The amount of things I do NOT know about commercial real estate is staggering. Sometimes, I don’t even know where to start looking for the right answer to a question. Volumes could be written about the things people know that I don’t.
But after having met with some of the greatest leaders in our industry, here is something I do know:
If you want to be successful in this business in Atlanta, then money can’t be your main motivation.
Careers in commercial real estate can be (and often are) very rewarding financially. It is not uncommon for a good broker to make $1 Million per year and a “lucky” developer to make more than that. And I am certainly not suggesting we live the Jeffersonian itinerant farmer life. We all need to make money and CRE is a great way to make a lot of it. But, in my mind, that is the icing on the cake. The great financial benefits are just a nice reward for working in a great industry. Those benefits cannot and should not be the reason for staying in the industry.
Here is why:
Sooner or later you will have to chose between a relationship and a paycheck. You will get some adverse information or some unforeseen circumstance will give you a decision between eroding your margins and doing what you promised to a tenant, client, whoever. This circumstance or complication might even kill the deal that you have been working on for 18 months. You are then forced to chose between integrity and a paycheck.
Do you have the guts to approach a client or broker and say “Mr. Client/Broker, this just happened and it is probably going to end our hopes of making a deal”?
Or maybe we should rephrase that . . . “Mr Client/Broker, I have found a good reason why you shouldn’t pay me my $200,00 commission check on this deal.”
Hopefully you see the ethical dilemma in spite of my over-the-top example. There are times when you could bend the truth or sweep the issue under the rug as “no big deal,” but if you were honest with yourself then you would probably admit to misleading the other party. That ‘big deal” issue is the mole hill you should have made into a mountain if you were acting in their best interest.
Now, I know that sitting here and phrasing it as black-and-white as I just did in the vacuum of the hypothetical, it is easy to make that call. The truth is, it is almost never that black-and-white. We operate in a gray society. I can always convince myself that “he already knows that and has figured it into his proforma” or that “I’m just being a drama queen and the listing broker wouldn’t even care about that minimal flood damage.”
I realize that my examples are a little silly, but focus on the point of my argument and not the semantics of the example. The easiest person to lie to is yourself and it becomes less and less difficult as you add more and more zeroes to the end of a paycheck.
So here is the punch line: If you want to make as much money as possible as soon as possible in your CRE career regardless of the consequences, then please do me a favor. Do not call me.
I realize that I am turning down deals here and I am walking away from potentially large paychecks. But when I am 80 years old and I am looking back at a 60+ year career in CRE, I’m not going to look back fondly on the huge paychecks and fancy cars I drove that are now at the junkyard. I will look back at the deals I enjoyed the most and all of the time I got to spend working with my friends. In the end, I think we all want to do business with our buddies. That will offer a reward beyond financial compensation: fulfillment.
I suppose I just want to err on the side of honesty and integrity vs the side of untold riches and wealth. If I give up a few deals because of that, so what?
In Part II I will get back up on my soapbox and talk about what I think are proper motivations for this career. Until then, enjoy the weekend.
If you are reading this post, then I will assume that you have a certain level of web browsing skills and technical savvy. I will further assume that you buy into the notion that technology can improve and enhance our abilities to serve clients and to present our skills in the best light possible.
Given those two assumptions, allow me to make a suggestion:
Video presentations are a tremendous way to showcase your talents, history, portfolio, satisfied clients, or whatever you want.
For example, if you went on Website A and read the company’s customer reviews about how satisfied they were with Company A’s performance, you might be convinced that Company A is worth your time and money.
If you went on to website B and saw a half dozen videos from satisfied customers raving about Company B’s performance and integrity, I bet you would lean toward Company B over Company A.
Both companies may have the same reputation and stellar customer service, but the fact that you can see a real human talking about their experience or their company gives a potential client more familiarity and comfort. Just seeing someone’s face and hearing them talk will make you feel like you know someone at the company and it will reassure you that this firm is run by actual people who you can see.
Take it from someone who runs a couple web sites, there are way too many web scammers and faceless creeps that can write anything on the internet. So, if your strategy for putting your best foot forward is posting some euphemistic paragraph about your talents and abilities on the corporate website, then you are just one (perceived) step above these creeps who hide behind their keyboard. Putting your face and voice on the internet takes guts and shows that you and your company have nothing to hide from prying eyes.
Are you starting to see the “customer perception” benefits of video?
If I see a site that has someone on camera discussing this company and its capabilities, I subconsciously trust that company more. Plain and simple. That doesn’t mean that these companies can’t lie and deceive by video, but with someone’s name and face accessible 24/7 all over the world in a video, I doubt they would just lie straight up about a company or its abilities. There are legal ramifications for intentional deception and it is much easier to track someone down when you know what their face looks like instead of chasing IP addresses and blogging styles. So the incentive to lie, deceive, or even twist the truth is seriously diminished.
So, are we in agreement that to maximize customer trust and to upgrade customer perception we should use videos to highlight our expertise and to showcase satisfied customers? Great, then these are the three basic videos I suggest:
1. A video about who your company is, what it does, and why it is good at what it does.
2. A video from satisfied customers who are willing to go on camera and talk about your great service, expertise, whatever.
3. A voice-over video that highlights a project or service that you completed recently that highlights your company’s talents and skill set.
I will give more suggestions about how to maximize the effect of these videos in later posts, but for now let’s all agree that the successful company of the future will use web videos to enhance and protect its hard-earned image and reputation.
I have a hunch and I am going to share it with you for free.
Last year, multifamily properties were sort of the darling of the industry. Credit was easy to come by thanks to Fannie, Freddie, FHA, and LifeCo appetites. Tons of deals got done and we saw cap rates compress by hundreds of basis points (Sub-5 Cap on FL apartments! What?!!).
That was last year.
My prediction for this year is that we will start to see transaction volume increase in the hospitality sector. I’m not going to distinguish between full-service and other hotel sub-types. I am just lumping all hospitality together as one and predicting an across-the-board increase in activity.
Here is why:
There are properties available. People seem to be coming to the table with realistic expectations of sales prices and several investors want to free up cash since now is such a wonderful time to buy property. If you had a b-class hotel in a gateway market that was performing, but not rolling in cash, wouldn’t you consider selling it to an investor to free up cash to chase 3 more deals? I would.
There is money available. Does anyone doubt that for the right deal you can find equity? Aren’t there like $4 Trillion in CRE equity just itching to be deployed? If there is a lack of transactions, it won’t be because of a lack of equity sources.
Fundamentals are improving. Occupancy looks better and is trending upward. So is REVPar. Business travel is increasing again (highlighting the divide between Wall St and Main St, actually). Unemployment is decreasing. All sign point to “go.”
Having said all that, I am not sure that we will see nearly the volume we saw in the MF business. There is no Fannie, Freddie, FHA platform for hotels. There is some LifeCo money, some balance sheet debt, and CMBS 2.0 doesn’t seem to hate hotels in the right markets. So, there is debt, but not like we see in MF.
Plus, there will always be a need for a place to lay your head every night. You always need a place to call home and apartments provide the cheapest option. You don’t HAVE TO travel to Milwaukee for the National Procrastinators Convention (postponed to Mid-July!). You don’t have to visit the Mississippi Obesity Awareness Foundation (All-you-can-eat buffet!). Those are optional trips that businesses and individuals can cut out as they see their prices and overhead remaining stubbornly high.
So, I don’t think we will see anywhere near the transaction volume of MF last year for hotels this year, but I do think signs are pointing upward for hospitality and they will be the investor’s darling in 2011.
I guess we will see.
When I graduated from college, my dean said that “a good question is an opened door and a good answer is a closed door.” He then charged us with opening more doors than we closed and challenging our assumptions about business and relationships.
To that end, I am always thirsty for great questions and the insight they provide into the answerer.
I believe I may have stumbled into one of those questions.
For the past six months or so I have been networking relentlessly in order to find my next full time position. My meetings have been a combination of follow-up meetings with previous contacts and first-time introductions to new contacts.
With the follow-ups, it is always: How have you been? How is the fam? Is business any better this year? Seeing any trends of note? Blah, blah, blah. Just the typical catch-up banter that is necessary to refresh people and to maintain contact with good folks. It is pleasant and I genuinely care about the answers, but it isn’t particularly challenging or thoughtful conversation.
With the new guys, it typically goes: This is who I am, who are you? This is what I do, what do you do? Can I help you or introduce you to anyone? Blah, blah, blah. Again, interesting and pleasant, but not challenging.
So, that is why I try and end all of my conversations with: Tell me the three people in our industry you respect most?
This question acccomplishes three things:
1. It makes him or her think in a meaningful way. You can’t just go through the motions and word-vomit your way through a question that ranks all of your contacts. You have to think hard about who has your respect and why.
2. It gives me a great list of people to reach out to in my networking. I am not trying to meet the richest people in my business, nor am I aiming at the most successful. I want to meet the people that have garnered the most respect. Those are the people that I will try to emulate over the course of my career. If I do that, the money and success will take care of themselves.
3. It tells me about the answerer’s values. When they tell me who they respect, they always tell me why. I always get reasons for the list I have been given. “I respect her for Reason A” or “He is the best at Skill B.” This shows me what people respect in the men and women they do business with. Think about how valuable that information is!
With that single question, I now have a target to aim at in order to garner respect from my peers, I have living examples to learn from, and I have challenged a colleague to think deeply rather than just regurgitating a rehearsed answer.
It is a great question. I’m pretty sure I heard it on a book on CD or something. I certainly didn’t come up with it myself, but I was listening for a good question and I think you should be as well.
Feel free to use the question for yourself and be sure to listen carefully to the responses (Write them down!). You will start to see the astounding value and utility of the right questions. They will teach you more about your peers and yourself than any other instrument I know of.
So, here’s hoping you find the best questions to ask and have more opened doors than closed doors in your career!
Many of you saw this article, but I wanted to comment on it before it got too stale.
Ray Uttenhove did a piece in RealTalk this week about developing the next generation in CRE talent.
The link is here:
While the article mostly talks about the NG’s meeting at Tech with Mark Toro, Ryan Gravel, Beau King and Skip Beebe, I wanted to point out the fact that Ray is actually taking time in the middle of this tumultuous market to think and act on this agenda.
It is very easy to pay lip service to “developing future leaders” and “training the next generation,” but I have found very few shops that actually take the time to do so. Many people will wax poetic about how important Gen Y and the Millenials are to the future of our city and country and then they will tell you how they have had a three year hiring freeze.
Hmmmmm. Interesting. How does one train a future leader without hiring a future leader?
This is why the Uttenhove article stands out to me. I have been lucky enough to meet Sarah Williams several times and I can tell you that she would attest to Ray’s mentorship and guidance in her young (and successful) career. SRS (formerly Staubach) walks the walk, if you will.
So, cheers to Ray and the whole SRS team. As I have friends ask for potential employers, I will keep SRS at the top of my “Recommended Employers” list. (Yes, I actually have a list)
To justify my title, let me start with two assumptions:
1. You are in your current industry for the long-run. You want to be in the same industry for the next 30 years.
2. You would like to make as much money as possible given the same time and workload.
If those assumptions are untrue, then disregard this article. If they are true, pleas read on.
If you plan on being in a business for an extended period, you have no choice but to be honest and ethical in all of your dealings. In an ever-shrinking business world, reputations are more global and more fragile than ever in human history. Privacy is a luxury that most people can no longer afford. Since we live much of our lives on the internet (I’m looking at you Facebook and Twitter) and every bad deal, misquote and scam can be looked up instantaneously through Google, everyone knows almost all of your business whether you want them to or not.
So, if you think you can lie to an employer, a client, or even a janitor, think again. It will come back to you sooner or later.
I happen to work in commercial real estate in Atlanta, and in a massive city of almost 6 million people this business is actually a small, close-knit community. If you rob Peter to pay Paul, Paul is going to find out about it. So will Frank, Joe, Tom, Dick, and Harry. There is nothing you can do about it. Sooner or later they will find out that you scammed someone in a deal. Do you think that makes them more likely to do deals with you or less likely?
In most of the deals I have seen, there is almost never just one bidder. Many brokers bid for listings. Several buyers bid for property or note purchases. Multiple lenders chase the same loans. So if Company A is competing against Companies B, C, D, and E, and I know that Company A scammed one of my competitors, they are automatically off the table. Even if their bid is 10% better than everyone else’s. No price is worth dealing with unethical, immoral, or dishonest people. Those headaches and sleepless nights are just not worth it.
I think the same logic applies in an interview. Let’s say, hypothetically, that I am a hiring manager at a local real estate firm. I sell real estate widgets. You come in to interview with me and tell me that you have always wanted to sell real estate widgets and your life’s dream is to be the best real estate widget salesman on the planet. Ok, I buy it and I hire you.
Then, all of the sudden you leave our company after 6 months (or however long) and do retail leasing for Jim’s Leasing Shack. That is completely the opposite of what you told me. So, when you said you wanted to be the world’s greatest RE Widget Guy, you were lying to my face.
Down the road, when I own a few key shopping centers and I am looking for a good leasing agent, do you think I will be calling you to see if you will lease my property? Fat chance.
The key here is that skill sets at a certain level are relatively even. For example, 40-year-old leasing agent A has the same basic skill set that 39-year-old leasing agent B has. There is very little difference between the skill sets of the two agents. So I have to differentiate with other criteria. Sure, you can lease some space, but do I trust you? Will tenants trust you? Do I really want someone who would lie to my face to represent me and my center to potential clients?
So the overarching moral of the story is that the world is so small and this community is so close, that you really have no choice but to be honest and ethical in all of your dealings. If you are not, then be prepared to watch your competitors pass you by as people hear of your flim-flammery. It may not happen today or tomorrow, but, mark my words, sooner or later it will catch up with you and your business will suffer.