Crunched for time early this week, so I will stay random.
1. I realized this weekend that CRE pros are like actors. Just because you can make some money on a deal doesn’t mean you should take it. You want to be Daniel Day-Lewis, not Eddie Murphy. (Sorry Eddie! We cool?)
2. I still need to be convinced that there is demand for a BILLION DOLLAR gambling complex in Norcross. It’s a cool idea, but Norcross? I’m from Gwinnett County, but Norcross? We’ll see.
3. Shout out to DDR for the SetUpShop concept they have been experimenting with here in Atlanta! Basically it’s like co-working space for retailers (kinda), and apparently they are killing it with those favorable lease terms.
4. Who’s jacked up about the Brookhaven cityhood vote? I’m ashamed to say that I have no opinion since I don’t know enough about the pros and cons. What a terrible resident I am. maybe I should write a post about both sides . . . .
5. Decatur might as well be Macon. There is no direct way for me to get there from my home in Brookhaven or my office in North Buckhead. I know they have tons of tasty treats and may be the most walkable part of Atlanta, but I could get to the airport in 20 minutes and get on a plane to Dubai before I arrived in downtown Decatur.
6. There has been some speculation that I am Duke Long‘s son. It is a fabrication. “The Duke” is my pseudonym that is used to preserve the liability of any of my employers or clients who disagree with my posts. My real name is Ron Mexico (and if you don’t get that joke then you ain’t from ’round here).
7. By the way, if you haven’t checked out www.CRE-Apps.com yet, do it. If you are under 40, it will get you jacked up about the future of tech in our industry. If you are over 40, you will probably be unimpressed and mutter something about face-to-face interaction blah blah blah.
8. I’m only half kidding about the over 40 thing. I have found many boomers and older Gen X-ers embracing and encouraging technology as a medium to transform and streamline our industry. But I find still more in that age bracket who like to talk about walking to work in the snow, life before the internet, and reading proformas by candlelight. Personally, I love when people refuse to embrace tech changes. That clears the path for me to have an obvious advantage over them.
9. I’m reading The Power of Habit and it’s pretty good. Look for a review in the next week or so, but after reading most of it I still submit that “He with the best habits, wins.”
10. I just hired a virtual assistant to help manage my schedule and research tasks and she has already saved me a tremendous amount of time over the last few weeks. It’s amazing how much I can accomplish when I don’t have to focus on the stuff I hate (research, data entry, paperwork, etc.). She is selectively looking to add clients. So, if you are interested, post in the comments and I will hook you up.
That’s your weekly dose of random, kids. Now leave Daddy alone and let me get back to causing trouble.
Big plans are easy. Grandiose schemes and strategies can be put together by anyone. What separates the great leaders from everyone else is their ability to execute on those plans and effectively implement strategy.
That is the central thesis of Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. Bossidy was an executive at GE, CEO of Allied Signal and CEO of Honeywell. Charan is basically a CEO “Coach” and expert on corporate governance. Together they argue that great companies and great leaders have a knack for execution and they attempt to identify tactics used by those leaders.
One of the best aspects of Execution is the authors’ use of real life examples. Charan will take the reader through real life examples of billion dollar companies and how their CEOs have had both resounding successes and catastrophic failures. All of them seem to start out with great plans, solid resumes, and a firm grasp of the business, but the great ones have a knack for execution and accountability.
Bossidy does the same thing with his tenures at GE, Allied Signal, and Honeywell. He gives real, quantifiable examples of business issues that he and the executive teams faced and how they executed a strategy around maximizing value for shareholders.
I love that they used real life examples, with real people, and included numbers and names. Too many business books use theory and hypothetical situations. Bossidy and Charan tell it like it happened and I find it easier to wrap my brain around real events and people that just a hypothetical.
If I could summarize the main thesis of the book it would be
Be intentional with every aspect of corporate strategy. Anyone can create aggressive goals and create impressive growth plans. Great business leaders create aggressive, realistic, quantifiable goals for each business unit and then create a corporate culture in which every employee both takes ownership of those goals and is held accountable for reaching those goals.
I would highly recommend this book for anyone who plans on pursuing a career in commercial real estate. Sooner or later, we will all be part of a strategic planning or growth meeting (you may even run the meeting). Execution will give you a useful road map for creating goals, milestones, and action plans and it can help ensure you get them accomplished.
Execution in Two Sentences: Every executive can make aggressive plans and impressive growth strategies. The greatest corporate leaders create plans that give employees a sense of ownership in the goals and create an environment where all employees are held accountable for reaching the quantifiable milestones necessary to achieve those goals.
Pros: Very interesting real-life examples, good ideas for business leaders, decently well written
Cons: You could argue that the authors are tooting their own horn a bit and bragging about their business success (I don’t feel that way, but others have argued that on Amazon).
Target Audience: Anybody who aspires to a role in business leadership or who wants to be a part of a business
This book is best for: Executives
Overall Rating: ♦♦♦♦ (out of 5)
♦ = Not worth your time
♦♦ = May be worth your time if it is specific to your industry or interests
♦♦♦ = A decent book and worthy addition to your library depending on your interests
♦♦♦♦ = A great book and an excellent addition to your library.
♦♦♦♦♦ = One of the all time classics. A must-read for anyone and everyone.
Over the last few months I have been working for a private equity firm that acquires commercial mortgages from the FDIC. Through a structured sale, we purchase these notes and then share profit on the notes with the FDIC.
You could call me a “Successor Creditor.” Note that I don’t go by “Lender.” Lenders want long-term relationships. I want resolutions.
I have found that most of my borrowers are confused as to who we are and what we do. Once they get that, borrowers tend to be mystified as to how to deal with someone like me and my company.
So I put together a list of things you should know about me and successor creditors and how we conduct our business.
1. I Have A Soul. I don’t enjoy making people unhappy. I’m not here to take your kids out of private school and send you to the soup kitchen. Every evening, I go home and tell my wife about my day at work and I have good and bad days like everyone else. So, speaking solely for myself, please understand that I am a real person who really wants to make a deal with you.
2. I Get Paid For Resolutions. As I just mentioned, my role is about making deals. I don’t get paid to hurt you. I get paid as loans sell, properties sell, and discounted payoffs are funded. It is not in the best interest of my employer to torture you for 18 months. Let’s make a deal and move on with our lives.
3. I’m Not Afraid Of Bankruptcy. Having said #2, I am not afraid to take my time and work through bankruptcy with financially crushed (or uncooperative) borrowers. I work through cases of Chapter 13, Chapter 11, and Chapter 7 bankruptcies on a daily basis and I talk to bankruptcy trustees regularly. So don’t think that threatening to go BK will scare me or make me go away. As a secured creditor, I am in a great position to emerge well from your bankruptcy and you won’t be able to borrow money from anybody for at least 7 years (more likely 10). So, go ahead and file BK if you want. I’d rather work something out with you, but if that is your preference. . . knock yourself out.
4. I Don’t Have The Final Say. Everything I do is subject to approval by credit committee. I can give you preliminary approval for a deal and I know what credit committee wants. I have never had to re-trade a deal before, but you should know going in that I don’t have final approval authority and it is possible that I will say “yes” and credit committee will say “no.” You can get mad at me all you want, but I am at their mercy just as much as you are champ.
5. You Will Be Held Accountable For That Personal Guaranty You Signed. When you borrowed these funds originally, you were so certain that you would repay this loan that you signed a document that said that you personally guarantee the repayment of these funds. You were so certain you would perform that you put all of your personal financial assets up for grabs if you didn’t. Then you didn’t pay. Now I have a legitimate legal claim to ALL of your financial assets (if your guaranty was unlimited and most of them were). Don’t try to walk away from that because it will just piss me off. Give me a deal that will satisfy the guaranty and THEN you can walk away. I assess the value of the mortgaged property and the value of the personal guaranty. If Donald Trump had a loan with us that was $200,000 underwater, I wouldn’t care because I would just ask him to write us a check for the shortfall. The property isn’t worth the loan amount, but Mr. Trump’s personal guaranty is certainly worth $200,000. So keep that in mind when you are negotiating with me. The personal guaranty needs to be satisfied before you can walk away from any loan.
6. Honesty Is The Best Policy. I do this all day every day and I have gotten very good at spotting liars. If you are upfront with me and show all of your cards, you will enjoy working with me. As I said in #2, I’m not here to hurt anybody. If you try to hide things, transfer assets to your wife, or simply refuse to cooperate with me, you will not enjoy working with my attorney. Tell me the truth and we can be allies in finding the best solution. Lie to me and my attorney will crush you financially.
7. Effort Counts. Remember that I am selling your resolution to credit committee. I want to tell them that “Mr. Borrower has done everything he can; begged money from relatives, sold his collection of baseball cards, and moved into an apartment to help us resolve this loan. We need to approve this deal.” I’m not telling you to move into an apartment, but work hard trying to find creative ways to come up with cash and financing options! There are hundreds of private lenders and wealthy family members out there willing to help if you go look for them. Turn over every stone and we WILL get a deal done. If I get the impression you are sand-bagging or not even attempting to find a resolution, then my attorney will give you a little kick in the rear to get you going. One way or another, you are going to have to do some work to get this deal done. I’d rather not do it in court. Just put in a little effort and find a way to get a deal done and let’s move on.
8. The Law Is On Our Side And We Have More Money Than You. Some of my more, um, confident borrowers get it in their head that they can exploit legal loopholes in the loan documents or that they can just wear us down in court. These borrowers are the ones who lose the most money to us (which is great for us, by the way!). Even though we are buying mortgages from failed lenders, the legal documents are pretty much all boilerplate with your personal data injected. They all have the same covenants, restrictions, and clauses and the legal system has upheld all of these documents when borrowers have attempted to exploit any weaknesses. Think about it: If all these documents pretty much say the same stuff the same way, what judge wants to make a ruling that says these documents are not legally binding? It would crush the lending system if a court ruled their documents were not legally enforceable. It ain’t happening, so don’t waste your time or your (our) money. For those who want to wear us down and sue/counter-sue us, feel free. We do this all day every day and I have never heard of anyone beating us in court except for blatant fraud or illegal transactions. We are a multi-billion dollar company with some of the best attorneys in the country. You are more than welcome to try to manipulate the US legal system to protect you, but I wouldn’t recommend it and I won’t feel sorry for you when you come back to me $200,000 poorer and in the same place you were before all that jazz.
9. What Is Equity? Unless you borrowed at 50% LTV in 2005 (and we both know you didn’t), your property is underwater. Get used to that idea and don’t try to throw appraisals from 2005 and BOVs from 2006 at me. Those are worth about as much as toilet paper. You have no equity in your property. Get over it, move on, and let’s free you up to find some deals where you CAN have some equity.
10. We Can Be A Great Ally. We have thousands of loans all over the country and we are looking to move ALL of them in one way or another. Work with us and you will have access to some good deals that we need to move. Someone could make a great deal of money by purchasing deals we are selling. So don’t burn bridges with us. If you want to be a long-term player in CRE, you will want to have a good relationship with us. I’ve sent several deals to former borrowers who I liked working with. That’s how this business works. I deal with people I like and trust. Earn my respect and my trust through a contentious relationship and I will go out of my way to help you in future deals. Good borrowers make my life easier and I want to return the favor.
So, there they are. Those are my ten insights into the world of successor creditors. Has your experience been different? Do you have any insights to add?
Just ran across this site last night and I love it. Check it and and let me know what you think.
CRE Apps is a site dedicated to commercial real estate technology and software applications.
Some of my favorite articles are:
Keep up the great work and we will add CRE-Apps to the RSS feed on the right!