All Posts Tagged Tag: ‘Best Practices’

  • The Impending Demise of the American Analyst

    Sooner or later our deals are headed to Bangalore.

    Once upon a time, there was a young man who dreamed of a successful career in real estate.

    This bright young chap, diploma in hand, stormed the commercial property landscape at the ripe age of 22. He knew that his ivy league education and exceptional internships and extra-curricular experience would put him on the fast track to success.

    But our young hero faced a problem – paying dues. He was told to pay his dues, sit at a desk, and run numbers.

    “Be and ARGUS-jockey,” they said.

    “You have to know the numbers,” they said.

    “You have to know how to model a deal to have any success,” they said.

    Our hero was placed in front of a computer and told to model deals, stack leases, and build proformas. He didn’t leave his desk. He saw Excel more than he saw his family. He knew more about ARGUS than about how to save money. And every day, a little bit of that youthful exuberance, unbridled energy, and zeal for a career in commercial real estate died, crushed under the shear weight of computational monotony.

    He was forced to do this for 8 years, until he was thirty and everyone agreed he had now “paid his dues” and could actually have some responsibility and become the deal-maker. Unfortunately, most of his ambition and zeal had been beaten out of him one model at a time. He had been obtaining and rearranging data for so long that he forgot about creativity, innovation, pushing-the-envelope, and the joy of waking up every day to new and exciting challenges. The very skills he would need to succeed as a creative deal-maker were the ones he had no time to develop while he spent every day reading and stacking leases.

    He had gotten comfortable (and arrogant) in his ability to assess a deal and now passed the model-making to the hot-shot 22 year old new hire from Princeton, perpetuating the “pay your dues” commercial real estate career path. And another brilliant young mind is beaten into submission one lease abstract at a time . . .


    I know I’m exaggerating a little in the parable above, but, really, how far off am I? How many people enter our industry as deal-makers or with any real responsibility? If it is more than 1% I will be shocked.

    Now to be fair, I think it is TOTALLY reasonable to assert than anyone in our industry should know how to analyze a deal. If you don’t get the interplay of modelling and financing in commercial real estate, you will have a very difficult time finding success in our business. Every deal is based on numerical and economic assumptions and the most effective way to understand those assumptions is with a well-built model that you can manipulate and tweak as the market dictates. So understanding models is crucial, in my opinion.

    But here is where I break from the classic model and our sad story above. I don’t think you have to build models to understand them. And I don’t think Americans will be building models much longer.

    Here’s why –

    I didn’t build my car. I had absolutely nothing to do with my car’s construction. But . . . I know it pretty well and I know how to use it. I have taken the time to get to know it and what it can and can’t do.

    I know that is a bit of a silly example, but it rings true. Just because I didn’t physically input a rent roll into my model, doesn’t mean I don’t understand the occupancy rate, discounts, bad debt, etc. It is very easy for me to understand the output of a model without having done any of the input.

    If you sent me a completed discounted cash flow model tomorrow, I would check out the property type, address, units/sf, profit & loss, rent roll summary, and any projections. I would look at your rent/expense growth assumptions, occupancy/rollover, discount rate, hold period, cap rate, and projected returns and decide which of those I agree with. Maybe I even take 4 minutes on CoStar to see if I agree with your cap rate (if I don’t know the submarket). The point is, after minimal training, it’s not hard to figure out 1) the assumptions that went into the model and therefore 2) if I agree with the model’s output.

    So again I say that the only really tricky part of financial modeling is interpreting the output. The input is just shuffling numbers.

    And that’s the problem.

    For simplicity’s sake, let’s say that a 22-year-old analyst just out of college will be paid $50,000 per year or $25 per hour. Neat! Way to go, sport! Now sit at a desk and shuffle numbers all day, young fella!

    Or . . .

    Since it’s just number shuffling, I could pay someone in Pakistan $6 per hour to do it.

    Seriously. I’m not kidding.

    Anyone who has paid attention knows that off-shoring is spreading like wildfire in every industry in the country. Friedman’s The World is Flat, Pink’s A Whole New Mind, and Ferris’ 4-Hour Work Week all extensively profile the affects of off-shoring and the benefits it brings.  Off-shoring is real and here to stay. $6 per hour is not only a decent salary in developing countries, it will also get me an MBA-educated 30-something who specializes in analysis.

    Yeah, his English may not be great. Yeah, it may take me a while to work out some of the kinks. But, frankly, every analyst needs training and correction and I expect there to be kinks. If I am saving $19 per hour every hour, then I am totally fine with working out some kinks.

    The inherent beauty of the setup is the time difference. I can send 5 deals to my team of analysts on Bangalore at 7PM EST and having them ready and waiting for me in my inbox by 6AM the next morning. They work while I sleep.

    Let me say that another way:

    I am being productive while I sleep.

    Cool, right?

    So, you tell me. Would you rather pay an American financial analyst $25 per hour to stack leases and project cash flows during the day, or would you prefer to pay an offshore analyst $6 per hour to complete the model for you while you sleep?

    Seems pretty obvious to me.

    So, you heard it here from your buddy at the APJ. The days of the American analyst are numbered. In twenty years, we may have no more analyst positions in our industry based in the US. That doesn’t mean we stop needing to understand and interpret financial models. It just means we stop paying 4x as much for creating them.

    – Duke

  • Anchoring and Priming in Commercial Real Estate


    He’s contemplating anchoring and priming

    After reading Thinking Fast & Slow, I was struck by two interesting concepts: anchoring and priming.

    Anchoring is the psychological concept of mentally attaching to an initial value. The most understandable example is retail discounts. Retailers will advertize the price of a good as steeply discounted from the original price in order to distract the buyer from the actual value of the product.

    For example, Bloomingdale’s will sell you a plate for $200, but will advertize it as “Originally $300”. That way, you focus on the fact that you are getting $100 and 33% off the original price rather than trying to determine whether or not the plate is actually worth $200.

    In the example, you as the consumer are anchored to the original “value” of $300 and ignore the intrinsic value of what you are buying.

    Priming is the idea that someone can affect your actions by conditioning your subconscious. Put another way, your conscious self can be motivated by your subconscious self.

    The classic experiment to demonstrate the phenomenon of priming is the word jumble experiment. In the experiment, people would be given 5 jumbled words and asked to make a four word sentence.

    An example would be: Happy, Men, Women, Make, Bingo

    Depending on your opinion, the sentence would be “Men make women happy” or Women make men happy.” The actual sentence is irrelevant. The “outlier” word is important. In this case it is “bingo” and in the experiment, all of the words were associated with old age. So they would give obvious 4-word sentences and then include words like Florida, Retire, Grey, Wrinkle, etc.

    The key part of the experiment was what the subjects would do after the word jumble. They were asked to walk down the hall to another room and those running the experiment would time that walk. They found that the walk down the hall after the word jumble was twice as slow as the walk before the jumble.

    The punchline is that the subjects’ subconscious had been primed to think about elderly people and the body then began behaving like an elderly person (walking much slower than normal).

    Kahneman gives several other examples that ring true and drive home the point, but let’s assume that I have convinced you that priming is a real phenomenon where your subconscious will cause you to do things your conscious mind might not be fully aware of and we can manipulate that subconscious.

    Big friggin’ deal, you say. What does it have to do with commercial real estate in Atlanta?

    Well, curious youngster, both have profound effects on our business and will be worth millions of dollars to you over the course of your career.

    I would argue that anchoring is one of the fundamental aspects of negotiation and pricing and priming might be one of the single most important considerations for developers, architects, and landscape architects.

    For the anchoring argument, let’s assume you are negotiating either the sale of a property or a lease of some of its space. You do your homework, figure out a realistic value range for the property and then need to advertize your price to the market. That initial advertized number is your “anchor” and you must choose it wisely. All ensuing negotiations and price discussions will be based upon a relationship to that number.

    If you advertize Midtown office space at $33 psf, then the tenant will probably want to settle at $26 or $27 psf. It doesn’t matter to them that Midtown office space is only worth $23 psf. They feel like they got a deal. Just like the Bloomingdale’s example above, they see only the discount to the original $33 psf rather than objectively analyzing the value of the space. Everyone wants to feel like they got a deal and if you wisely choose your original price anchor both parties will come out feeling like they had the better end of the deal.

    (*Note* – Of course, there is a limit to this effect. If you try to anchor at $55 psf in the example above, clients will ignore you and pass you off as ridiculous. But, done well, anchoring can serve you very well in your negotiations.)

     For priming, I would argue that developers, architects, interior designers, landscape architects, and any other “space creators” are in the business of first impressions and must understand priming. Bob Lutz of General Motors famously said that they were in the “arts and entertainment business” because he understood the value of consumer impressions. If he could position his cars as “works of art” and mobile entertainment centers, they would transcend the mundane Point-A to-Point-B machine that cars had symbolized for many of us.

    The exact same concept applies to commercial property. If you can convince tenants that this is a safe, relaxing, a beautiful place to conduct business or live (for apartments), I bet they will be interested in leasing your space. If you can convince buyers that this industrial park is well-maintained, clean, and efficient, I would be surprised if they didn’t put an offer on the table to buy the property. You can use the subtle effects of priming to make leasing and selling your buildings much smoother.

    If you can use things like beautiful landscaping, water features, clean hallways, organized parking, and other small features to “prime” your investor/client/tenant to think that this is a great property, then 95% of your job is done. Because in the end, almost all of us are selling the same thing:

    This is a great property and you want to be involved here.

    So, if that is what we are selling, then we should all be using subtle priming methods to convince others that this is first class and well done. We can dig into more of the details of this later, but suffice it to say that everything from the way you dress to the way you shake hands to the way you smile when you talk will affect the subconscious of the buyer or renter.

    So you want to “prime” people to buy what you are selling, no matter what it is. That’s why they tell telemarketers and phone sales professionals to smile when they talk on the phone. It makes them seem happy and we consumers like to buy from happy (friendly) people.


    Hopefully you can see that the subtle effects of anchoring and priming can have profound effects over the course of a career. If you can get an extra 5% pricing on your deals because you anchor well or you can close an extra 4% of deals because you prime buyers well, and then compound that over a 40 year career, look out. You can waive at me from your Maserati.

    I exaggerate a little, but please don’t miss the point. In this highly competitive business, you need to use every small psychological advantage you can over your competition.

    To bring it home, when was the last time you refused a deal you wanted where the salesman warmly smiled at you and offered you an immediate 20% discount off the asking price?

    See my point?

    – Duke

  • Book Review: Startup Nation

    Startup Nation – The Story of Israel’s Economic Miracle by Dan Senor & Saul Singer

    Start-up Nation: The Story of Israel's Economic MiracleImage Courtesy

    I full admit that I’m a startup junkie. I love to hear the rags-to-riches stories of entrepreneurs who had great ideas and then the guts to follow through on making something special. It’s the quintessential American capitalism story and I get my monthly fix in Inc and Entrepreneur magazines.

    So it shouldn’t be a huge surprise that I read a good deal about startups. Entrepreneurship, venture capital, and the art of creating something from nothing are just fascinating, in my opinion. Oddly enough though, I got this book recommendation from David Birnbrey of Shopping Center Group.

    (When I am meeting with industry veterans to pick their brains and look for wisdom I almost always ask for good book recommendations. Startup Nation was Birnbrey’s recommendation.)

    I usually expect books that are country-specific to be overly patriotic or home country propaganda. This wasn’t like that. Startup Nation is basically just an examination of the culture created in Israel that has pushed this tiny nation to be one of the top 5 most innovative cultures on the planet.

    The author asked, “How can such a tiny country with such limited natural and human resources become such a technology and innovation giant?

    A large part of the answer, it turns out, comes from the IDF. The Israeli Defense Force is the national military that protects this small nation from hostile neighbors. Senor found out that the IDF culture is one of improvisation and questioning authority.

    For example, he found that in an air raid all planes and pilots will know the main objectives of the mission and do what is necessary to accomplish those objectives. If one plane is shot down or fails to hit a target, another plane will carry out the bombing run with the remaining explosives it has on board. Seems logical, right?

    Well in the U.S. Military (and apparently most national militaries), all planes are to stick to their objectives and ONLY their objectives. Any deviation from the prescribed flight pattern will lead to reprimand and possibly disciplinary action. Not so in the IDF.

    The IDF has created a system where you are encouraged to go “off-script” if it will lead to accomplishing the major objectives of the mission.

    The IDF also encourages questioning superiors.

    If you disagree with the judgment of a superior officer, question him or challenge her respectfully. The IDF seems to believe that leaders should have accountability to those they lead and apparently it’s not uncommon for privates to go over the heads of captains when they disagree on decisions or actions.

    So the IDF actively promotes a culture where all servicemen and women are asked to consider the broader goals of the military and to actively question authority. Senor argues that this culture leads to a fantastic startup culture once these soldiers enter the private business market. Since all adults in Israel are required to serve in the military, it’s easy to see why this mentality pervades the entire adult population of Isreal.

    While the IDF argument was my favorite theory, Senor provides ample resources and supporting arguments for why Israel has become so innovative. Be sure to check out his argument on why Charles DeGaulle was responsible for the rapid ascension of Israeli weapons technology and why Intel owes much of its chip-selling success to Israel.

    The reason I am including this book in our Commercial Real Estate Bookshelf, is that I think it is crucial to understand innovative culture. If we aspire to be next-generation leaders in the commercial real estate industry, then we had better gain a firm grasp on creating innovative cultures. If we do not innovate, we will be passed.

    So, if you aspire to inspire, then I recommend reading Startup Nation and taking note of how the leaders described in the book use deliberate and intentional practices to create environments conducive to some of the best work on the planet. If you can replicate that type of environment, there is no telling how far you and your company can go in the business.

    Happy Innovating!

    Startup Nation in Two Sentences: The tiny middle-eastern country of Israel has become a global hotbed for innovation and technology startups. This culture of innovation can be attributed to a national culture of questioning authority, improvisation, and a few other key historical events that have forced the Israeli people to innovate or perish.

    Pros: Solid arguments on the foundation of innovation, Good historical examples, Easy read and interesting anecdotes

    Cons: A bit redundant at times and can seem like an Israeli tourism magazine ad

    Target Audience: Those who aspire to create an atmosphere of innovation

    This book is best for: Business leaders looking to replicate an innovative culture

    Overall Rating: ♦♦♦♦ (out of 5)

    Here is the Amazon link to buy this book:


    Ratings Guide

    ♦ = 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.

  • CRE Sites: Finding Images

    Everyone loves a striking image

    If you follow web publishing and copy-writing, or if you surf the internet, you’ve probably noticed that most major online sites, blogs, and e-zines have high-quality images in their articles. Actually, an entire segment of the web is dedicated to great images, graphics, icons, and other visual displays. (Think Pinterest.)

    So, if your site is going to be successful, you probably need to have some evocative and interesting images on your site and throughout your blog posts. But unless you are an amateur photographer, you probably don’t have a library of thousands of license-free images stored on your computer.

    So, this article will help you find the images you need to make your commercial real estate website flourish under an array of great images.

    Let’s start with the basics –

    You  MUST credit any photo that you use that isn’t yours.  I can’t stress this enough. Some photographer somewhere created that beautiful/intriguing/amazing image and you need to give them credit.

    You can put a small comment at the end of your article or directly under the image itself (i.e. image courtesy Flickr user ABCDE), but whatever you do, make sure you credit the rightful owner of that image.

    Many images are not allowed to be reused for commercial use. You want to look for images that are published under a “creative commons” license. That basically means that you may use the image as long as you credit its original owner. Several sites will allow you to sort by license type and will save you the time of sorting through thousands of useless images looking for that creative commons license.

    Where to find these images, you ask? Well . . .


    Sites for Free Images

     Searches – Google, Bing, and other Search Engines

    Good place to start

    Probably the simplest way to find images for an article is to Google them. Unless you live in a cave, you probably know that Google will allow you to search for images the same way you search for websites or articles. Simply type in what you are looking for under the “Images” tab, sort through the results, find an image with a creative commons license, and you’re good to go.



    Be sure to look for “creative commons”

    Yes, there are other photo-sharing sites on the internet. But Flickr is still king of the castle as far as I’m concerned. Flickr has millions of great images from millions of unique users and the great thing about Flickr is its searchability. It will allow you to search images by keywords and then filter the results by those with a creative commons license. Very easy and effective and one of my favorite ways to get images on the cheap ( . . . free).


    My favorite site for “free” images

    These are two sites that have royalty-free and creative commons images that you can download. As I said before, you still need to credit the user that uploaded the image (i.e. its owner), but there are thousands of high-quality images here. I tend to use SXC more than MorgueFile, but both have plenty of great images that are available. Be sure to pay attention to the fine print to the side of the image you find for attribution and  credit.


    Sites for Paid Images

     Getty Images

    If you can afford it, it’s the best

    The creme-de-la-creme of image sites. This is where the pros shop. Pretty much all of the greatest photographs and images on the planet are here. But be warned, you’re gonna pay for them. There are millions of the best images ever created or captured, but expect to pay $50 minimum for a decent-sized image. For promotional materials and game-changing publications it is probably worth getting a Rolls-Royce quality image. This is the place to do that.


    iStockphoto, Shutterstock, Dreamstime

    The affordable version

    These are just three of the other paid-image sites and three that I have used before. I prefer Dreamstime because they seem a little cheaper than the other two, but you really can’t go wrong with any of these three options. They are much cheaper than Getty, but will not have the quantity or quality of Getty either. One observation, several of these sites tend to use points instead of dollars. That is, you pay $10 for 15 points and then Dreamstime charges you 12 points per image of a certain size. Maybe they think you are more open to spending points than dollars, but it all seems the same to me.


    Other Resources


    Best screenshot tool I have found

    One of my favorite free resources in called Jing. Jing is a screen-capture and video software that is free. The cool thing about Jing is that it is quick and easy to use. You just click the Jing button, drag across the image you want to capture, save it, then use it. Piece of cake. And it’s free! Give it a try and see if I’m lying.


    Those are the resources that we at the APJ have been using. Have you found any more? Please let us know in the comments and we will update this list as we get feedback from our readers!

    – Duke

  • Book Review: Thinking Fast and Slow

    Thinking Fast and Slow by Daniel Kahneman

    Thinking, Fast and Slow

    Image Courtesy

    Don’t tell anybody, but the economist in me is breaking out. I’m starting to get more and more interested in behavioral economics, game theory, and decision theory as I grow into my commercial real estate career.

    I have found that the concepts I learn and grow to appreciate in behavioral economics are useful in my every day interactions with deal-makers and colleagues. Learning about how people make decisions and how they make rational choices given the information available is crucial.

    Let me see if I can bring it home to commercial real estate. Consider the following questions:

    Given the information available to me, should I build this shopping center?

    Given the information available to me, should I buy this flex industrial building?

    Given the information available to me, should I lease this office space to this prospective tenant?

    Given the information available to me, should I refinance my apartment complex with Life Company debt?

    Given the information available to me, should I pursue this retailer as a potential lease lead?


    Those are just a handful of examples of decisions facing CRE professionals that I would file under behavioral economics, game theory, or decision theory. You can certainly apply the concepts to tenants or clients:

    Given the information available to them, how will a tenant want to use this space?

    Given the information available to them, what will a shopper want to see in this center?

    Given the information available to them, what will visitors to my property want in their parking experience?


    Again, just a few examples of behavioral economics in action in our world, and I hope you can see why I find those concepts so relevant. They shape almost everything we do.

    That’s why I enjoy books like Thinking Fast and Slow by Daniel Kahneman. To call this a follow up to The Black Swan wouldn’t be fair, but I can say that they are highly related and TFaS quotes tBS fairly often. Black Swan told us how much we suck at predicting anything, particularly “outlier” events. I would say Thinking Fast and Slow is more about our everyday decision-making skills and biases.

    In the book, Kahneman discusses two systems of our thinking that he labels System One and System Two. System One is our automatic recall memory, our first impression, our first thoughts and reactions to the world around us. System one isn’t very good with statistics and is prone to mathematical errors and all sorts of biases.

    System Two is our more analytical, slow, methodical thinking system that takes the time to analyze probabilities, best practices, likelihood, etc. This is the system we use when we take the time to really break down a problem or decision and analyze it mathematically or systematically. We don’t rely on our impressions or memories of similar problems in System Two. We approach everything more carefully and methodically than we would in System One.

    A large section of the book is dedicated to the short-comings and biases of System One and how we, as imperfect decision-makers, rely too heavily on System One for our decisions. Kahneman does a thorough job of breaking down our biases and heuristics when faced with similar situations. He uses questions like: “Would you prefer a 40% chance to win $100 or a 8% chance to win $1000?”

    All-in-all the thought processes and common decision biases he examines are though-provoking and interesting, but I would warn you that his style of writing can tend toward academic. He is very skilled in describing complex scenarios at high levels, but tends to use numbers heavily and will stroll through complex psychological issues that the lay reader may not be familiar with.

    So, this wouldn’t be an easy beach vacation read that you leisurely peruse between trips to the pool. You need to take your time with Kahneman, take notes, and allow yourself a chance to digest these complex psychological contradictions. I think it’s worth your time to do so, if nothing else you will better understand your own short-comings in quick decision analysis and judgment and may be able to recognize when to slow down your thinking and engage System Two for some heavy lifting.

    Thinking Fast and Slow in Two Sentences: Each of us have two systems of thinking: System One (Thinking Fast) and System Two (Thinking Slow). System One is our quick-judgment, memory, and recognition center that is prone to errors in estimation while System Two is our more analytical and statistical system that methodically breaks down options to reach rational conclusions.

    Pros: Very interesting foray into psychology that explores decision-making, game theory, and behavioral economics. Well-researched and well-argued.

    Cons: A bit length and highly academic/mathematic in parts. Not a leisurely read.

    Target Audience: Any reader interested in human psychology, the psychology of decision-making, heuristics, game theory, and behavioral economics.

    This book is best for: Someone wanting to analyze and improve the way they make decisions and judgments.

    Overall Rating: ♦♦♦ (out of 5)

    Here is the Amazon link to buy this book:



    Ratings Guide

    ♦ = 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.

  • Five Things Our British Brothers Do Better Than We Do

    Highclere Castle (aka Downton Abbey)

    I just got back from 10 days in the UK. I didn’t get to see any of the Olympics in person, but I did get to visit dozens of architectural treasures and centuries-old towns in the British and Welsh countryside. The trip was a birthday gift for my wife and she has a nice little obsession with English castles, manors, and historic estates.

    So most of my trip was spent in and around dramatic buildings and classic examples of British architecture. After about a dozen guided and audio tours of these magnificent buildings, I realized that these Brits have been creating architectural masterpieces for 500 years.

    So, I thought I would briefly share with you a few thoughts I gathered from my trip through some of Britain’s greatest buildings.


    1. They Build Stuff That Lasts

    Oxford University

    I know that I may have a sampling bias here since I mainly went to the coolest and grandest castles in the country, but those Brits know how to build stuff that lasts. I marveled at how amazing the structures were preserved and the stone buildings showed minimal signs of wear.

    I know that the National Trust has worked relentlessly to make these buildings appear to be in mint condition, but there is something to be said about carefully and meticulously building structures out of stone. They last for hundreds of years.

    I think it also speaks to the enduring appeal of classic English architecture. Those buildings are still as stunning and spectacular today as they were when they were built hundreds of years ago. And they don’t come across as grotesquely ornate or intricate for the sake of intricacy. Great architectural design stands the test of time and they have done a magnificent job with their classical architecture.

    I see the nasty brick condo buildings that we built around here in the 80s and I wish we had the same classic architecture and building practice. That isn’t to say that we can’t build to last or that we don’t have architectural treasures of our own. It’s just that there are so many beautifully-built and maintained buildings, including the humblest of stone-built country homes, that there seems to be a national trend that I find missing here.


    2. They Understand Scale


    Sometimes I get the feeling that we always assume bigger is better. Since I’m a fairly large guy myself, I usually don’t complain. But traipsing about England, in and out of castles and churches, I began to appreciate the significance of size and scale a little more. I think I become desensitized to scale when every major building I’m in here tries to impress me with its enormity, soaring ceiling, grandiose artwork, etc.

    In England, scale matters. cathedral ceiling are 40 feet high and vaulted to represent the awe-inspiring nature of God. Grand castles have 40 bedrooms not because they are needed, but because at the time they were built the region needed to send a message of power and wealth. It was crucial to the area to have a few huge manors as a sign of regional strength. Even the smallest, tiniest details seem to be meticulously scrutinized. The daintiest teaspoon and salt cellar had craftsmanship that Chippendale would envy.

    Here, I walk into a 2500 sf suburban home with a 25 foot ceiling in the entry foyer and all I think about is the enormous cost to heat and cool the space. And maybe I miss the tiny details and craftsmanship in our delicate treasures, but they seem to be more pronounced over there. I just appreciated the use of scale in their buildings and crafts because they didn’t use size or intricacy for the sake of size and intricacy. They used it when it was appropriate.


    3. They Use Space Well

    Royal Crescent Hotel

    This observation came more from the contemporary buildings I observed. Anyone who has been to Europe knows that it is a continent created and built by small people on horses. This is, after all, the continent that gave us IKEA.

    So the doorways are small, ceilings are low, streets are narrow, and space is very limited.  The English have had to become creative with their limited space and have been forced to maximize the utility of every inch of space without crowding or cluttering.

    I think they have done so. There are some spaces left empty and some space packed with furniture, lighting, appliances, or whatever. I felt like there was a good balance of blank and filled space that left me thinking how much space we waste here in The States. Hopefully the recent trend away from “stuff-for-the-sake-of-stuff” will help us become more efficient with our space and I think we can learn a thing or two from our brothers across the pond.


    4. They Understand Density


    They had to. Most of these small British towns started as agricultural centers or ports in the pre-industrial era. They were farmers and ranchers that raised crops and animals, or they were merchants in a port town who needed to be close to the market to hock their goods. As industrialization took hold, the English moved into the cities in great numbers and moved as close into the city center as possible.

    This early densification made urban dwellers have to deal with the pros and cons of density. So they built multi-story, stone buildings around a town center and then radiated out from there. As I alluded to in Point 1, there is a lasting demand for multi-story housing near a downtown center. That trend hasn’t faded in the subsequent 500 years and shows no sign of fading hereafter.

    We in the U.S. tend to have problems when we spread out too much and put single-story, single family homes in downtown corridors. The early English also had the (dis)advantage of traveling by horse when their downtowns were built whereas many of our major cities were built after the invention of the steam engine. So, when we could get from Downtown Atlanta to Marietta in 25 minutes, they had to make the same distance trip in two hours. Sprawl really wasn’t an option. So I think they have done density well even though it was out of necessity.


    5. They Appreciate the Importance of Words

    Holbeck Ghyll

    This one is more about culture than business, but I think it is worth mentioning. England is the home of Shakespeare, Chaucer, Wordsworth, Churchill, Rowling, and dozens of the greatest wordsmiths in the history of the planet. I thoroughly enjoyed the British ability to turn a phrase eloquently.

    Maybe it’s just my own internal backlash against a country full of people saying: “OMG. I found five dollars! Best. Day. Ever. LOL!”

    Seriously, that overly-dramatic, constant exaggeration drives me crazy. Here is a challenge to illustrate my point:

    Step 1. Go onto iTunes and download a podcast or free audiobook of Winston Churchill speaking and listen to it for 5 minutes.

    Step 2. Go onto Facebook and read the stats updates of your friends.

    Step 3. Compare.

    Get my point? I know I am putting our friends at a disadvantage comparing them against one of the greatest orators in history, but take note of the style of his speaking and his careful word selection. Speaking and writing eloquently is a learned skill and I think it can be done artfully. Team GB gets that. Facebook doesn’t. Score one for the land of David Beckham.


    So consider this my tip of the cap to our cricket-playing brethren. Well done, ladies and gents.

    I loved the countryside and have a new appreciation for our brothers across the pond.

    Have you had any similar experiences abroad? Think I missed something crucial about our British counterparts? Let me know in the comments.

    – Duke


  • When I grow up, I want to be Jordyn Wieber

     “It’s not how far you fall but how high you bounce that counts” -Zig Ziglar

    Fine. I’ll admit it. I’m addicted to the Olympics.

    I LOVE watching our country compete in anything and the Olympics create this unique, high-tension environment where everyone is watching and Gold is on the line.

    Say what you want abut NBC, they are dominating my DVR right now. (I recorded the weight-lifting championships yesterday!)

    I even get into Women’s Gymnastics.


    I’m a 27-year-old, testosterone-filled meat-head and I like watching our girls flip around on balance beam, uneven bars, vault, and floor routine. Don’t judge me. Blame it on Kerri Strugg. I was 12 when she stuck that vault in ’96 a few miles away from where I was sitting. I’ve watched ever since.

    So, it should come as no surprise that I was watching this past weekend and I was watching last night when our girls, the so-called Fab Five, were competing. I’m not a sports reporter and I know a little-more-than-nothing about Gymnastics (I’m 6 foot freaking 7), so I will leave the details and superlatives to the experts.

    What I do know is courage and toughness.

    It’s the double-edged sword of sports that we can see the best and worst about us. You can know some of the most extreme highs and intense lows through competition, and sometimes they happen in the same week.

    Enter Jordyn Wieber.

    Wieber, as I am told, is the defending world champion in the individual competition. In my basic understanding of the sport, that means she is the best all-around gymnast on the planet.

    In the Olympics, girls compete on the team level and individual level. Their qualifying scores from this weekend determined who would qualify for the individual finals and which teams would qualify for the team finals. Through a quirk of the Olympic rules, only two girls from any one country can qualify for the individual finals. So, even if the U.S. has 4 of the top 5 gymnasts on the planet (which I am told is true this year) only two of the four can qualify for the individual finals in the Olympics.

    Again, I will leave the drama and sportscasting to the pros, but Wieber ended up placing third or fourth of all girls and two other Americans placed ahead of her.

    The reigning world champion did not qualify for the individual finals.

    NBC made sure to get a ton of close-ups of her sobbing into her hands as soon as she learned she wouldn’t qualify and in one particularly torturous shot they showed the U.S. teammate that beat her in the foreground as she was crying in the background. (Sometimes I think you have no soul, NBC.)

    But Wieber’s Olympics weren’t over. She still needed to compete for the team title for the U.S.

    Long story short, she did so last night and led our girls to their first gold medal since the aforementioned Strugg killed it in ’96. She was terrific. She was the team leader and maybe the best performer in the gym last night in London. Knowing that all personal accolades were gone and any individual medals were hopeless, she still went out and crushed it and led our country to a gold medal.

    Cool story. Queue the epic music. Wave the flag. And so on.

    Yeah, I was proud of her and proud of my country. But more than that, I was motivated. Whatever Wieber has inside of her, I want that.

    You may wonder what Olympics gymnastics has to do with commercial property in Atlanta.

    Well, you may have noticed that the last 5 or so years in our economy haven’t been so great. We aren’t exactly sailing smoothly. Some of the greatest names in our business in the last 20 years have retired, gone bankrupt, or just folded and drifted away.

    We are an industry that literally built the city of Atlanta. Yeah, we have Coke, Home Depot, UPS, and some other cool businesses here. But, at our heart, we are a commercial real estate city. We led all major U.S. cities in growth over the last 10 years (prior to ’08-’09).

    Our industry was home to the leaders and innovators in a great city heading for great things.

    Then 2008 came along. We got hit. We got black eyes. We lost momentum, time, and money.We lost chances at greatness. No doubt about it.

    But if little Jordyn Wieber can find the strength and courage to do what she did last night, why can’t we?

    Ours is a city filled with brilliant and talented people who have all been hurt by this Great Recession. Some of us have wanted to sulk into a corner and cry (and some of us have).

    But, you know what?

    The sun came up this morning. Today is a new day. Tomorrow is full of promise.

    And we still have something worth fighting for.

    This is a great city with a bright future and I’m excited to see where we can go. We have our issues to work out and demons to overcome, but we can be great and we just need another chance to show it.

    Maybe you went bankrupt. Maybe you damaged your reputation. Maybe some great relationships have come to an end. Maybe you lost your life savings. Maybe some dreams died.

    Cry. Get upset. Get angry.

    And then move on.

    We have some great things we still need to do around here, and our teammates need us to step up.

    So, here is a toast to Jordyn Wieber and a toast to all of us. She showed us what we all need to do after a crushing blow. Move on, keep competing, and act like the best.

    Do that . . . and greatness will never be far away.

    Thanks Jordyn.

    – Duke

    Enhanced by Zemanta
  • Lies, Damned Lies, and Sustainability

    Look how fragile! Let’s spend a bunch of money and make it better!

    A Word on Sustainability

    If someone tells you they’re a sustainability consultant, or expert, your reaction should be to ask, “in what industry?”

    The reason I say this is because sustainability is not a profession with a defined industry, it’s a specialization.  It’s similar to being a lean manufacturing expert or a talent acquisition consultant.  They’re both specializations within larger industries i.e. manufacturing and human resources.  Sustainability is a skill set within a large realm of thinking, much like creative writing would be to grammar.  However, the realm that sustainability exists in is a strange mix of management consulting, environmental analysis, and politics.  It’s tough to really pin down.

    Sustainability has become a leviathan-like specialization because you can apply its principles to nearly everything, which is good.  But, what makes it dangerous is that you can tie everything you analyze back to some life threatening environmental hazard.  This is the sustainability marketing technique used to grab your attention and then reel you in.  Everyone is worried about their health and well-being, so of course everyone worries about the world becoming uninhabitable.  This is why I say most of what you hear coming from sustainability experts, most often entrepreneurs cashing in, is lies or damned lies.  They’re just looking to get you worked up; ever heard of Al Gore?

    It’s All Lies

    Fossil fuels aren’t running out, the weather is different every year no matter what we do, and that Al Gore fellow is the only thing on this planet full of hot Green House Gas.  That’s what you want to hear right?  Well, all of those are all lies.  Or are they?  In fact, if you’re a sustainable thinker none of that matters.  Are you confused yet?  Good, because that’s exactly what I want.

    Sustainability is just like statistics.  There are lies, damned lies, and sustainability.  Sustainability is an overly complicated opportunity cost methodology backed with statistical and environmental analysis, which is usually quite shoddy, used to confuse average people into feeling guilty so they spend more money.  A common tactic used in sustainability is the butterfly effect.

    If you don’t recycle, this puppy will die. How do you sleep at night? Don’t you feel guilty and want to spend some money on sustainable stuff.



    “If you take that plastic bag from your grocer, you’re killing an endangered species in Namibia.”





    You’ve either said something like this before or heard someone say it.  Perhaps not to this extreme, but I bet it’s closer than you think.  Arguing a point like my Namibia-Plastic-Bag-conundrum can be very effective if you’re dealing with an overly emotional audience, but in reality it’s almost impossible to actually prove.  If you’re a statistician you’re familiar with the term “spurious relationship”.  Just because two things are statistically related doesn’t mean they are causal.  This is something sustainability speakers don’t want you to realize when they’re hammering home their point about how your poor choices are ruining the earth and more importantly our economy.

    But, it’s not Sustainability’s Fault

    There are two cold, hard truths here to consider: 1) We are terrible at global thinking and 2) we want all of our issues in life to be black and white.  Neither are true.

    We, as humans, are ill equipped for global thinking.  Earth’s systems are far to complex for us to handle as individual thinkers.  The reason climate change can’t be irrefutably proven is because climate models can’t predict all the factors affecting localized weather events.  I use that example not to poke fun at climate scientists, but to illustrate that proving a butterfly effect is nearly impossible because Earth’s systems are so very complex.

    All those things that happen outside our realm of understanding are called externalities.  As an example, pollution is an externality in standard business decision making.  We don’t really understand and can’t predict how pollution will affect a company’s ability to operate down the road.  We can’t understand it, so we don’t use it in decision making.

    So, Earth is difficult to understand and here’s the second truth.  We like our answers to be 100% correct or 100% wrong.  Grey areas are not our specialty.  A former real estate mentor of mine had a great saying he used each time he entered a room to discuss a new deal with investors.  This, for those uneducated, is that last place you want to be unsure of an outcome.  He would say, “The numbers we’re going to show you today are incorrect and the financial result of this deal will not look like this.  But, we’ve done our best to analyze the risk and we think we have a good one on our hands.”

    And, he was right.  The actual numbers never reflect our predictions because externalities are roughly impossible to predict (we don’t understand them, remember).  He didn’t know it at the time, but that’s my favorite saying both for finance and also for questions of sustainability.  He had a great understanding that life happens in the grey area.

    Let’s recall my first proposition here.  Sustainability isn’t an industry; it’s a specialization.

    Perhaps a cleaner definition for sustainability is to say,

    “it seeks to define and analyze risk associated with externalities to improve long term decision making.”

    Like the premise that there is no such thing as a free lunch, sustainable thinking seeks to show how costs add up on a grander scale.  There will always be winners and losers no matter how anything is produced and sold.  Sustainability attempts to reduce the number of unforeseen future losses caused by the winners today (there’s no accounting for the damage caused by Charlie Sheen however.)  It’s pretty much impossible, but it’s worth trying.  Not all of sustainable thinking is a lie and in fact I think it represents a new wave of analysis for capital investment.  The hoopla created by greedy greenies seeking to make a quick buck makes proving the validity of that a bit more difficult.

    Keep reading here to learn more about what environmental risks should be considered to improve our understanding of investment and economic development.

    – Hunter

  • What to Do When Your Commercial Lender Fails (Part II)


    All is not lost. Relax, have a plan, and let’s make a deal happen!

    So your community bank failed. Bummer.

    And then the FDIC took over your commercial mortgage. Double bummer.

    Now, you get a letter that says some LLC has purchased your mortgage. What next?

    Well, I work for that LLC. My company is the controlling member of that LLC and my job is to work something out with you, Jim Borrower, that everyone can live with.


    Ok, for the purposes of this article, I will assume that your mortgage has been purchased through a structured sale with the FDIC or has been transferred/sold to a loss-share bank. We can get into the difference between the two types of new owners elsewhere, but your position really doesn’t change much either way and I think the steps you should take are the same.

    So here’s what you do:

    Step 1 – Find the Buyer

    The first step you should take is figure out who just bought your mortgage. Assuming your loan matures before 2030, you are going to have to deal with these jokers ( . . . me  . . . ) sooner or later. So you need to know who you are dealing with. The fastest way to do that is to follow the headlines.

    These sales with the FDIC are all public record, so eventually the FDIC will have it on their website, but it will take a while for them to update that. So you need to follow the headlines in a Google Alert like “FDIC Commercial Loan Sale” or “Commercial Mortgage Sale by FDIC.” The point is, you want to see the article that names the equity firm or bank that now owns your loan. Otherwise you will have to wait a couple months for it to enter public record.

    If you don’t see it and get a notice that says that “Jim Bob’s LLC has purchased your commercial mortgage,” you should immediately hunt down that LLC through the secretary of state’s website. We will get into the details of the Sec of State searches later, but for now let’s just assume you know your way around that database and find out ACME Inc bought your mortgage. Great! Moving on . . . .


    Step 2 – Weigh Your Options

    As I see it, there are only six options available to you:

    • Refinance
    • Discounted Payoff
    • Full Payoff
    • Foreclosure
    • Guaranty Suit
    • File for Bankruptcy

    I will describe each of these in detail in the next article, but I want you to start thinking about your options from both sides. We are an investor looking to maximize our returns and you are looking to have as little pain as possible in owning and maintaining this property. Where those two desires meet is where we will make a deal. Otherwise, you’re just wasting my time or I’m wasting yours. So this step is important. Know your options and have an idea of what will be suitable for both parties.


    Step 3 – Call the New Owner

    Assuming you want to make a deal (instead of being non-cooperative or just continuing to pay your loan into oblivion), now is the time to reach out. You know who we are, you know your options, you have all your paperwork organized, and now you need to reach out to the deal maker.

    This may take some additional research.

    You need to use company websites, LinkedIn, and your professional network to find someone at ACME Inc. Find someone and they can point you to the decision-maker on your loan. In our case, we have thousands of loans and dozens of asset managers. So there isn’t one guy to call for your loan. It could be any one of two dozen people that work loans every day.

    Get to someone and let them guide you to the right person within ACME.


    Step 4 – Keep your Head and Strike a Deal

    We get paid to resolve loans and find solutions. We don’t get paid to hurt you. Calm the heck down and let’s make a deal happen. Yelling at me or trying to intimidate me just pisses me off and makes me call my attorney. Trust me when I tell you that you would prefer to deal with me than my attorney. In fact, you are legally liable for any legal fees I incur trying to chase down the money that you owe us.

    Look at the calm tranquility! Don’t you want that?

    So approach this person as an ally helping you wade though a tough situation. In my experience, people have watched too many crime dramas where they think the only way to negotiate with someone is to shine a light in their eye, yell loudly, and imply physical pain. Doesn’t work and it’s a waste of time. Save us both some time and let’s be grown-ups and work out a deal. I have 100 other deals that need my attention and I don’t have the patience to deal with screaming idiots.

    You already have all your ducks in a row and a strategy in hand, so send in your paperwork, propose a resolution (including a timeline), and let the person think it over. If you do that, you’ve done most of the hard work for the gal anyway and she will want to work it out with you. The easier you make her job the better deal you will get.


    Step 5 – Follow Up and Close

    You can promise and talk all you want, but if you don’t deliver then you’ll get the wrath of the new mortgage-holder who has the right to pursue you (usually). So, once you’ve worked out a deal with her, check in every couple weeks to update on status and timing and close that bad boy.

    Do everything within your power to close and, if all else fails, communicate more. I totally understand when someone is refinancing one of my loans and their refinancing lender needs another 15 days to close. That’s fine. Earth is probably NOT going to explode in 15 days. Just keep me in the loop and get it done. If you drag it out for 6 months, then I’ll just call my attorney. But I am reasonably patient when borrowers keep me in the loop with legitimate hold-ups. Again, I have 100 other borrowers to attend to and don’t want to spend too much time watching every move you make. I just want to know what’s happening.


    Step 5 – Move On

    Closed? Great! Wipe your brow, take a deep breath, and get back into the business of making money and out of the business of spending money. In fact, make some money off of me!

    I just told you that I have 100 deals I am looking to move. Why don’t I move a few in your direction? There is always a deal to be had if you want to hold the property longer than we do or are more willing to invest in improvements or whatever. Your timeline and risk-profile are different than ours, so take a look at a couple deals and let’s see if we can get a few deals done!


    That’s it. Be prepared, make my life easy, and keep your cool and we can all be friends. Remember, we are here to make deals and move loans, not hurt people. The only people who get hurt are the ones who scream, lie, and try to trick us. They get what is coming to them. You don’t want to be that guy. Be easy to work with and my first phone call on a great deal I need to move may be to you . . .

    – Duke

  • Commercial Real Estate Technology – 5 Commandments


    Translation: Test your product and pivot.

    I’ve been doing a fair bit of research into the CRE tech world recently as I have been considering developing some of my own software.

    What I’ve discovered is that commercial real estate software is a unique animal that has some unique needs and patterns. Just about everyone in our business knows what CoStar and ARGUS are, but few have heard of good software like Skire, Ten Eight, 42Floors, Catylist, etc. I would argue that those last 4 are much more elegant and intuitive software than the preceding two, but popularity remains with the incumbents.

    So that got me to thinking:

    What are the basic requirements to create great software in the commercial real estate game?

    I came up with 5 and I’m going to call them “commandments” because they seem pretty straight forward and more-or-less universal.

    Here goes:


    1 – Thou Shalt Make It Easy

    If your software requires a training class or takes more than a week to figure out (cough. . . ARGUS . . cough), it’s too complicated. Presumably, you are marketing this tech to multiple people across multiple generations with multiple levels of technological savvy. You need to have high functionality that caters to the lowest common denominator. Think iTunes. Just about everyone can figure out how to download and organize music on iTunes. Make your product that easy and your customer service department will thank you.


    2 – Thou Shalt Make It Pretty

    This plays into the first point. Part of making it easy to use is making it look good. I have read about numerous experiments in psychology mentioning how font, color, text size, and readability play a HUGE role in the effectiveness of an item or message. If it’s cluttered or non-intuitive, users will stop using it.

    Oooooo . . . pretty colors and stuff.

    Important messages, items, or links should start in the top left and move right and down as they decrease in their importance to the user. (see “book, face”)


    3 -Thous Shalt Make It Cost-Effective

    Hopefully this doesn’t need much explanation. Brokers, owners, landlords, and lenders all have some funds set aside for technology and office supplies. The bigger chunk you take out of that budget, the more game-changing your software had better be. Spend time on pricing, split test it, then pivot. This is hugely important and you should take your time to get this right.


    4 -Thou Shalt Market The Living Daylights Out of It

    Our industry is famously (our notoriously) slow to adopt new technologies. Your steepest hill to climb is going to be convincing a historically technically-averse industry to buy new technology. No small feat. So make sure you build an appropriate marketing and advertising budget into your business plan. “It will sell it self because it’s so awesome” is ridiculous. Don’t be afraid to copy Google, Apple, Nike, Budweiser, or other major companies to get clever ideas for your marketing strategy. And squeeze every ounce of publicity you can out of social media to cater to the part of our industry that plays in that space.


    5 – Thou Shalt Test the Market and Pivot

    Don’t try to tell the market what it wants. Let it tell you. I know that seems outrageously simple, but I have heard too many war stories about companies building tech products and software, spending hundreds of thousands of dollars, and then learning that no one wants their widget. Build a Minimum Viable Product, test it, gather feedback, and then adjust your model to incorporate what you hear. If 85 out of 100 testers say it needs to be bigger, make it flippin bigger. This isn’t rocket surgery. Listen to your customers and be flexible enough to change to meet their needs.


    Those are my five and I feel pretty good about them. But I will be the first to admit that I’m new to the software startup game and could be wayyyyy off base.

    If you think I am or have had another experience, let me know in the comments.

    – Duke

Page 2 of 6«12345»...Last »

    No Twitter Messages