:56,120 --> 00:49:59,150
from your framework? It really.
Depends.

812
00:49:59,290 --> 00:50:04,030
You know, I think that,
it really depends to a large

813
00:50:04,030 --> 00:50:09,250
extent on the, the constituencies
that you need to address,

814
00:50:09,250 --> 00:50:11,890
either internally or externally.
You know, large,

815
00:50:11,890 --> 00:50:15,580
large public companies, you know,
might have many constituents that

816
00:50:15,580 --> 00:50:19,600
they want to involve in the process, we're working with a company

817
00:50:19,600 --> 00:50:23,770
in Minneapolis right now that,
you know, there's, there's for,

818
00:50:23,980 --> 00:50:27,790, you know, subsets of internal
employees from different groups that

819
00:50:27,790 --> 00:50:30,850
are contributing to the process.
And then that's all bubbling up to,

820
00:50:30,850 --> 00:50:34,600, strategy planning team that are,
you know, charged with with

821
00:50:34,600 --> 00:50:37,990
crafting these. Do you go to.
Clients, customers and vendors and

822
00:50:37,990 --> 00:50:41,920
everything else outside the firm?
So in the in the initial discovery,

823
00:50:41,920 --> 00:50:44,620
we would always recommend
absolutely talking to people

824
00:50:44,620 --> 00:50:47,860
inside the organization.
And again it depends upon,

825
00:50:48,040 --> 00:50:52,330
you know, the, the the size of the
company and the sophistication.

826
00:50:52,330 --> 00:50:54,040
You know,
I was I would start with the,

827
00:50:54,040 --> 00:50:59,470
with the mantra that you should be, talking with people that can,

828
00:50:59,470 --> 00:51:03,730
that can be strategic thinkers as,
as your first screening criteria.

829
00:51:03,730 --> 00:51:05,920
But there's politics involved.
If I'm going to talk to Jane,

830
00:51:05,920 --> 00:51:08,920
I better talk to John,
or else John's going to be upset.

831
00:51:08,920 --> 00:51:13,540
So you know, who you talk to is
sort of a process within a company.

832
00:51:13,540 --> 00:51:18,880
But I will often go out to investors
and shareholders and vendors and

833
00:51:18,880 --> 00:51:24,610
partners and learn what are the what
are the strengths and weaknesses.

834
00:51:24,790 --> 00:51:26,920, what are some of the
strategic nuggets?

835
00:51:26,920 --> 00:51:29,890
That action will fall out of
trees from unexpected places.

836
00:51:29,890 --> 00:51:33,820
So there's lots of value in
doing those broad discovery,

837
00:51:33,820 --> 00:51:36,940
you know, kind of based interviews, both internally and

838
00:51:36,940 --> 00:51:40,240
externally in the company.
So once a plan is created,

839
00:51:40,900 --> 00:51:47,290
implementing it requires direction.
Yet, in my opinion, adaptability,

840
00:51:47,800 --> 00:51:53,380, to unforeseen challenges.
Examples being 911, the GFC,

841
00:51:53,410 --> 00:51:57,700
the pandemic. Yeah.
How do you build flex in flexibility

842
00:51:57,700 --> 00:51:59,950
yet discipline into the process.
Yeah.

843
00:52:00,070 --> 00:52:02,080
Well,
so so that's what I talked about.

844
00:52:02,080 --> 00:52:05,680, at the beginning here was,
was making sure that you have

845
00:52:05,680 --> 00:52:09,850
strategies in place that you're ready
to deploy at different phases of

846
00:52:09,850 --> 00:52:13,180
the economic cycle. Got it. Right.
So what you were doing in the

847
00:52:13,180 --> 00:52:16,720
expansion phase of the cycle may
be very different than what you

848
00:52:16,720 --> 00:52:21,160
were doing in the downturn, and as you approach the cyclical

849
00:52:21,160 --> 00:52:27,370
peak in a, in a real estate cycle, that is a very important

850
00:52:27,370 --> 00:52:30,910
planning and execution period of
time for companies, right?

851
00:52:30,910 --> 00:52:35,260
And thinking about what they
should be doing when they believe,

852
00:52:35,260 --> 00:52:38,290
because you never really know
when you were approaching sort

853
00:52:38,290 --> 00:52:40,630
of a cyclical peak, right?
If you miss the cyclical peak and

854
00:52:40,630 --> 00:52:44,110
you're making some big bets at the
wrong time, that can sink a company.

855
00:52:44,110 --> 00:52:47,560
If you're in the bottom of a
downturn and you miss the upturn

856
00:52:47,560 --> 00:52:50,170
by a couple of quarters,
that's not going to that's not

857
00:52:50,170 --> 00:52:53,500
going to kill a company. No.
But if you miss if you miss the

858
00:52:53,500 --> 00:52:57,280
downturn, the beginning of the
downturn, that can be bad.

859
00:52:57,610 --> 00:53:01,990
So again, thinking ahead to what do
we do in this phase of the cycle?

860
00:53:01,990 --> 00:53:04,180
What do we do when we think we're
approaching a cyclical peak?

861
00:53:04,180 --> 00:53:07,120
What do we do as we're as we're
on the downslope?

862
00:53:07,120 --> 00:53:10,600
What do we do at the bottom?
And how do we think about when

863
00:53:10,600 --> 00:53:14,170
we should be getting to make new
investments and plan for growth

864
00:53:14,170 --> 00:53:16,150
of them?
So right now,

865
00:53:16,150 --> 00:53:19,300
the conversations I'm having with
real estate companies are okay.

866
00:53:19,300 --> 00:53:23,320
We regardless of whether the the
US economy is in a recession and

867
00:53:23,320 --> 00:53:26,920
technically it is not real estate has
been in a recession for the last,

868
00:53:27,190 --> 00:53:31,750
you know, 12 to 18 months for sure.
So the question right now is when,

869
00:53:31,750 --> 00:53:35,080
when are we going to start to see an
uptick in the real estate economy?

870
00:53:35,290 --> 00:53:40,810
And my argument is that it may be too
soon to see the green shoots just yet

871
00:53:40,810 --> 00:53:43,870
in a, in a recovery taking place.
But I think the ground is starting

872
00:53:43,870 --> 00:53:47,860
to thaw and we're already in our
business, starting to see a lot more,

873
00:53:47,950 --> 00:53:51,580, contacts about new opportunities
coming up and companies thinking

874
00:53:51,580 --> 00:53:54,250
about, okay, well,
this isn't going to last forever.

875
00:53:54,760 --> 00:53:59,620
Fortunes are made in the inflection
point, between downturn and.

876
00:53:59,620 --> 00:54:01,990
Upcoming or ahead of them.
Yeah, exactly.

877
00:54:01,990 --> 00:54:09,160
And so early movers that can lay
in opportunities now, can can

878
00:54:09,160 --> 00:54:12,760
reap the rewards for years to come.
So I think, I think back to the work

879
00:54:12,760 --> 00:54:17,710
that we were doing with the auto
group, who I, I think is a great

880
00:54:17,710 --> 00:54:22,210
example of a company that was an
early adopter in 2010, Gotti

881
00:54:22,210 --> 00:54:25,480
and I were in a strategy session
with Tom and the team and said,

882
00:54:25,870 --> 00:54:30,340
you should back the truck up and
and buy all the land you possibly

883
00:54:30,340 --> 00:54:35,980
can now. And they did.
And for the next five years they

884
00:54:35,980 --> 00:54:41,050
had a great foundation that, that,
that stood them in good stead for

885
00:54:41,050 --> 00:54:44,920
many, many years in the expansion.
And in 11, 1213.

886
00:54:44,920 --> 00:54:49,450
When I interviewed Tom,
he said that 2007 and eight almost

887
00:54:49,450 --> 00:54:52,120
took the company down. Well, sure.
Because of home building.

888
00:54:52,690 --> 00:54:55,690
Yeah, right.
That was that was their downfall.

889
00:54:55,690 --> 00:54:58,990
Yes. They got overexposed and land.
Well that.

890
00:54:59,380 --> 00:55:03,640
That cycle was, I mean, like the
pandemic was was unique and different

891
00:55:03,640 --> 00:55:08,800
and different from 90 to 91. Right?
In that, it was a speculative,

892
00:55:09,040 --> 00:55:12,040, credit bubble.
Not not a demand bubble. Yeah.

893
00:55:12,430 --> 00:55:18,700
And so we were we were advising there
were a lot of condo converters. Yeah.

894
00:55:18,700 --> 00:55:22,240
And I remember big time,
lots and lots of studies and,

895
00:55:22,600 --> 00:55:27,310, I remember specifically
writing into our reports back in

896
00:55:27,310 --> 00:55:32,740
2005 and six and into seven,
saying you should make sure and

897
00:55:32,740 --> 00:55:36,040
get comfortable that the,
the buyers and the marketplace are

898
00:55:36,040 --> 00:55:41,350
actual end users and not speculators,
because what happens when prices go

899
00:55:41,350 --> 00:55:45,790
sideways? Forget about going down.
The speculators are gone because

900
00:55:45,790 --> 00:55:50,320
they're in it to buy on a
Thursday and sell on a on a

901
00:55:50,320 --> 00:55:53,680
Monday at a higher price. Right.
When we heard that there were

902
00:55:53,680 --> 00:55:56,830
cocktail wakes, waitresses in
Vegas that are speculating on

903
00:55:56,830 --> 00:55:59,440
condo contracts, it's like, well,
that's the beginning of the,

904
00:55:59,470 --> 00:56:02,950
you know, the sign of the apocalypse.
That should be one of the signs that,

905
00:56:02,950 --> 00:56:05,920
you know, were getting overheated.
And so that did happen.

906
00:56:05,920 --> 00:56:11,560
When the markets cooled in oh seven,
the speculators evaporated.

907
00:56:11,560 --> 00:56:14,530
And the challenging part back
then is we thought that there

908
00:56:14,530 --> 00:56:17,680
were only 30% speculators.
It turned out in a lot of these

909
00:56:17,680 --> 00:56:20,080
developments there were 70 or 80%.

910
00:56:20,860 --> 00:56:24,610
So that market turns on,
on a proverbial dime.

911
00:56:26,020 --> 00:56:30,520
Can you anticipate that though is the
question how do you how do you know

912
00:56:30,520 --> 00:56:33,760
whether you're over your skis too
far or not I guess is the question.

913
00:56:33,760 --> 00:56:37,690
And that's maybe a gut feeling.
You know, I, I,

914
00:56:37,690 --> 00:56:41,920
I wish I could say that,
that we saw it coming and that we

915
00:56:41,920 --> 00:56:45,460
were smarter than everybody and
we were assigned, you know,

916
00:56:45,670 --> 00:56:50,500
that we were ringing the alarm bells.
The reality is that, in our

917
00:56:50,500 --> 00:56:53,680
business and in a lot of real estate
businesses, they had some of the

918
00:56:53,680 --> 00:56:57,730
best years they ever had in oh five,
oh six and oh seven.

919
00:56:57,910 --> 00:57:02,260
And, it turns out that it was
a bubble for sure, but you didn't

920
00:57:02,260 --> 00:57:10,030
know that until 0809 and, and,
you know, look, if, a broken

921
00:57:10,030 --> 00:57:14,440
clock is right twice a day. Right.
But and there were very few people

922
00:57:14,440 --> 00:57:17,410
that were calling for the kind
of calamity that we saw in the

923
00:57:17,410 --> 00:57:22,750
great financial crisis. Very few.
So, you know, do I feel bad for

924
00:57:22,750 --> 00:57:26,140
having missed that? Sure.
I was not alone. We were not alone.

925
00:57:26,650 --> 00:57:28,480, we were telling our clients
at the time,

926
00:57:28,480 --> 00:57:31,720
and I do remember this distinctly, that we were telling people like,

927
00:57:31,720 --> 00:57:35,920
look, this, this is too good to
be true. This can't last forever.

928
00:57:36,130 --> 00:57:39,970
So be careful again,
make sure you have actual end users.

929
00:57:39,970 --> 00:57:43,840
Be careful about your capital stack.
Don't get yourself overextended.

930
00:57:43,840 --> 00:57:48,250
Not don't do this deal because we
don't know for sure that September

931
00:57:48,250 --> 00:57:55,390
of 2008 is coming. Nobody did.
Also coming closer to today, March

932
00:57:55,390 --> 00:58:01,270
of 2020 came to a wholly different
type of problem. Sure, none.

933
00:58:01,270 --> 00:58:05,140
No one could have anticipated that.
So yeah, I.

934
00:58:05,140 --> 00:58:08,500
Don't think you can design a strategy
around the great financial crisis.

935
00:58:08,500 --> 00:58:10,990
You can't design a strategy
around pandemic.

936
00:58:10,990 --> 00:58:13,210
Pandemic because you would do
nothing. Right?

937
00:58:13,210 --> 00:58:15,370
So that is not realistic.
The question is being.

938
00:58:15,370 --> 00:58:19,150
Ready for it though. Well, yeah.
So the so the question is how do

939
00:58:19,150 --> 00:58:26,170
you design a strategy that
minimizes or at least contains

940
00:58:26,170 --> 00:58:31,180
your downside risk exactly.
To the sleeping point. Exactly.

941
00:58:31,270 --> 00:58:35,470
You as an owner or a manager. Right, because we are in the

942
00:58:35,470 --> 00:58:38,140
business of making.
Money, how do you build a cushion

943
00:58:38,140 --> 00:58:40,660
without being too conservative?
Right. Yeah.

944
00:58:40,660 --> 00:58:44,260
Having $150 million in cash on
your balance sheet probably is

945
00:58:44,260 --> 00:58:46,840
not a great idea.
I mean, Warren Buffett is probably

946
00:58:46,840 --> 00:58:50,200
too conservative, but he's done
pretty well over the years.

947
00:58:50,200 --> 00:58:55,390
Right? Exactly, exactly.
You know, so that's the question.

948
00:58:55,390 --> 00:59:00,280
And you wrote your third edition
probably as a result of what happened

949
00:59:00,280 --> 00:59:03,370
during the pandemic, I'm guessing.
So go ahead and talk about that

950
00:59:03,370 --> 00:59:04,150
a little bit.
Hey,

951
00:59:04,150 --> 00:59:08,950
I wrote I wrote the third edition, it's been hanging over my

952
00:59:08,950 --> 00:59:11,350
head for the last five years,
quite honestly. Oh, really?

953
00:59:11,440 --> 00:59:14,410
Well, I mean, look, what do you
do when the sun is shining?

954
00:59:14,710 --> 00:59:17,140
You make hay.
Of course, our business has been

955
00:59:17,140 --> 00:59:21,970
strong and. Right, you know, I would never,

956
00:59:21,970 --> 00:59:24,670
advise someone to write a book
in their spare time,

957
00:59:26,050 --> 00:59:29,260
which I did not have.
So that's why it took me five

958
00:59:29,260 --> 00:59:31,690
years to actually get it.
And then when it when I finally

959
00:59:31,690 --> 00:59:33,520
it really took me about a year
to get it done.

960
00:59:33,520 --> 00:59:36,850
When I finally said, okay, enough is
enough and I got to get this done.

961
00:59:36,850 --> 00:59:41,080
Well, how much of this new
addition is new, I guess? Yeah.

962
00:59:41,080 --> 00:59:45,190
Well, well,
I will say entirely okay.

963
00:59:45,190 --> 00:59:50,410
I mean, so the process,
that we have devised and have

964
00:59:50,410 --> 00:59:54,700
been executed over the years,
is still valid and I think still

965
00:59:54,700 --> 00:59:58,150
applicable to the business.
So the fundamental exercise that

966
00:59:58,150 --> 01:00:01,300
you go through and the.
Tenants of a well rounded strategy

967
01:00:01,300 --> 01:00:04,780
for a real estate company I think are
largely intact and still relevant.

968
01:00:05,410 --> 01:00:09,670, what has changed is obviously
it's a completely different market.

969
01:00:09,880 --> 01:00:13,030, it's a different time frame.
There's different capital market

970
01:00:13,030 --> 01:00:15,370
environment,

971
01:00:15,970 --> 01:00:20,410
and a couple of things that we,
that we did in the latest edition,

972
01:00:21,010 --> 01:00:25,090, is the so the capital,
strategy pillar is much more

973
01:00:25,090 --> 01:00:28,150
robust and talks a lot more
about institutional capital.

974
01:00:28,300 --> 01:00:33,640
You know, was certainly in the
business in, in 2008 and 2009.

975
01:00:33,640 --> 01:00:37,780
But, you know, every real estate
company in the country now is

976
01:00:37,780 --> 01:00:41,830
thinking about should we be a fund?
Well, maybe yes, maybe no.

977
01:00:41,830 --> 01:00:46,930
But that wasn't on people's
radar in 2005, 2006 necessarily.

978
01:00:46,930 --> 01:00:50,500
So the capital markets and the
evolution of capital from

979
01:00:50,500 --> 01:00:52,900
friends and family,
and investing your own capital to

980
01:00:52,900 --> 01:00:57,010
going outside of the shop and other
people's money and institutional

981
01:00:57,010 --> 01:00:59,890
capital and sovereign wealth funds.
And, you know,

982
01:01:00,310 --> 01:01:04,450
now we're looking at,
crowdsourcing of capital for,

983
01:01:04,450 --> 01:01:08,110
for deals, you know, so there's, you
know, that that continues to evolve.

984
01:01:08,110 --> 01:01:12,370
And, and we brought that current.
The other thing that we did,

985
01:01:12,370 --> 01:01:17,890
is that we noticed that a lot of
the companies, we were very we're

986
01:01:17,890 --> 01:01:20,530
very good in saying strategies
about what you do and where,

987
01:01:20,530 --> 01:01:23,530
which I said earlier,
how you do it is important,

988
01:01:23,530 --> 01:01:26,440
but that's implementation.
So figure out what your strategy

989
01:01:26,440 --> 01:01:29,830
is first, then figure out how to
how to execute on it.

990
01:01:30,310 --> 01:01:32,050
Or else you're going to get the
cart before the horse.

991
01:01:32,050 --> 01:01:34,540
And sure, planning with
constraints like we talked about.

992
01:01:34,990 --> 01:01:37,510
Well, what I realized is that many
of our clients got to the end of

993
01:01:37,510 --> 01:01:39,880
the strategy planning process
and we're like, we're done.

994
01:01:39,880 --> 01:01:43,660
And then put the strategy on a
shelf and then forgot to follow

995
01:01:43,660 --> 01:01:47,680
through and put the strategy
into an implementation plan.

996
01:01:47,860 --> 01:01:53,680
So you'll notice in the Parthenon in
the third edition, there is a final

997
01:01:53,680 --> 01:01:58,840
pillar that is implementation, right?
Because that is an to me,

998
01:01:58,840 --> 01:02:02,440
an absolutely essential part of a
well-rounded strategy is making sure

999
01:02:02,440 --> 01:02:05,950
that you have an implementation plan.
So you do have to go through the

1000
01:02:05,950 --> 01:02:08,290
process of saying, okay, here's
what we said we're going to do now,

1001
01:02:08,290 --> 01:02:11,440
here's how we're going to do it.
And here are the key initiatives

1002
01:02:11,440 --> 01:02:13,210
that we're going to follow through.
Here's the time frame.

1003
01:02:13,210 --> 01:02:15,850
Here's who's in charge of it.
Here's how we're going to incentivize

1004
01:02:15,850 --> 01:02:17,920
people to get things done.
Here are the resources that we

1005
01:02:17,920 --> 01:02:23,410
need that now has been added as
an essential part of the round

1006
01:02:23,410 --> 01:02:27,130
trip and as a strategy
consultant and facilitator.

1007
01:02:27,130 --> 01:02:31,630
If if I don't help you get your
implementation plan done, the

1008
01:02:31,630 --> 01:02:35,770
strategy is not complete, of course.
Well, how often should we revisit it?

1009
01:02:35,770 --> 01:02:38,560
I guess it's the question.
Yeah, I think most I think most

1010
01:02:38,560 --> 01:02:42,910
companies are kind of on a cycle
of every 3 to 5 years. Right?

1011
01:02:43,060 --> 01:02:45,910
The reality is you probably do
it every 5 to 10 years.

1012
01:02:45,910 --> 01:02:48,760
And I would say that that's
probably appropriate.

1013
01:02:48,760 --> 01:02:53,350
But for when the cycle turns, right.
If there is a meaningful

1014
01:02:53,350 --> 01:02:57,700
inflection point in the economic
or real estate market cycles,

1015
01:02:57,700 --> 01:03:03,610
that is the time to maybe revisit
your strategy in whole or in part.

1016
01:03:03,610 --> 01:03:09,310
Now, I would say that, a good
exercise for real estate companies

1017
01:03:09,310 --> 01:03:12,700
and probably any company is to do
an annual review of your strategy.

1018
01:03:13,000 --> 01:03:15,820
Here's what we said we're going to
do, you know, for the next ten years.

1019
01:03:15,820 --> 01:03:19,000
And we're in year three of ten.
How were we progressing?

1020
01:03:19,000 --> 01:03:21,250
What has changed in the external
market environment?

1021
01:03:21,250 --> 01:03:25,480
What's change in the company?
What should we do to modify our

1022
01:03:25,480 --> 01:03:28,210
strategy going forward to make sure
that it's still relevant and not

1023
01:03:28,210 --> 01:03:33,460
just be on cruise control? Right.
So, if you completely change your

1024
01:03:33,460 --> 01:03:37,240
strategy every year or two years,
you probably didn't land on the

1025
01:03:37,240 --> 01:03:41,920
right strategy to begin with,
but to let it go for a long period

1026
01:03:41,920 --> 01:03:46,630
of time without revisiting,
checking, monitoring, fine tuning,

1027
01:03:46,630 --> 01:03:50,710
I think is also a mistake.
You highlighted it, but of all

1028
01:03:50,710 --> 01:03:54,580
the pillars in your framework,
in my mind the most important is

1029
01:03:54,820 --> 01:03:58,630
was it in the first edition,
Cycle Management, you changed

1030
01:03:58,630 --> 01:04:01,960
its name to Risk Management.
In this edition,

1031
01:04:02,500 --> 01:04:05,710
discuss the important aspects of
this and why it's so important.

1032
01:04:05,710 --> 01:04:09,430
Perhaps with a case study and you.
You cited a few things before,

1033
01:04:09,430 --> 01:04:12,310
but is there a case study of,
you know, why you changed it

1034
01:04:12,310 --> 01:04:17,350
from cycle to risk?
Well, this goes this goes

1035
01:04:17,350 --> 01:04:21,010
back to, to Chris Weinberger.
And, you know, his his original

1036
01:04:21,010 --> 01:04:23,890
organizing principle was the
extreme cyclicality in the in the

1037
01:04:23,890 --> 01:04:27,790
business was the impetus for the
need for strategy planning in real

1038
01:04:27,790 --> 01:04:34,000
estate and why it's so urgent.
And I, I didn't mean to diminish

1039
01:04:34,000 --> 01:04:38,590
that in any, any way.
And I think I say in the book that,

1040
01:04:38,590 --> 01:04:41,740, cycle strategy and market
risk is still one of the most

1041
01:04:41,740 --> 01:04:43,720
important things for a real
estate company to be thinking

1042
01:04:43,720 --> 01:04:47,440
about and planning around.
But as I interfaced with more

1043
01:04:47,440 --> 01:04:50,350
companies over the years,
I realized that there are other real

1044
01:04:50,350 --> 01:04:54,520
estate risks and factors that are
important to take into account.

1045
01:04:55,060 --> 01:04:58,450
You know, capital market risk
and balance sheet metrics,

1046
01:04:58,450 --> 01:05:02,850
you know, material. Of loans.
There's silly stuff like slips and

1047
01:05:02,850 --> 01:05:07,170
falls, right. Corporate liability.
So there's a whole host of.

1048
01:05:07,170 --> 01:05:12,090
And lots of large sophisticated real
estate companies have risk managers.

1049
01:05:12,090 --> 01:05:14,490
I mean,
it's a it's it's a job description.

1050
01:05:14,730 --> 01:05:18,000
Oh, if one of the principals of the
firms dies. What how is that a risk?

1051
01:05:18,000 --> 01:05:20,250
Yeah. Well, sure.
Now that starts to talk about

1052
01:05:20,250 --> 01:05:22,950
succession planning,
which which we talk about in the

1053
01:05:22,950 --> 01:05:25,470
organization pillar.
But sure that that is another risk

1054
01:05:25,470 --> 01:05:31,440
factor in ensuring that your company
has a robust succession plan,

1055
01:05:31,440 --> 01:05:37,470
either to deal with unanticipated, or planned, turnover in

1056
01:05:37,470 --> 01:05:41,280
the organization is absolutely
critical for the longevity.

1057
01:05:41,280 --> 01:05:45,990
And, and, you know,
creating a robust organization that

1058
01:05:45,990 --> 01:05:49,650
will stand the test of time.
So I recently interviewed

1059
01:05:49,650 --> 01:05:54,300
Cameron Pratt of Folger Pratt, they may be,

1060
01:05:54,300 --> 01:05:58,140
current or former client of yours,
perhaps when he joined the company,

1061
01:05:58,140 --> 01:06:00,540
they were concentrated in
Montgomery County, Maryland,

1062
01:06:00,870 --> 01:06:04,890
and looked at one deal at a time
for financing and fee generation.

1063
01:06:05,490 --> 01:06:10,380
They were also vertically invested in
construction, property management,

1064
01:06:10,380 --> 01:06:14,790
development and investments.
Last year, he decided to sell their

1065
01:06:14,790 --> 01:06:19,140
construction group to Clark Real
Clark Real Clark Construction

1066
01:06:19,200 --> 01:06:22,890
and transition to third party
management with Mizuho. Yeah.

1067
01:06:23,670 --> 01:06:27,570
I didn't ask him if our CFO was
advisor, but even if you weren't,

1068
01:06:27,570 --> 01:06:32,880
please opine on this decision and
perhaps provide a completely opposite

1069
01:06:32,880 --> 01:06:36,510
case where services were added to
have better control over the overall

1070
01:06:36,510 --> 01:06:42,780
process in its rationale? Possibly.
Well, I think you'll highlight an

1071
01:06:42,780 --> 01:06:49,020
absolutely essential component of
strategic planning, which is deciding

1072
01:06:49,020 --> 01:06:51,780
what you're going to do and what
you're not going to do. Right.

1073
01:06:52,290 --> 01:06:55,470, part of that exercise that I
talked about, figuring out where

1074
01:06:55,470 --> 01:06:59,850
you're making money, is,
is the first step in helping you make

1075
01:06:59,850 --> 01:07:02,700
some of those critical decisions.
There are lots of companies that

1076
01:07:02,700 --> 01:07:07,860
are fully integrated, right?
They do investment, construction,

1077
01:07:07,860 --> 01:07:11,190
property management, Barstow is one great example,

1078
01:07:11,400 --> 01:07:13,110, here in the Washington
metropolitan area.

1079
01:07:13,110 --> 01:07:17,550
And they have consciously made a
decision to be in to be in all three

1080
01:07:17,550 --> 01:07:22,020
of those businesses because they
believe that the synergies and the

1081
01:07:22,020 --> 01:07:26,670
benefits they get out of having
control over the whole round trip of

1082
01:07:26,670 --> 01:07:31,950
a real estate investment is is part
of their success. They believe it.

1083
01:07:31,950 --> 01:07:36,750
I think, their, success over
the years has demonstrated that

1084
01:07:36,750 --> 01:07:40,230
they're probably right for them,
for other companies.

1085
01:07:40,230 --> 01:07:44,670
And Kettler is a good example also
here in Washington DC, where they

1086
01:07:44,670 --> 01:07:49,890
decided, you know, they were at,
you know, 22, 25,000, rental

1087
01:07:49,890 --> 01:07:56,670
apartment units under management.
And that today is a small maybe,

1088
01:07:56,670 --> 01:07:58,350
I mean, mid-sized,
maybe even pushing it.

1089
01:07:58,350 --> 01:08:01,590
That's kind of a small portfolio
to manage efficiently.

1090
01:08:01,590 --> 01:08:06,000
So Bob made the decision 7 or 8
years ago to outsource property

1091
01:08:06,000 --> 01:08:09,450
management because they were losing
money in the property management.

1092
01:08:09,600 --> 01:08:13,110
And they realized, I think more
importantly, at least for them,

1093
01:08:13,110 --> 01:08:18,210
that they weren't adding value in
property operations, they were adding

1094
01:08:18,210 --> 01:08:23,310
value through their investment
development and asset management.

1095
01:08:23,310 --> 01:08:27,630
But for them, at least, property
management was a commodity that they

1096
01:08:27,630 --> 01:08:31,140
could outsource to somebody else.
I'm working with a company right now,

1097
01:08:31,140 --> 01:08:34,620
happens to be in Memphis.
They believe strongly that their

1098
01:08:34,620 --> 01:08:39,660
property management is part of their
success, and I challenged them to

1099
01:08:39,660 --> 01:08:43,350
think about whether that was in fact
the case and whether the investors

1100
01:08:43,350 --> 01:08:48,840
that they had valued there fully
integrated model or not, because the

1101
01:08:48,840 --> 01:08:52,980
markets have been shifting on that, you know, so I got them to

1102
01:08:52,980 --> 01:08:56,010
think very deeply about that.
At the end of the day,

1103
01:08:56,010 --> 01:09:01,170
I think they recommitted to being in
the property management business,

1104
01:09:01,170 --> 01:09:05,670
but they decided I only want to
perform property management separate

1105
01:09:05,670 --> 01:09:08,940
from asset management for assets in
which we have an economic interest.

1106
01:09:08,940 --> 01:09:11,910
It's the third party business
that's killing us. Yeah.

1107
01:09:11,910 --> 01:09:16,920
And so they've made a decision to,
over time, to exit the third party

1108
01:09:16,920 --> 01:09:20,730
business, because that was the
source of consternation for them.

1109
01:09:20,730 --> 01:09:25,230
But they really felt like controlling
the the resident experience in

1110
01:09:25,230 --> 01:09:28,980
their properties was essential to
their success and why they were

1111
01:09:28,980 --> 01:09:33,360
able to attract outside investors.
So it's a philosophical thing is

1112
01:09:33,360 --> 01:09:38,340
basically what I'm hearing you say to
some extent, and the talent that

1113
01:09:38,340 --> 01:09:41,430
you're able to retain internally to
be able to manage those processes.

1114
01:09:41,430 --> 01:09:43,950
So you mentioned Mizuho,
which I know pretty well. Sure.

1115
01:09:44,850 --> 01:09:48,330, you know,
their growth as a company,

1116
01:09:48,330 --> 01:09:50,670
but came from property management.
I mean,

1117
01:09:50,670 --> 01:09:55,050
Tom told that told me that early on,
if it weren't for the crisis of

1118
01:09:55,050 --> 01:09:58,350
the early 90s, they wouldn't have
gone into the property management.

1119
01:09:58,450 --> 01:10:01,450
Business because they need fee
revenue to they didn't have deals.

1120
01:10:01,450 --> 01:10:04,630
They couldn't do deals at that time.
So they had to build their company

1121
01:10:04,630 --> 01:10:07,450
through property management. Fee.
The fee business is what grew

1122
01:10:07,450 --> 01:10:10,660
their business at that time.
And then over time,

1123
01:10:10,660 --> 01:10:14,800
they decided to do other things and
become more vertically integrated.

1124
01:10:14,800 --> 01:10:17,260
But they would never have grown.
And Julie Smith,

1125
01:10:17,260 --> 01:10:20,410
I have to give the most credit.
I mean, she was amazing at what

1126
01:10:20,410 --> 01:10:24,610
she did, and still is. Yeah.
Well, she's doing she's not

1127
01:10:24,610 --> 01:10:28,810
doing that anymore, but. Yeah, hand it over to Stephanie. Yeah.

1128
01:10:28,810 --> 01:10:33,100
So I've interviewed, you know, Tom,
Toby and Julie for that reason,

1129
01:10:33,100 --> 01:10:37,420
because I know each one of them did
something different to grow that

1130
01:10:37,420 --> 01:10:41,080
firm, which was fascinating to me.
So, so Bazardo and the companies

1131
01:10:41,080 --> 01:10:44,410
like them are great examples of what
we talk about early in the book.

1132
01:10:44,740 --> 01:10:47,980, which is strategic balance,
right, for a real estate company.

1133
01:10:47,980 --> 01:10:52,330
And the notion of strategic
balance is is creating a real

1134
01:10:52,330 --> 01:10:59,050
estate platform where you have
recurring sticky income that can

1135
01:10:59,050 --> 01:11:02,860
support your organization in good
times and in bad. Right? Right.

1136
01:11:02,860 --> 01:11:06,970
And that enables you to take big
capital risks of development or

1137
01:11:06,970 --> 01:11:10,450
value add or acquisitions, whatever
it may be, at the appropriate

1138
01:11:10,450 --> 01:11:13,510
points in the cycle. Right.
So the difference is,

1139
01:11:13,510 --> 01:11:18,340
there's lots of developers out there,
but for every 3 or 4 years,

1140
01:11:18,340 --> 01:11:20,680
out of every ten developers are
sitting on their hands.

1141
01:11:20,680 --> 01:11:24,520
That's right, as you well know. Yeah.
And some of them, you know,

1142
01:11:25,120 --> 01:11:29,650
find it very difficult to keep their
teams together and even survive in

1143
01:11:29,650 --> 01:11:34,690
downturns because they're recurring, revenues, which are acquisition

1144
01:11:34,690 --> 01:11:37,900
fees and development fees and
construction management fees go to

1145
01:11:37,900 --> 01:11:44,560
zero when they're not doing anything.
So, we we talk about creating

1146
01:11:44,560 --> 01:11:47,860
that kind of strategic balance
in a real estate platform.

1147
01:11:47,860 --> 01:11:49,990
That is the revenues.
So don't think of yourself as a

1148
01:11:49,990 --> 01:11:52,240
developer.
Think of yourself as a real

1149
01:11:52,240 --> 01:11:56,650
estate company. That's right.
That, has recurring revenues

1150
01:11:56,650 --> 01:11:59,950
either from income producing
assets or from, you know,

1151
01:11:59,950 --> 01:12:04,030
fee management that is not dependent
upon transactions or development.

1152
01:12:04,600 --> 01:12:08,410, and then doing higher risk
activities that can juice your

1153
01:12:08,410 --> 01:12:11,440
returns and really, really may be
the reason you're in business,

1154
01:12:11,440 --> 01:12:14,680
but you're only going to do at the
appropriate points in the cycle.

1155
01:12:14,800 --> 01:12:19,120, companies are now faced with
complicated real estate markets

1156
01:12:19,120 --> 01:12:24,580
with extreme winters data centers,
industrial select retail properties

1157
01:12:24,580 --> 01:12:28,390
and extreme losers class,
back office, older malls,

1158
01:12:28,390 --> 01:12:32,410
commodity older apartments and
unfriendly capital markets.

1159
01:12:32,410 --> 01:12:36,730
As in all challenging markets,
positioning is is critical.

1160
01:12:37,000 --> 01:12:40,960
How would you recommend your clients
to position themselves today?

1161
01:12:40,960 --> 01:12:45,670
Cite three examples depending on
size a small, medium and large

1162
01:12:45,670 --> 01:12:49,600
company with rationale for each.
Maybe you can cite three examples.

1163
01:12:49,810 --> 01:12:55,720
This sounds like a three hour exam
that I will take. Oh that's tough.

1164
01:12:56,380 --> 01:13:01,660, so, well, let me, let me try.
And you redirect me if I, if I were

1165
01:13:01,660 --> 01:13:07,030
to wander, you know, I guess,
I guess what I would say is that,

1166
01:13:07,030 --> 01:13:10,660
you know, at, at, at this point
in the cycle and other points,

1167
01:13:10,660 --> 01:13:16,300
you know, like this, you know,
you talk about winners and losers.

1168
01:13:16,450 --> 01:13:22,480, you know, I think there's,
there's opportunities that exist

1169
01:13:22,480 --> 01:13:26,950
even in some challenging sectors.
So let's talk about office for a

1170
01:13:26,950 --> 01:13:29,740
moment. Sure.
Which everyone would acknowledge is

1171
01:13:29,740 --> 01:13:33,550
under extreme stress and duress.
And that probably will only

1172
01:13:33,550 --> 01:13:37,840
increase over time.
And yet, there will be an

1173
01:13:37,840 --> 01:13:41,620
opportunity for new office
development and value add office.

1174
01:13:41,620 --> 01:13:44,200
What's happening today?
It's happening today. Look at Reston.

1175
01:13:44,200 --> 01:13:47,140
There are there are cranes in
the sky and, you know,

1176
01:13:47,140 --> 01:13:52,240
flight to quality and, 100%
locations and assets will probably

1177
01:13:52,240 --> 01:13:57,070
perform well or at least better.
But if you own a bunch of class B

1178
01:13:57,070 --> 01:14:01,000
office, you may own some dirt and
you're just don't know it yet.

1179
01:14:01,150 --> 01:14:05,710
So, you know,
retail is another great example.

1180
01:14:05,710 --> 01:14:09,040
I mean, retail has been reinventing
itself since the beginning of time.

1181
01:14:09,040 --> 01:14:14,800
So of course, there's nothing new.
I mean, sure has, has, has, you know,

1182
01:14:14,800 --> 01:14:20,080
the internet accelerated that pace
of of reinvention. Absolutely.

1183
01:14:20,440 --> 01:14:23,620, but there will be winners
and losers, you know,

1184
01:14:23,620 --> 01:14:28,570
the class A malls, the 100% suburban
malls will probably do. Okay.

1185
01:14:28,570 --> 01:14:32,650
And smart owners and operators
are investing in those malls and

1186
01:14:32,650 --> 01:14:35,710
intensifying them and adding
medical office and housing and

1187
01:14:35,950 --> 01:14:40,330
and and making them centers not
just for retail expenditures,

1188
01:14:40,330 --> 01:14:44,800
but for for a community, but again, if you own a B mall

1189
01:14:44,800 --> 01:14:48,760
in a less than 100% location,
you know, we've been analyzing a

1190
01:14:48,760 --> 01:14:50,740
number of those.
And some of them, we've been thinking

1191
01:14:50,740 --> 01:14:55,030
about them as dirt, not as, you know,
retail development. There are at.

1192
01:14:55,030 --> 01:14:57,430
Least two,
maybe three in this market that I

1193
01:14:57,430 --> 01:15:01,980
can think of right now. Landmark. The one in Gaithersburg.

1194
01:15:02,010 --> 01:15:06,420
You know, the big one there?
Lake forest and then on the. Yeah.

1195
01:15:06,420 --> 01:15:09,690
And I think Dulles Town Center
eventually, too, I mean,

1196
01:15:09,690 --> 01:15:13,440
and of course, both White Flint
and Landover were torn down,

1197
01:15:13,440 --> 01:15:18,240
basically, or gone. So.
So, so I think I think as you,

1198
01:15:18,240 --> 01:15:22,650
as you look out in the landscape
as a real estate company, a

1199
01:15:22,650 --> 01:15:26,010
couple of things to, to keep in mind.
You know, number one,

1200
01:15:26,130 --> 01:15:31,050
demographics is destiny, as we
always say in this business. Right?

1201
01:15:31,050 --> 01:15:34,770
We are blessed in this country of
having a fundamental underpinning of

1202
01:15:34,770 --> 01:15:37,800
population and household growth,
which is the demand side of the

1203
01:15:37,800 --> 01:15:40,740
equation.
So if you believe that there is

1204
01:15:40,740 --> 01:15:45,720
going to continue to be household
growth and we, fix or at

1205
01:15:45,720 --> 01:15:50,400
least modify our immigration policy, in the country, you know,

1206
01:15:50,400 --> 01:15:54,390
there will be demand for housing.
And so that may be a good

1207
01:15:54,390 --> 01:15:57,810
strategy to focus on housing.
Now, where in housing do you

1208
01:15:57,810 --> 01:16:00,060
want to focus, do you want to be in the

1209
01:16:00,060 --> 01:16:02,490
homebuilding business,
which I agree is much more cyclical,

1210
01:16:02,490 --> 01:16:04,650
or do you want to be in the,
you know, the multifamily business,

1211
01:16:04,650 --> 01:16:07,500
which may be more stable and maybe
you want to be in both, but,

1212
01:16:07,500 --> 01:16:10,500
you know, those are some of the
decisions that you need to make based

1213
01:16:10,500 --> 01:16:13,620
on your company's skill set and your
capital stack and so on and so forth.

1214
01:16:13,650 --> 01:16:18,720
So there's there's there's going to
be opportunities in housing,

1215
01:16:18,720 --> 01:16:22,230
you know, onto the, into the future.
There will be cycles, of course,

1216
01:16:22,230 --> 01:16:27,000
but if I was going to bet on housing,
I would feel good about that as

1217
01:16:27,000 --> 01:16:30,300
a real estate company strategy, industrial.

1218
01:16:30,840 --> 01:16:33,150, and if you've been in the
industrial business,

1219
01:16:33,150 --> 01:16:37,410
multifamily or self-storage or data
centers in the last 5 to 10 years,

1220
01:16:37,410 --> 01:16:41,040
you've you guessed right and
you've probably done pretty well.

1221
01:16:41,460 --> 01:16:44,070, are those going to be the
flavors going forward?

1222
01:16:44,730 --> 01:16:49,740, you know, it's hard to see
e-commerce, slowing down,

1223
01:16:50,310 --> 01:16:56,310
near shoring and, you know, and,
and on shoring of manufacturing and

1224
01:16:56,310 --> 01:17:00,570
distribution and logistics, sure.
There's there's been some

1225
01:17:00,570 --> 01:17:04,140
overbuilding.
And when Amazon takes a pause,

1226
01:17:04,530 --> 01:17:07,440, developers take note.
But, you know,

1227
01:17:07,440 --> 01:17:12,600
their strategy is is evolving.
And so I see industrials as having,

1228
01:17:12,600 --> 01:17:15,630
you know, having legs, housing,
having legs.

1229
01:17:15,660 --> 01:17:19,290
I think the resort and hotel
business will continue to be,

1230
01:17:19,290 --> 01:17:21,390
you know, cyclical.
But people are going to take

1231
01:17:21,390 --> 01:17:23,130
vacations.
People are going to travel. Right?

1232
01:17:23,130 --> 01:17:26,700
I mean, so you just have to think
about the fundamental underpinnings

1233
01:17:26,700 --> 01:17:30,120
of demand for various real estate
products, and that'll help guide

1234
01:17:30,120 --> 01:17:32,910
your strategy as a company.
And then there's always going to

1235
01:17:32,910 --> 01:17:36,510
be niche opportunities,
even in a down sector in a

1236
01:17:36,510 --> 01:17:40,140
particular market or submarket.
So I don't think there's a blanket

1237
01:17:40,140 --> 01:17:45,120
right or wrong strategy for a
company to pursue going forward.

1238
01:17:45,600 --> 01:17:50,610, now, if if, you know,
you owned a bunch of, suburban,

1239
01:17:50,790 --> 01:17:54,840, b, you know, 1960s vintage
office buildings, you might want

1240
01:17:54,840 --> 01:17:59,100
to think about diversifying and
doing some other things, okay.

1241
01:17:59,670 --> 01:18:05,130
So scale really doesn't matter.
Is it just how you pivot and what you

1242
01:18:05,130 --> 01:18:09,810
pivot with? Basically to some extent?
Well, I'm not sure I would go

1243
01:18:09,810 --> 01:18:13,200
that that far.
So scale is another dimension that I

1244
01:18:13,200 --> 01:18:15,990
think is an important one for real
estate companies to wrestle with.

1245
01:18:15,990 --> 01:18:18,720
Right.
And, and particularly as

1246
01:18:18,720 --> 01:18:24,000
companies evolve,
from being small to midsize to being,

1247
01:18:24,000 --> 01:18:29,580
you know, midsize to large,
and it really has to do with,

1248
01:18:29,580 --> 01:18:32,730
capital formation and deployment
more than anything else.

1249
01:18:32,730 --> 01:18:38,370
So if if you have an ambition to
tap institutional capital,

1250
01:18:38,370 --> 01:18:42,600
either in one off investment
investments or more often in a, in a

1251
01:18:42,600 --> 01:18:48,720
fund or some sort of programmatic
venture, then, those,

1252
01:18:48,720 --> 01:18:53,820
those institutional capital providers
want to write checks that have,

1253
01:18:53,820 --> 01:19:00,360
you know, $200 million in them, and so there is an efficiency

1254
01:19:00,360 --> 01:19:04,860
standpoint in terms of accessing
capital that does speak to a

1255
01:19:04,860 --> 01:19:08,340
certain size and scale.
So if you want to tap institutional

1256
01:19:08,340 --> 01:19:12,870
capital, you probably need to
have sufficient throughput to be

1257
01:19:12,870 --> 01:19:15,870
of interest to that capital.
So it's a virtue. They don't want.

1258
01:19:15,870 --> 01:19:17,670
To just do one deal with you.
They don't want.

1259
01:19:17,670 --> 01:19:20,640
And and you as a developer
probably don't want to do one off

1260
01:19:20,640 --> 01:19:23,700
capitalizations because all the brain
damage that's involved in doing that,

1261
01:19:23,700 --> 01:19:27,930
I'd rather raise $200 million and
have a mandate within a box to go

1262
01:19:27,930 --> 01:19:31,560
and pursue this strategy. Exactly.
And then I don't have to worry my

1263
01:19:31,560 --> 01:19:36,390
guys and gals in the field about,
generating capital. I got the money.

1264
01:19:36,390 --> 01:19:39,630
You go find the deals.
So that is a big inflection

1265
01:19:39,630 --> 01:19:42,000
point that a lot of small and
mid-sized companies make when

1266
01:19:42,000 --> 01:19:46,380
they start thinking about how to
tap more programmatic and

1267
01:19:46,380 --> 01:19:50,580
institutional capital,
is having sufficient size and scale,

1268
01:19:50,940 --> 01:19:53,940, in a sector or in a market to
be able to deploy that capital in

1269
01:19:53,940 --> 01:19:56,910
an efficient manner? Well, you.
Mentioned one company,

1270
01:19:56,910 --> 01:20:00,350
and I'm going to bring in another.
That have been able to have been

1271
01:20:00,350 --> 01:20:04,310
very fortunate to hit the the
good cycles at the right time

1272
01:20:04,310 --> 01:20:08,780
and to be able to reinvest their
capital in a diversified way.

1273
01:20:08,810 --> 01:20:12,380
The one company is the Peterson
organization, who never had a fund.

1274
01:20:12,380 --> 01:20:15,800
I don't believe and don't think
I ever had a one off

1275
01:20:15,800 --> 01:20:19,730
institutional capital partner.
They were very,

1276
01:20:19,730 --> 01:20:23,990
productive in the for sale market
and were able to build enough of

1277
01:20:23,990 --> 01:20:28,880
a capital base internally to not
have to go to the institutional

1278
01:20:28,880 --> 01:20:31,970
capital market that often.
And then the other company is

1279
01:20:31,970 --> 01:20:36,410
the Lerner organization,
Lerner Enterprises, who completely

1280
01:20:36,410 --> 01:20:40,130
changed their business plan, with the regional mall business,

1281
01:20:40,520 --> 01:20:43,820
you know, I mean,
had to completely shut it down.

1282
01:20:44,630 --> 01:20:48,050
And I interviewed Art Forcillo,
and he told that story.

1283
01:20:48,050 --> 01:20:50,240
And, of course,
they just had the largest sale in

1284
01:20:50,240 --> 01:20:55,370
Northern Virginia history of land,
which was a mall to a data center

1285
01:20:55,850 --> 01:20:59,540
group, of course, that bought it.
So they were able to pivot,

1286
01:20:59,720 --> 01:21:04,790
but they had huge assets to start
with and able to to afford to, to go

1287
01:21:04,790 --> 01:21:08,240
through those crises accordingly.
So so I think the Peterson is a

1288
01:21:08,240 --> 01:21:12,260
is a is a great example because I
remember having this conversation

1289
01:21:12,260 --> 01:21:15,620
with with John Peterson and his
team when we were doing strategy

1290
01:21:15,620 --> 01:21:20,540
planning just a few years back.
And yeah, and their their strategy is

1291
01:21:20,540 --> 01:21:25,760
a risk risk management strategy.
They have consciously decided to

1292
01:21:25,760 --> 01:21:29,570
do one off capitalisations of
their real estate investments and

1293
01:21:29,570 --> 01:21:32,360
assets because they don't want
to cross collateralize them,

1294
01:21:32,450 --> 01:21:35,780
so that one bad deal could take
down a whole bunch of others.

1295
01:21:35,780 --> 01:21:39,500
So that is the jeopardy in the
fund model where everything is

1296
01:21:39,500 --> 01:21:42,980
co-mingled if something goes bad,
that affects the whole fund.

1297
01:21:42,980 --> 01:21:46,730
So I'm not saying that it's a right
or wrong strategy, but that is

1298
01:21:46,730 --> 01:21:51,320
the strategy that works for them.
And clearly they have been successful

1299
01:21:51,320 --> 01:21:55,580
in, in, attracting a stable
of investors over the years.

1300
01:21:55,580 --> 01:22:00,260
So it's not a rate limiting factor.
Another example on the other side,

1301
01:22:00,350 --> 01:22:04,160
you know, Lily Dunn,
of course, the CEO,

1302
01:22:04,160 --> 01:22:08,240
president at, partners. Right.
Well, they started off with friends

1303
01:22:08,240 --> 01:22:12,290
and family, country club money,
doing one off capitalizations.

1304
01:22:12,290 --> 01:22:17,780
And then when John Bell took over for
his father and he had a career in,

1305
01:22:17,780 --> 01:22:20,000
in Wall Street and in the
capital markets,

1306
01:22:20,300 --> 01:22:25,820
brought the fund concept to Bell.
And they migrated from that one

1307
01:22:25,820 --> 01:22:30,290
off investment to a fund line.
I think they're working on fund

1308
01:22:30,290 --> 01:22:33,140
nine now. Over.
And so it's been it's proven very,

1309
01:22:33,140 --> 01:22:37,310
very successful.
But part of what they did there was,

1310
01:22:37,670 --> 01:22:41,180, they narrowed the focus of
what they did, similar to how

1311
01:22:41,180 --> 01:22:46,100
the REIT's have done it.
They are a multifamily value add

1312
01:22:46,100 --> 01:22:49,400
investment platform. Right.
And they would they would probably

1313
01:22:49,400 --> 01:22:52,130
describe themselves not as a,
not as a real estate company.

1314
01:22:52,130 --> 01:22:54,590
They would they would describe
themselves as a real estate

1315
01:22:54,590 --> 01:22:58,190
private equity firm. There it is.
Which is what they are really,

1316
01:22:58,190 --> 01:23:01,460
at the end of the day now,
they happen to believe in the fully

1317
01:23:01,460 --> 01:23:06,380
integrated model of acquisition
value, add property and property

1318
01:23:06,380 --> 01:23:09,590
management because they believe
that that their investors are

1319
01:23:09,590 --> 01:23:12,710
interested in that model.
But we continue to debate should

1320
01:23:12,710 --> 01:23:14,990
we sell perform property
management or should we not?

1321
01:23:14,990 --> 01:23:17,990
In the most recent, you know,
strategy update that we did with

1322
01:23:17,990 --> 01:23:21,770
them just a year or so ago?
So they're still thinking about

1323
01:23:21,770 --> 01:23:26,210
should we be in that business or
should we outsources and came

1324
01:23:26,210 --> 01:23:29,030
back and, and affirmed that that
is part of their secret sauce.

1325
01:23:29,030 --> 01:23:33,350
And the resident experience is
critical to what they're selling

1326
01:23:33,380 --> 01:23:37,040
to their investors, and so reaffirmed that that's

1327
01:23:37,040 --> 01:23:40,760
an important part of what they do.
But the point there was,

1328
01:23:40,760 --> 01:23:44,510
you know, the migration from one
off capitalisations at a diverse

1329
01:23:44,510 --> 01:23:49,970
platform to a targeted single
sector and large fund model.

1330
01:23:50,570 --> 01:23:53,360
Neither Peterson or Bell got it
right or wrong.

1331
01:23:53,360 --> 01:23:55,820
It's just a different strategy.
And it seems to be working for

1332
01:23:55,820 --> 01:23:58,820
both of those companies.
So you got to figure out what's

1333
01:23:58,820 --> 01:24:03,140
the right strategy for you that
balances risk, reward efficiency.

1334
01:24:03,680 --> 01:24:05,270
And you talked about critical mass.
Right.

1335
01:24:05,270 --> 01:24:11,120
So that's one of the things that
we do talk about is down to the

1336
01:24:11,120 --> 01:24:15,680
market or submarket level,
is convincing our strategy clients

1337
01:24:15,680 --> 01:24:22,250
that they have generated sufficient
concentration of assets or efforts to

1338
01:24:22,250 --> 01:24:25,820
operate efficiently and effectively,
right. Economies of scale. Correct.

1339
01:24:25,820 --> 01:24:32,060
So within a given metropolitan area,
to have a minimum of 2 to 3000

1340
01:24:32,060 --> 01:24:37,130
apartment units or 6 or 7 communities
that a regional manager can visit

1341
01:24:37,130 --> 01:24:41,150
within one day, is one of the,
you know, in the multifamily

1342
01:24:41,150 --> 01:24:43,850
space is one of those organizing
principles that you say, okay,

1343
01:24:43,850 --> 01:24:47,390
I want to I want to focus on markets
where I can convince myself that

1344
01:24:47,390 --> 01:24:53,300
I can grow to and maintain that
minimum critical mass of operation

1345
01:24:53,300 --> 01:24:56,450
in order to operate efficiently
and effectively just from a

1346
01:24:56,450 --> 01:25:00,340
profitability standpoint. And that.
Can be something that guides you

1347
01:25:00,340 --> 01:25:03,100
into a decision about what are
the segments that you follow?

1348
01:25:03,130 --> 01:25:05,890
What are the markets that you pursue?
And even within a metropolitan area,

1349
01:25:05,890 --> 01:25:07,540
what are the submarkets that you
pursue?

1350
01:25:07,540 --> 01:25:11,110
So strategy can get very
granular when you start talking

1351
01:25:11,110 --> 01:25:12,970
about size and scale.
I think even before the

1352
01:25:12,970 --> 01:25:17,260
multifamily sector, the retail
sector did that even more so I.

1353
01:25:17,260 --> 01:25:20,440
Could say the same thing for
office or industrial or whatever,

1354
01:25:20,440 --> 01:25:24,580
whatever it may be.
Suppose you were speaking to a group

1355
01:25:24,580 --> 01:25:28,990
of real estate company leaders
today in light of the explosion of

1356
01:25:28,990 --> 01:25:34,420
technological changes happening.
What would you recommend they

1357
01:25:34,420 --> 01:25:37,870
focus on to keep current and
adaptable to these changes? Yeah.

1358
01:25:39,010 --> 01:25:42,010
Well that's a that's a real
challenging issue for real

1359
01:25:42,010 --> 01:25:43,540
estate company.
So so first of all,

1360
01:25:43,540 --> 01:25:49,060
you know the the the intrusion,
the infusion of technology into

1361
01:25:49,060 --> 01:25:52,960
real estate spectacular, you know,
has been growing exponentially.

1362
01:25:52,960 --> 01:25:56,230
And that will only increase in pace.
Right.

1363
01:25:56,230 --> 01:26:00,310
So I would argue that companies
that do not embrace technology

1364
01:26:00,310 --> 01:26:03,280
are at some point going to be
left behind dinosaurs.

1365
01:26:03,280 --> 01:26:06,640
So the challenge for real estate
companies, particularly small and

1366
01:26:06,640 --> 01:26:12,370
mid-sized companies, is where to
play on the spectrum of, you know,

1367
01:26:12,370 --> 01:26:15,610
bleeding edge to leading edge to,
you know, close follower.

1368
01:26:15,610 --> 01:26:18,610
And it's it's kind of it's
pejorative. Right.

1369
01:26:18,610 --> 01:26:20,620
Most people say, well, I don't want
to live on the bleeding edge, right.

1370
01:26:20,650 --> 01:26:24,970
I'm not going to I'm not going to
be Ecker and invent LRO because

1371
01:26:24,970 --> 01:26:27,490
I don't have the resources or
the capital to do that.

1372
01:26:27,880 --> 01:26:31,600
I don't want to be so far behind that
I am at a competitive disadvantage.

1373
01:26:32,200 --> 01:26:36,250
So I need to play somewhere on
the spectrum to to be current,

1374
01:26:36,250 --> 01:26:40,180
but not make investments that
are outsized for the size and

1375
01:26:40,180 --> 01:26:43,540
scale of our organization.
So artificial intelligence,

1376
01:26:43,540 --> 01:26:50,380
big data, this is all going to
be part and parcel of of what a

1377
01:26:50,380 --> 01:26:54,850
real estate company needs to, to,
to wrestle with in their strategies.

1378
01:26:54,850 --> 01:26:58,450
And I would say that, you know,
technology, it's in and of

1379
01:26:58,450 --> 01:27:01,690
itself is not a strategy.
It's a tool that of course,

1380
01:27:01,690 --> 01:27:04,570
help you achieve your strategic,
strategic objectives.

1381
01:27:04,570 --> 01:27:07,180
So I don't think there are a lot
of real estate companies that

1382
01:27:07,180 --> 01:27:12,130
should have a technology strategy.
They should have a technology point

1383
01:27:12,130 --> 01:27:15,550
of view and an implementation
plan to make sure that they're

1384
01:27:15,550 --> 01:27:20,140
competitive and current.
But, you know, developing software

1385
01:27:20,140 --> 01:27:23,440
that's proprietary to your company.
I don't know if that makes sense.

1386
01:27:23,440 --> 01:27:27,010
Now, there there are those that
speculate that,

1387
01:27:27,220 --> 01:27:31,930
democratization of technology will
enable small and mid-sized companies

1388
01:27:31,930 --> 01:27:35,290
to behave like big companies.
And I think to some extent that

1389
01:27:35,290 --> 01:27:37,390
is true.
But at the same time,

1390
01:27:37,390 --> 01:27:41,110
the investment that is required in
some of these enterprise platforms,

1391
01:27:41,110 --> 01:27:46,000
you think about some of the yards
and real pages of the worlds that

1392
01:27:46,000 --> 01:27:49,390
you know everyone is plugging into.
I mean, those are those are

1393
01:27:49,390 --> 01:27:54,340
massive investments in systems and
software and licensing and time.

1394
01:27:54,820 --> 01:27:56,950
Yeah,
and training and so on and so forth.

1395
01:27:56,950 --> 01:28:01,480
And, so virtuous circle back
to property management. Right?

1396
01:28:01,480 --> 01:28:04,810
So a lot of the companies,
small and mid-sized companies that

1397
01:28:04,810 --> 01:28:07,750
are facing that kind of investment,
that's one of the things that

1398
01:28:07,750 --> 01:28:10,300
typically triggers them to start
thinking about, gee,

1399
01:28:10,450 --> 01:28:13,090
do I really want to stay on the
treadmill of staying current and

1400
01:28:13,090 --> 01:28:15,970
investing in all this technology,
or do I want to outsource it to

1401
01:28:15,970 --> 01:28:21,610
someone like a bisto or a gray
star who has the size and scale to

1402
01:28:21,610 --> 01:28:25,450
make those investments, and they
can do the property operations?

1403
01:28:25,450 --> 01:28:27,280
I'll asset manage the hell out
of them.

1404
01:28:27,640 --> 01:28:33,460
But let me see that space to someone
that has more critical mass or not.

1405
01:28:33,460 --> 01:28:36,700
But that's a an absolutely
critical decision that every

1406
01:28:36,700 --> 01:28:40,390
company in the real estate space
is facing today and increasingly

1407
01:28:40,390 --> 01:28:44,410
will have to face going forward.
So what you're saying is it's a

1408
01:28:44,410 --> 01:28:50,530
tool that your strategy framework
uses in helping design the plan

1409
01:28:50,530 --> 01:28:53,710
in essence and what so you're
looking at an investment here.

1410
01:28:53,710 --> 01:28:57,460
So the question is as you said, do
you want to be on the bleeding edge,

1411
01:28:57,460 --> 01:29:01,870
the the cutting edge or you know,
closely behind?

1412
01:29:02,530 --> 01:29:05,920, is that the life cycle of
the company type of situation?

1413
01:29:05,920 --> 01:29:10,030
You, you're willing to take the risk
on taking a more aggressive policy

1414
01:29:10,030 --> 01:29:14,710
there, or would you maybe to get
an advantage and to cut a niche,

1415
01:29:14,710 --> 01:29:20,200
you might take a risk, and take
a bold move on, on on doing it.

1416
01:29:20,200 --> 01:29:24,610
So for instance, I interviewed, a company called Rocker Box,

1417
01:29:24,610 --> 01:29:29,470
and the company is a what they
do is they have an analytical

1418
01:29:29,470 --> 01:29:34,300
tool for developers of apartment
buildings to determine a demand

1419
01:29:34,300 --> 01:29:38,560
of different aspects of the,
of the development process.

1420
01:29:38,560 --> 01:29:42,460
So the, the finishes in the,
in the units, the amenity package,

1421
01:29:42,460 --> 01:29:46,690
the location, all these things
are added up into this equation.

1422
01:29:46,690 --> 01:29:51,250
And so there's a monthly it's a,
it's a SAS kind of a you buy it

1423
01:29:51,250 --> 01:29:55,330
and then you apply your project
through this lens.

1424
01:29:55,330 --> 01:29:57,850
It's an expensive one but it
could be an advantage.

1425
01:29:57,960 --> 01:30:01,800
For some company that's trying to get
an advantage in something like that.

1426
01:30:02,130 --> 01:30:04,980
So the question is how do you
make that decision? Yeah.

1427
01:30:05,430 --> 01:30:09,540
Well, I'm sure the I'm sure that
company is not a real estate company.

1428
01:30:09,540 --> 01:30:11,340
It's a technology company.
Yes they are.

1429
01:30:11,670 --> 01:30:13,410, or they are a real estate
company. Well, Rocker.

1430
01:30:13,410 --> 01:30:16,350
Box is a as a technology company.
That's what. I'm saying. Yes.

1431
01:30:16,350 --> 01:30:19,050
So for them,
their strategy is technology.

1432
01:30:19,080 --> 01:30:21,540
Well, of course, for the companies
that are deploying that I'm.

1433
01:30:21,540 --> 01:30:25,290
Talking about hiring them, you know.
Yeah. Right. So yeah licensing their.

1434
01:30:25,380 --> 01:30:28,530
Licensing their software. Yeah.
So that that, you know,

1435
01:30:28,530 --> 01:30:31,320
I think what I, what I saw.
So like CoStar for instance,

1436
01:30:31,320 --> 01:30:34,350
you know when do you get CoStar or
why why would you have it. Yeah.

1437
01:30:34,470 --> 01:30:37,890
Well the last ten years I saw,
you know, companies sort of

1438
01:30:38,100 --> 01:30:40,650
doing beta tests and trying to
do some of the things on their

1439
01:30:40,650 --> 01:30:44,280
own and with limited success.
And there's, you know, there's really

1440
01:30:44,280 --> 01:30:48,300
only a handful of companies out
there that are the Avalon Bay's of

1441
01:30:48,300 --> 01:30:50,340
the world or the Boston properties
of the world that, you know,

1442
01:30:50,340 --> 01:30:54,180
could really afford to make those
kinds of proprietary investments

1443
01:30:54,180 --> 01:30:57,510
in technology and systems.
And I think that the path for

1444
01:30:57,510 --> 01:31:01,260
most companies is going to be to
leverage technology companies

1445
01:31:01,260 --> 01:31:04,260
that are creating solutions for
the real estate industry and

1446
01:31:04,260 --> 01:31:08,040
licensing that technology.
And right again, being being a close

1447
01:31:08,040 --> 01:31:12,780
follower, but not a developer.
I think the the number of companies

1448
01:31:12,780 --> 01:31:15,240
that really can afford to take
that kind of risk and invest,

1449
01:31:15,240 --> 01:31:18,930
that kind of capital is, is,
is few and far between.

1450
01:31:19,800 --> 01:31:23,250
So reflecting back on when Gordian,
you first conceived the idea of

1451
01:31:23,250 --> 01:31:27,450
writing the first edition of your
book or second edition to today,

1452
01:31:27,450 --> 01:31:30,300
what are the most significant changes
you've witnessed in real estate

1453
01:31:30,300 --> 01:31:36,360
organization strategy and why? Yeah.
So the the period from,

1454
01:31:36,360 --> 01:31:41,700
you know, 2007 to today. Yeah, well, we were already seeing

1455
01:31:41,700 --> 01:31:44,910
the we talked about this already,
the infusion of institutional

1456
01:31:44,910 --> 01:31:48,390
capital into the business in a,
in a major way.

1457
01:31:48,390 --> 01:31:53,130
And that just accelerated at an
exponential pace in the last 20

1458
01:31:53,130 --> 01:31:55,710
years.
So that that I think is that I

1459
01:31:55,710 --> 01:31:59,070
think is the,
the one of the biggest changes.

1460
01:31:59,070 --> 01:32:02,550
Which was forced on the industry
because of what happened post the

1461
01:32:02,550 --> 01:32:04,800
financial crisis to some extent.
Right.

1462
01:32:04,800 --> 01:32:07,800
Well, I think it was a
consequence of of that.

1463
01:32:07,800 --> 01:32:12,960
And also real estate really
growing as an independent asset

1464
01:32:12,960 --> 01:32:15,990
class that allocations.
Right, you know,

1465
01:32:15,990 --> 01:32:19,740
from institutional capital providers.
So suddenly they needed to

1466
01:32:19,740 --> 01:32:23,520
ensure that they had, you know,
20% of their Nav in real estate.

1467
01:32:23,520 --> 01:32:27,120
And so how are we going to do that, and and so I think that

1468
01:32:27,120 --> 01:32:32,940
propelled the real estate industry, in, in, in that regard.

1469
01:32:33,270 --> 01:32:38,640, I think the general level of
sophistication,

1470
01:32:38,820 --> 01:32:42,750
among real estate companies. Right.
I mean, so historically, you know,

1471
01:32:42,750 --> 01:32:47,040
we're a bunch of, cowboys, right?
Fighter pilots. You know, all those.

1472
01:32:47,130 --> 01:32:49,230
Trammell Crows of the world.
Yeah, yeah.

1473
01:32:49,530 --> 01:32:55,020, now, I think that and and again,
I think over the last 20 years,

1474
01:32:55,020 --> 01:32:58,080
companies have been moving in this
direction, you know, are are more

1475
01:32:58,080 --> 01:33:03,000
corporate, more sophisticated, you know, we are using,

1476
01:33:03,000 --> 01:33:08,010
big data and analytics.
We are sophisticated asset managers.

1477
01:33:08,550 --> 01:33:13,050, you know, we are thinking about
brand and and brand equity in the

1478
01:33:13,050 --> 01:33:18,150
business much more so than we were 20
years ago as a legitimate, you know,

1479
01:33:18,150 --> 01:33:22,050
asset class and investment,
choice for institutional capital.

1480
01:33:22,050 --> 01:33:25,890
So I think I think those,
those things are probably the,

1481
01:33:25,890 --> 01:33:30,210
the, the growing sophistication
and the infusion of institutional

1482
01:33:30,210 --> 01:33:34,350
capital or are some of the biggest
changes that we've seen. Well, I.

1483
01:33:34,350 --> 01:33:37,110
Said I wanted to postpone one
part of the conversation.

1484
01:33:37,110 --> 01:33:43,440
Now I'm bringing it up.
So the pandemic created a unique

1485
01:33:43,440 --> 01:33:48,210
set of circumstances, the retail industry was just

1486
01:33:48,210 --> 01:33:51,150
like shocked.
Gary Rapoport was I interviewed him,

1487
01:33:51,150 --> 01:33:54,780
he was crying actually, about it, with some of his tenants,

1488
01:33:55,110 --> 01:34:00,600
the hotel sector completely shut
down, almost nonexistent.

1489
01:34:01,170 --> 01:34:03,540
Nothing like that's ever
happened before.

1490
01:34:03,540 --> 01:34:09,420
So, you know, you brand new events.
So I remember in reading your

1491
01:34:09,420 --> 01:34:13,350
preface, I think in your book,
you said the pandemic. Did.

1492
01:34:13,560 --> 01:34:16,860
You know, it jolted people in a
way that, you know,

1493
01:34:16,860 --> 01:34:19,830
no one really thought of before?
And there was another reason.

1494
01:34:19,830 --> 01:34:23,070
So I bring that up to think that
maybe that was another.

1495
01:34:23,070 --> 01:34:26,400
So it was more of a supply real
estate issue.

1496
01:34:26,400 --> 01:34:30,000
The capital markets really didn't
have an impact on that per se.

1497
01:34:30,090 --> 01:34:33,360
Correct.
And then what happened as a result?

1498
01:34:33,360 --> 01:34:36,540
The federal government comes in
and over supplies the market with

1499
01:34:36,540 --> 01:34:40,590
cash to try to solve the problem.
And then that creates a capital

1500
01:34:40,590 --> 01:34:45,600
markets issue, because you can't
throw money in at something and

1501
01:34:45,600 --> 01:34:49,920
think that people are going to act
rationally. They're not. Right.

1502
01:34:50,850 --> 01:34:56,100
Well, I mean, the pandemic was a
classic black swan right event,

1503
01:34:56,100 --> 01:35:02,180
right? It was you, you. You can't.
You cannot plan for that, right?

1504
01:35:02,180 --> 01:35:04,940
You just can't.
And,

1505
01:35:05,060 --> 01:35:09,290
and I did a number of interviews
with developers all over the country

1506
01:35:09,290 --> 01:35:13,850
about some of the things that they
were doing in real time to react.

1507
01:35:13,850 --> 01:35:19,580
I mean, creating, you know,
virtual, tours of apartments

1508
01:35:19,580 --> 01:35:25,970
and creating, you know, DIY online,
how to unclog your sink because no

1509
01:35:25,970 --> 01:35:28,430
one wanted to have a maintenance
person in their apartment.

1510
01:35:28,610 --> 01:35:33,260, you know, touchless,
technology and elevator cores

1511
01:35:33,260 --> 01:35:35,420
and office buildings and,
you know, all kinds of.

1512
01:35:35,600 --> 01:35:39,920
Remote pickup of it had shopping
centers for food and all that.

1513
01:35:39,920 --> 01:35:41,900
Right, exactly.
So everyone was kind of learning

1514
01:35:41,900 --> 01:35:45,680
on the fly.
And what, what what I remember

1515
01:35:45,680 --> 01:35:50,510
people were saying in 2020 and
2021 in particular was, you know,

1516
01:35:50,510 --> 01:35:56,780
the the advent of e-commerce and
delivery and all of these sort

1517
01:35:56,780 --> 01:36:01,460
of virtual technologies was in
the works already,

1518
01:36:02,060 --> 01:36:06,380
but it just accelerated, right, at a pace that was unimaginable.

1519
01:36:06,380 --> 01:36:10,400
And it was very stressful for for
lots of company and people that

1520
01:36:10,400 --> 01:36:14,600
were identified as essential
workers to put themselves at risk.

1521
01:36:14,600 --> 01:36:17,600
I mean, of course, I don't know
what you were doing, but but I was

1522
01:36:17,600 --> 01:36:21,290
able to sequester myself at home
with a computer screen and stay

1523
01:36:21,290 --> 01:36:26,210
connected to to my colleagues via B.
It happened to be zoom, but,

1524
01:36:26,330 --> 01:36:29,120
you know, there are people out
there on the front lines who were,

1525
01:36:29,120 --> 01:36:33,020
you know, who put themselves at risk.
And it's just, you know,

1526
01:36:33,020 --> 01:36:36,110
and a lot of our clients,
particularly in, you know,

1527
01:36:36,110 --> 01:36:39,440
the property management business,
they were essential workers.

1528
01:36:39,440 --> 01:36:41,840
They construction work from home.
Or construction. Work.

1529
01:36:41,840 --> 01:36:44,930
Well, a lot of construction workers
were sent home for non-essential

1530
01:36:45,380 --> 01:36:49,850
work, but in residential was deemed
essential. Yeah. And so yeah.

1531
01:36:50,540 --> 01:36:53,780
So yeah I don't I don't think
you can plan for that.

1532
01:36:53,780 --> 01:36:55,790
I don't think it's wise to plan
for that.

1533
01:36:56,360 --> 01:37:03,530, it, it created an environment
where, we improvised and,

1534
01:37:03,680 --> 01:37:08,180, and learned to do new things
on the fly, fascinating.

1535
01:37:08,180 --> 01:37:11,900
From an academic standpoint.
Terrifying to live through it. Yeah.

1536
01:37:11,900 --> 01:37:16,490
So, you're now you're in a
new environment.

1537
01:37:16,490 --> 01:37:19,430
You have to rethink things that
you never even thought could

1538
01:37:19,430 --> 01:37:22,340
have happened before. Right?
So it's a whole different

1539
01:37:22,340 --> 01:37:26,330
strategic process, right? Yeah.
And I don't think that a lot of

1540
01:37:26,330 --> 01:37:29,720
companies engaged in new
strategic thinking.

1541
01:37:29,720 --> 01:37:34,550
They were in emergency reaction mode.
But now you're thinking strategically

1542
01:37:34,550 --> 01:37:37,400
at this point, right? Sure.
So now, you know, how do how do we

1543
01:37:37,400 --> 01:37:41,510
take what we've learned right over
the last three, four years. Right.

1544
01:37:41,510 --> 01:37:47,630
And use that to our advantage? Yeah, and I think of the experiment

1545
01:37:47,630 --> 01:37:52,820
that we did up at of their white
flint with their Konso development,

1546
01:37:53,360 --> 01:37:58,550, which is a new community that
had no on site staff, all

1547
01:37:58,550 --> 01:38:03,380
virtual tours, so on and so forth.
That was in the works well

1548
01:38:03,380 --> 01:38:06,560
before 2020. Sure.
It came to market in November,

1549
01:38:06,560 --> 01:38:08,540
I think, of 2020.
And it just happened to be like,

1550
01:38:08,540 --> 01:38:12,020
well, what a great, what a great
what an awful coincidence. Right.

1551
01:38:12,020 --> 01:38:17,360
But, but they learn so much
through that process that, you know,

1552
01:38:17,360 --> 01:38:20,270
now they're thinking about,
you know, deploying that in other

1553
01:38:20,270 --> 01:38:23,780
locations where that makes sense.
So, you know, to some extent,

1554
01:38:23,780 --> 01:38:27,140
it was it was helpful, you know,
for us to learn new tricks.

1555
01:38:27,140 --> 01:38:31,520
But what an awful way to do it.
Of all the clients you've served,

1556
01:38:31,520 --> 01:38:34,700
which situation was the most
satisfying due to the advice you

1557
01:38:34,700 --> 01:38:38,330
gave and how they were able to
implement it towards success.

1558
01:38:40,490 --> 01:38:45,020
Well, for, for me personally,
there's been a, there's been a couple

1559
01:38:45,020 --> 01:38:50,060
that fall into a sort of a category, and for me it speaks to the

1560
01:38:50,060 --> 01:38:53,600
power of strategic planning and
actually setting goals.

1561
01:38:53,600 --> 01:38:56,870
So I've worked with a number of
real estate companies where they

1562
01:38:56,870 --> 01:38:59,960
had never done strategic
planning really before.

1563
01:38:59,960 --> 01:39:03,860
And through the exercise of strategic
planning, they set what they thought

1564
01:39:03,860 --> 01:39:07,820
at the time were ambitious goals.
We're going to set, you know,

1565
01:39:07,820 --> 01:39:11,120
a stretch goal for ourselves that
looks like this and like, oh my God,

1566
01:39:11,120 --> 01:39:14,300
that's you know, wouldn't that
be great? But wow, that's scary.

1567
01:39:14,300 --> 01:39:17,360
And you know, five years out we
want to look like this.

1568
01:39:17,360 --> 01:39:20,120
Now let's back up and think, okay,
well what do we need to do to put

1569
01:39:20,120 --> 01:39:23,300
ourselves on the path to get there.
That's kind of the the exercise.

1570
01:39:23,300 --> 01:39:26,000
Sure.
And three years into that plan,

1571
01:39:26,180 --> 01:39:30,050
more often than not, companies
had met or exceeded their five

1572
01:39:30,050 --> 01:39:35,600
year goal and came back and said,
I can't tell you how energizing it

1573
01:39:35,600 --> 01:39:38,630
was to actually have a plan and to
have a goal and to have everyone

1574
01:39:38,630 --> 01:39:42,320
moving in the same direction.
And and now we're ready to

1575
01:39:42,320 --> 01:39:45,500
revisit our five year plan,
you know, in year three and,

1576
01:39:45,500 --> 01:39:49,670
and set the bar even higher.
So without naming names, I mean,

1577
01:39:49,670 --> 01:39:52,490
there's there's probably a dozen
companies that I've worked with over

1578
01:39:52,490 --> 01:39:55,610
the years that are in that category.
And that to me is the most

1579
01:39:55,610 --> 01:40:00,040
satisfying thing is to help people.
People realize their potential

1580
01:40:00,130 --> 01:40:04,060
and exceed their expectations.
For listeners out there,

1581
01:40:04,060 --> 01:40:07,060
I want to bring up one company,
and they're not a they're a real

1582
01:40:07,060 --> 01:40:09,670
estate company, but they're more
of an investment company.

1583
01:40:10,000 --> 01:40:13,900
And that's Walker and Dunlop. Walker.
And I don't know if you heard my

1584
01:40:13,900 --> 01:40:17,500
interview with with Willie. Walker.
Or if you're familiar with their

1585
01:40:17,500 --> 01:40:22,450
process, they have a five year
plan that they had started when

1586
01:40:22,450 --> 01:40:25,570
he when he took over the company
from his father. Mallory. Yeah.

1587
01:40:26,680 --> 01:40:31,480
And that five year plan just it
just exploded.

1588
01:40:31,480 --> 01:40:35,710
And he every five years he was
able to overachieve his five

1589
01:40:35,710 --> 01:40:38,950
year plan each time.
And consequently,

1590
01:40:38,950 --> 01:40:42,610
he's multiplied the value of his
company probably 20 plus times now,

1591
01:40:42,610 --> 01:40:46,510
20 X, if not more since he started,
took over the firm.

1592
01:40:46,630 --> 01:40:49,990
I mean, again, I think it's,
it's it speaks to the power of

1593
01:40:49,990 --> 01:40:53,260
actually having a plan and a
goal as opposed to just sort of

1594
01:40:53,260 --> 01:40:57,040
like muddling through. Yeah.
It's about as good an example as

1595
01:40:57,040 --> 01:40:59,380
I can think of in the real
estate industry today.

1596
01:40:59,980 --> 01:41:04,450, so let's shift to personal
things if we can. Truly.

1597
01:41:04,540 --> 01:41:07,990
What are your life priorities
among family work back?

1598
01:41:08,740 --> 01:41:14,200
Well, I, I think I've done a
good job about, you know,

1599
01:41:14,200 --> 01:41:16,960
the consulting business, you know, the client is

1600
01:41:16,960 --> 01:41:19,270
always right, and you're up and
you're on call 24 hours.

1601
01:41:19,270 --> 01:41:22,960
It's a stressful environment,
so I wish I could say I had a great,

1602
01:41:23,620 --> 01:41:27,880, life work balance over
the years. Probably not so much.

1603
01:41:27,880 --> 01:41:31,660
I was engaged, you know,
in every aspect of my,

1604
01:41:31,660 --> 01:41:35,560
my two kids growing up and wouldn't,
wouldn't have missed it,

1605
01:41:35,560 --> 01:41:38,920
you know, and I was, you know,
elbow deep and changing diapers

1606
01:41:38,920 --> 01:41:41,800
and doing, you know, soccer games
and everything over the years.

1607
01:41:41,800 --> 01:41:46,510
Now she's, she's 26. He's, he's 23.
So they're they're, they're, they're

1608
01:41:46,510 --> 01:41:51,850
semi launched. But that's great.
But you know so but I did a I think

1609
01:41:51,850 --> 01:41:58,120
I did a good job of trying to
separate my personal family life

1610
01:41:58,120 --> 01:42:02,800
from my professional career and,
and you know so I, I when I did

1611
01:42:02,800 --> 01:42:06,520
go home it wasn't always at 530.
But, you know, when I did go home,

1612
01:42:06,940 --> 01:42:09,700
cell phone was, you know,
put down. Right.

1613
01:42:09,700 --> 01:42:13,750
I wasn't working every evening.
And, you know, because it was

1614
01:42:13,750 --> 01:42:18,760
important to to have a family life, you know, who who wants to,

1615
01:42:18,760 --> 01:42:22,810, live to work, right?
You're working to live is the mantra.

1616
01:42:22,810 --> 01:42:26,590
So I think finding that balance
has been important for me and

1617
01:42:26,590 --> 01:42:30,670
speaks to the longevity, you know, I've been able to

1618
01:42:30,670 --> 01:42:36,220
enjoy here at Arco and, and the
career in general. Giving back.

1619
01:42:36,460 --> 01:42:40,900
Well, so, you know, our, our,
our company has a foundation.

1620
01:42:40,900 --> 01:42:46,930
And the focus of the foundation is, is affordable housing.

1621
01:42:46,930 --> 01:42:49,690
And so that's a particular
passion of mine.

1622
01:42:49,690 --> 01:42:54,640
And trying to figure out a way for
this industry to, to get involved

1623
01:42:54,640 --> 01:43:00,430
in providing essential housing.
I'm, I'm, I'm constantly, you

1624
01:43:00,430 --> 01:43:03,880
know, shouting into the wind that,
you know, why why, why does the

1625
01:43:03,880 --> 01:43:07,300
real estate industry have to bear
the burden of a societal need?

1626
01:43:07,300 --> 01:43:10,210
But, you know, them's the cards
that we've been dealt.

1627
01:43:10,210 --> 01:43:14,770
So, right now we're
trying to work with,

1628
01:43:15,040 --> 01:43:19,240
some of the influential organizations
in the industry, like Ndrrmc,

1629
01:43:19,240 --> 01:43:23,380
helping them think about toolkits
and ways to use tax abatements and

1630
01:43:23,380 --> 01:43:28,720
other creative solutions to increase
the supply of housing in general,

1631
01:43:28,720 --> 01:43:32,650
which we all know supports.
Have you worked with the Amazon

1632
01:43:32,650 --> 01:43:36,370
people with regard to their
investments in the market? Have not?

1633
01:43:36,370 --> 01:43:40,000
We've been involved with the
center at Uli, which, you know,

1634
01:43:40,000 --> 01:43:45,460
which is about workforce housing, you know, not necessarily

1635
01:43:45,460 --> 01:43:49,120
subsidized housing necessarily,
but, and we've written a lot

1636
01:43:49,120 --> 01:43:52,810
as a company about, you know,
the missing middle, sure.

1637
01:43:52,810 --> 01:43:57,730
In the country.
So, you know, it's a, it's a

1638
01:43:57,730 --> 01:44:02,320
it's a big and important issue.
And I feel good that our firm has

1639
01:44:02,320 --> 01:44:06,580
been able to contribute in a, in a
small way to trying to make a dent.

1640
01:44:06,580 --> 01:44:10,360
But it's going to take all of us
and it's going to take, you know,

1641
01:44:10,360 --> 01:44:13,720
governments and communities and
the private sector to partner and

1642
01:44:13,720 --> 01:44:17,650
and create a solution because
just it's just not tenable.

1643
01:44:17,920 --> 01:44:20,770
The path that we're on right now
in this country.

1644
01:44:22,180 --> 01:44:26,170
Which real estate industry
professionals inspire you and why?

1645
01:44:27,220 --> 01:44:31,870
You mean, other than, you know, hardly. Oh, wow.

1646
01:44:31,870 --> 01:44:35,380
I mean, there's so many icons of
real estate that I've, you know,

1647
01:44:35,680 --> 01:44:39,520
looked up to over the, you know,
the Sam, Zales and Barry starlets

1648
01:44:39,520 --> 01:44:43,360
of the sure people that I've, you know, that I've had

1649
01:44:43,360 --> 01:44:46,690
close contact with and good
relationships in and particularly

1650
01:44:46,690 --> 01:44:51,490
in strategic planning assignments,
you know, run to as one,

1651
01:44:51,490 --> 01:44:57,370
when we were working with, with TCR, back in the day, that that.

1652
01:44:57,480 --> 01:45:00,480
It was a fascinating experience
working with him.

1653
01:45:00,630 --> 01:45:04,770
You know, Ron, as you know, it was
just a tour de force and an amazing

1654
01:45:04,770 --> 01:45:08,790
individual, a fascinating guy and, interesting from a strategy

1655
01:45:08,790 --> 01:45:13,830
standpoint, what he is able to,
to achieve multiple times. Right.

1656
01:45:14,250 --> 01:45:18,450
TCR has had like, you know,
three incarnations for years and

1657
01:45:18,600 --> 01:45:20,850
he's no longer involved in the
latest incarnation.

1658
01:45:20,850 --> 01:45:23,760
But rinse and repeat is just a
fascinating.

1659
01:45:23,760 --> 01:45:26,880
When I moved here it was CRO two
earlier and Michelle was the

1660
01:45:26,880 --> 01:45:28,890
name of the company.
Well, and that was the second

1661
01:45:28,890 --> 01:45:32,490
person I was going to mention is
Dick Michelle, who I was working

1662
01:45:32,490 --> 01:45:37,890
with at, Travelpro residential
Mid-Atlantic and through the IPO

1663
01:45:37,890 --> 01:45:42,750
with Avalon and Avalon Bay and,
worked with him on some things

1664
01:45:42,750 --> 01:45:47,220
outside of real estate, just a just a fascinating,

1665
01:45:47,220 --> 01:45:50,040
brilliant guy.
Very strategic thinker.

1666
01:45:50,040 --> 01:45:55,410
What a wonderful man.
I mean, he's he's a guy who I

1667
01:45:55,410 --> 01:45:58,230
think, you know, sort of brought, you know, you know,

1668
01:45:58,230 --> 01:46:01,710
his background was in the Navy.
I think he was a submariner.

1669
01:46:01,710 --> 01:46:03,990
If I'm, if I'm not mistaken,
his his background.

1670
01:46:03,990 --> 01:46:08,010
But, you know, he he brought a
level of sophistication and

1671
01:46:08,010 --> 01:46:11,370
professionalism and management
to the real estate companies.

1672
01:46:11,370 --> 01:46:16,590
And he was the perfect choice
for the first CEO of of an iPod

1673
01:46:16,590 --> 01:46:22,050
Avalon at the time. That's great.
What advice would you give your

1674
01:46:22,050 --> 01:46:28,140
25 year old self, Charlie?
Oh good God. What would I do?

1675
01:46:28,140 --> 01:46:34,350
What? What I tell myself, that's a I,

1676
01:46:35,160 --> 01:46:37,950
I remember reading that question
and I thought about it, and I'm not

1677
01:46:37,950 --> 01:46:41,400
sure I came up with a good answer, there's all kinds of things I

1678
01:46:41,400 --> 01:46:45,090
would tell myself that were stupid.
And so stop doing. Right.

1679
01:46:45,630 --> 01:46:51,660, you know, I, I think.
You have a 26 year old child.

1680
01:46:51,660 --> 01:46:53,400
Now, what do you what are you
telling me? Well, but.

1681
01:46:53,400 --> 01:46:58,380
Yes, but she's she's pursuing a
PhD program in microbiology. Oh.

1682
01:46:58,380 --> 01:47:01,050
That's allergy.
So I really have no advice for her.

1683
01:47:01,080 --> 01:47:03,300
No.
And the boy is is pursuing a

1684
01:47:03,300 --> 01:47:07,320
career in, in the theater.
So, again, nothing that I haven't

1685
01:47:07,320 --> 01:47:11,730
totally different to help with. Yeah, I guess what I would tell myself,

1686
01:47:11,730 --> 01:47:17,070, 25 year old is follow the money.
Okay, interesting.

1687
01:47:17,070 --> 01:47:23,760
In in real estate,
I think that is a mantra that would

1688
01:47:23,760 --> 01:47:27,480
serve a lot of market participants.
Well,

1689
01:47:27,480 --> 01:47:32,640
figure out what the capital markets
want and where they are going,

1690
01:47:32,640 --> 01:47:37,260
wherever you are in the industry.
And that will that will serve you

1691
01:47:37,260 --> 01:47:41,040
well in a career, whether you want to
be in finance or whether you want

1692
01:47:41,040 --> 01:47:43,710
to be in development, or whether
you want to be in consulting.

1693
01:47:43,740 --> 01:47:48,690, I think that advice,
if I had followed that more

1694
01:47:48,690 --> 01:47:53,310
closely as a 25 year old,
I'd be even more fabulously

1695
01:47:53,310 --> 01:47:57,060
successful than if that's possible.
Well, it's interesting.

1696
01:47:57,060 --> 01:47:59,880
That's probably the most
volatile part of our industry is

1697
01:47:59,880 --> 01:48:00,900
the capital markets.
Well,

1698
01:48:00,900 --> 01:48:04,110
there's certainly no question the
capital markets have their own cycle.

1699
01:48:04,110 --> 01:48:07,140
Yes they do, from the economy to
real estate markets and they're

1700
01:48:07,140 --> 01:48:10,770
all intertwined. But absolutely.
Yeah, I was in it for almost 40

1701
01:48:10,770 --> 01:48:14,130
years. So yeah.
I remember doing some strategy

1702
01:48:14,130 --> 01:48:16,410
planning work with,
with Michael Leddy,

1703
01:48:16,410 --> 01:48:21,270
who's now the CEO at Crowe Holdings.
And I remember him that the,

1704
01:48:21,270 --> 01:48:22,680
the thing he told me a couple of
years ago,

1705
01:48:22,680 --> 01:48:27,120
just talking about private equity is
the best business on the planet.

1706
01:48:27,870 --> 01:48:30,720
So did David Rubenstein say the
same thing? Of course.

1707
01:48:30,720 --> 01:48:34,650
You said that many times in his
interviews. I think it.

1708
01:48:34,650 --> 01:48:37,890
Takes a certain, you know,
personality and individual to be,

1709
01:48:37,890 --> 01:48:40,470
you know, yes, in real estate,
private equity and, you know,

1710
01:48:40,470 --> 01:48:43,320
to take the risk.
And, you know, I,

1711
01:48:43,320 --> 01:48:46,140
consultants like me probably
that's probably a little rich for,

1712
01:48:46,140 --> 01:48:48,960
for my blood, but there you go, it was I thought it was

1713
01:48:48,960 --> 01:48:51,540
really good advice.
All right, if you could post a

1714
01:48:51,540 --> 01:48:54,720
statement on a billboard on the
Capital Beltway for millions to see,

1715
01:48:54,720 --> 01:48:59,460
what would it say? Charlie? It's.
It's about the supply, stupid.

1716
01:48:59,970 --> 01:49:02,730
There you go. Right.
So, again, getting back to

1717
01:49:02,730 --> 01:49:07,650
affordable housing, you know,
we've been having we've been

1718
01:49:07,650 --> 01:49:10,920
having a debate in this country
about solutions to developing,

1719
01:49:10,920 --> 01:49:13,860
you know, to producing and
preserving affordable housing.

1720
01:49:13,950 --> 01:49:18,900
And everything I have learned over
my career, has taught me that

1721
01:49:20,280 --> 01:49:23,760
increasing the supply of housing,
regardless of where it is on the

1722
01:49:23,760 --> 01:49:31,920
spectrum, will contribute to the
preservation of affordable housing,

1723
01:49:32,700 --> 01:49:36,120, even if you are not directly
producing affordable housing. Right.

1724
01:49:36,120 --> 01:49:39,930
So I think of, you know, think of
think of places like San Francisco

1725
01:49:39,930 --> 01:49:43,620
and Boston and even Washington,
D.C. to a certain extent, if you

1726
01:49:43,620 --> 01:49:47,700
constrain the supply of housing,
what happens is that, you know,

1727
01:49:48,030 --> 01:49:51,270, young affluent people go into
challenging neighborhoods and,

1728
01:49:51,270 --> 01:49:55,890
and put granite countertops in,
in crappy homes. Right.

1729
01:49:55,980 --> 01:50:01,130
That's that sounds terrible, but.
As opposed to Houston and Charlotte

1730
01:50:01,130 --> 01:50:05,270
and, you know, Atlanta, where there's
lots and lots of housing and the

1731
01:50:05,270 --> 01:50:08,570
market does a good job of filtering
because the supply is available.

1732
01:50:08,570 --> 01:50:12,350
And most people with sufficient
incomes want to buy things that are

1733
01:50:12,350 --> 01:50:16,220
new and shiny, and they don't really
want to renovate an old neighborhood,

1734
01:50:16,280 --> 01:50:19,280
you know, a crappy house and a
challenged neighborhood.

1735
01:50:19,280 --> 01:50:22,340
But if that's what's available,
that's what's going to happen.

1736
01:50:22,340 --> 01:50:27,590
So, again,
increasing the supply, I think an

1737
01:50:27,590 --> 01:50:30,590
MHK is doing a really good job.
And I think they're actually getting

1738
01:50:30,590 --> 01:50:34,460
through to members of Congress.
They've been on an intense lobbying

1739
01:50:34,460 --> 01:50:40,580
campaign. Doug Bibby was doing this.
And now, Sharon Wilson is

1740
01:50:40,580 --> 01:50:43,430
now doing that as well.
And I think she's making great

1741
01:50:43,430 --> 01:50:49,700
progress in getting that message
across to lawmakers that creating

1742
01:50:49,700 --> 01:50:53,270
opportunities to increase the supply,
regardless of where it is on the

1743
01:50:53,270 --> 01:50:57,950
price spectrum,
is one of the really important tools

1744
01:50:57,950 --> 01:51:02,060
that we have in our kit to preserve
and develop affordable housing.

1745
01:51:03,080 --> 01:51:06,320
Well, Charlie Hulett, thank you
very much for joining me on that.

1746
01:51:06,320 --> 01:51:08,990
Kind of appreciate your real estate.
It's been my pleasure.

1747
01:51:08,990 --> 01:51:14,270
Thank you very. Much. Okay.