Origination
Join us as we delve into the world of multifamily and commercial real estate, engaging in insightful interviews with industry-leading loan originators and salespeople. Discover the secrets that set apart these top performers from the competition as we uncover the strategies and skills that drive their success.
Origination
Episode 31: Chris Sower, Billion Dollar Closer
How do you get to be a $7 Billion guy? In this episode, we find out from the best: Mordecai interviews Chris Sower, Executive Managing Director with Cushman & Wakefield, and a salesman who has represented over 42,000, multi housing units, and closed over $7 billion of transactions.
TIMESTAMPS:
1:54 - Early Sales Experience
7:21 - The Line Between Sales and Execution
11:56 - Differences in Process for Unit Size
14:36 - Change in Perception on Larger Sales
17:16 - Safety Zones
21:00 - What Do You Look For When Hiring Salespeople?
23:53- What Makes a Collaborative Sales Environment?
29:42 - Understanding Trends Based On Your Market
31:05 - Training Your Competition
36:55 - The Whole Is Greater Than The Sum Of Its Parts
39:46 - Current Trends
44:30 - Not All Clients Are Equals
47:45 - Trends in Land Sales
53:10 - Changes in Waterfalls?
54:51 - Advice For College Grads Coming Into The Business
lenders, market, people, loan, client, equity, selling, deals, screen protectors, year, calls, rates, business, borrower, easy, long, sales, chase, interest rates, debt
Hey, it's Mordecai. And welcome back to the Origination podcast, where we speak to the top originators and salespeople in the multifamily industry to try to understand what separates the top performers and the rest of the pack. On this episode, I'll be speaking to Chris Sower, who is an Executive Managing Director with Cushman and Wakefield. Chris runs Crispin's, New England multifamily team. And in his career, he's represented over 42,000, multi housing units, and closed over$7 billion of transactions. Now, how do you get to be a $7 billion guy? What I've seen is that there's a certain amount of self perception that needs to change for salespeople. The men and women who see themselves as$50 million a year closers. It's hard for them to break out of that range. But you have to somehow expand your perspective on yourself. If you want to be a billion dollar salesperson, you have to see yourself as someone who can close a billion dollars of deals. I talked to Chris, about how that perspective changed for him, you know, what did it for him. And we also talk about what's going on in the current market, which continues to be choppy and volatile, here in June 2022. Hope you enjoy this conversation. I certainly did. So without further ado, let's speak with Chris. Chris Sower. Well, welcome to the Origination Podcast. I'm really excited to have you on.
Chris Sower:Well, thank you for having me. Appreciate it.
Mordecai Rosenberg:All right. So let's start Chris with a little trip down memory lane, which is one that I often take with guests on the show. If you have to think about your earliest sales experience, the first thing remember kind of like selling something. What comes to mind it could be grade school, high school, college after college, anything comfortable as far as early sales experiences.
Chris Sower:So I grew up in a real estate house real estate family in the in the Midwest in my dad was a residential developer and residential broker. So very early, I remember running around my dad's Prudential Realty office in Bloomfield Hills, Michigan, running around, you know, him watching him manage salespeople in Michigan, so it was quite an experience.
Mordecai Rosenberg:Hmm. And what about the first time you remember being on that sales side, you're selling something? It could have been? I don't know, anything to somebody else. It could be selling yourself. It could be chocolate in school, it could be baseball cards? Anything, anything come to mind.
Chris Sower:You know, personally, probably, you know, my personally myself selling something's probably when I got into business at CBRE and, you know, there was a 10 unit building in Boston that was kind of too small for everybody else. And I jumped on it took the reins and kind of figured out so kind of trial by fire. But that's probably one of my earliest memories. And that probably goes back to 2004/2005. Somewhere in there. So yeah, one of the earlier ones so yeah.
Mordecai Rosenberg:So how was that experience, getting into sales? Because I think I'm happy that you bring this up. Yeah, there are some people who you see that have have just been almost salespeople from birth at seven, eight years old, they were you know, selling chewing gum or baseball cards, you know, to their, your their friends. But that's sometimes that can be intimidating because like, oh, well, yeah, someone you have to either be doing either you had it in your blood and you're doing it from from the start or not. You know, I also really, I would say that my first real sales experience where that was really putting myself in the firing line was was also like after college, you know, when I got into the business, learning how to cold call and it was very, very uncomfortable at first, you know, so it's, how was that transition from school to all of a sudden being like, you know, just this kill or be killed environment?
Chris Sower:Yeah, no, it's and I was fortunate where I had two great mentors who didn't throw me to the wolves right away, where I was able to kind of learn the business coming up from the analytical side. So you know, learning that side of the business, and then working my way into sales, and I kind of had that same mentality with with my guys. And as you know, We all know some people are or are born for sale, some people, it takes time to learn the business and learn the trade. And some people are really good at managing other things, and not great on the sales side. So, but it was definitely, I learned the business the best way and learn the sales the best way by mirroring those guys for a number of years. And then, you know, as my skill set grew, was kind of moving into the sales perspective. And, you know, unfortunately, you see a lot of people that get pushed into sales too early when they're not ready. And they're probably their careers in brokerage are shorter than they should be. But I'd rather you know, train people and, you know, the same experience that I had, where I wasn't forced into it, but was able to learn over time and kind of phase my way into it.
Mordecai Rosenberg:So, yeah, yeah, it's an interesting thing about our industry, but how quickly people are moved into sales, and just given kind of a phone and a computer. And that's it, you know, the investment banking model, if your work at Goldman Sachs or you know, Deutsche Bank or wherever, you know, it's well over 10 years before, they're giving you sales responsibility, you know, and up until then, you're learning how to run deals. So it's, you know, I mean, there's pluses and minuses to both approaches. We definitely do, we do tend to push people onto the phone, you know, could be right off the bat, it could be after six months, you know, it's early.
Chris Sower:Well, I mean, lessons, sales, it's easy to say sales is, you know, it's all about the production side of the business. But, you know, the way I've run it, and the way I do it with my team is you got to be able to cover everything, right, you're not going to be able to sell if you don't understand the basic fundamentals of the underwriting and the real estate, and you know, the, the, the different pieces, the pros and the cons. And if you can understand the financials, you can understand the financing, you're not going to be able to get to that level of sales. And, you know, again, some people are really good at sales, and some people are really good at execution. And you need to have all of those pieces to have a successful sales day, like you just can't, if you're all business development, but you can't execute, you're not going to be able to, you're not going to be able to survive and compete in this market with how competitive it is out there.
Mordecai Rosenberg:So, yeah, what does execution mean to you, what's the line between sales and execution in your mind?
Chris Sower:Feels like it's blurred, depending on the time, and the deal and kind of where it is. But, you know, you know, obviously, there's, you know, there's the the front end of business and getting business and winning business and business production. And then there's the, you know, there's the the execution side of it, which is in my mind as getting the product from, you know, from being getting the deal from being hired to getting it out the door from a marketing perspective. You know, and then getting out there and hitting the phones and getting in front of people and tours and follow up. And obviously with the way the market is, you know, kind of shifted and where we are with with the rate environment, you know, you've got to be that guy picking up the phone and staying in front of groups. Just because it's it's, it takes that much more of a lift in this market, to be staying in front of people. So it's really execution. I think it really the blurred between that and sales. But again, if if if you're, you have a ton of business, but you can't tour it, and you can't get people through it, and you can't run a process effectively. You're not going to be able to get to the get to the finish line, in my opinion. So definitely takes a balanced team to be able to kind of, you know, be successful for a long run and in this business from what I found.
Mordecai Rosenberg:Yeah, I guess you know, if you're using a fishing analogy, it's one thing to be able to get the fish on the hook. That's good, but you're still far away from dinner.
Chris Sower:Yeah, exactly. Exactly. Gotta get him in the boat. You gotta get home. Everything else right.
Mordecai Rosenberg:So Right.
Chris Sower:Yeah, exactly. That's a fair assessment.
Mordecai Rosenberg:So do you ended up with your we're fortunate to have some great mentors. It sounds like, you know, in your first position. Do you remember the first time that they kind of gave you that phone and said, Alright, go call if it was like, did they give you someone who was already maybe had been a client or was a client but the first time they said they kind of gave you a little a little more slack in
Chris Sower:It was I don't think it was necessarily Them the rope. giving the opportunity. I think, you know, going back to early memories, you know, there was a group that owned actually an apartment building in, in in Nashua, New Hampshire that ever forgot it. guy had been, you know, kind of known from my midwest roots but didn't really know that well, and you know, as a young kid in the business, oh, wouldn't it be great to be able to get this property is probably a 40 or $50 million deal, whatever it was. And lo and behold, one day, he called out of the blue, and said, Hey, you want to sell this for me. So it was a little bit of luck. It was a little bit of persistence. But, you know, that was, again, from my experience, going moving up in this business, it's, it's either luck, or it's opportunities like that, that kind of force your way to move up through the ranks. Because, you know, it's a tough business to move up, right, especially when you've got senior members that have established books of business. But that really established to my team at that time. And then also to myself that, you know, this is this was, this wasn't rocket science, there's a way to do it, there's a way to get it. And, and also, a lot of, it's a little bit of luck. So I happened to be at the right place and get the right call at the right time. And that really helped me move kind of further up the ranks and doing more sizeable multifamily deals. You know, so that was kind of one that really stuck with me that, that helped me move up the ranks, but I wouldn't say it was. It was being fostered, necessarily, but it was definitely something that was an opportunity that drove me to go to the next step, and kind of the business.
Mordecai Rosenberg:So it helped you become more confident in yourself.
Chris Sower:Yeah. I mean, I was calling on small deals, you know, 10s and 20, and 30 unit buildings. Yeah. And again, you know, 400 unit deal come through the door was like, Whoa, you know, it was like, you know, what is it the dog that caught the firetruck or whatever it are chased the fire truck, you finally catch, and you're like, oh, my gosh, now--
Mordecai Rosenberg:Right now, what I do?
Chris Sower:What, again, that guy now, what do I do? Right? So yeah, but they were very, my mentors are very helpful. In that, you know, once I was able to land the business, you know, help again, help execute on it. Right.
Mordecai Rosenberg:So, yeah. What was the difference in terms of the 400 unit, as opposed to the 10 unit or 20? Unit? How would you compare that process? Is it do you think, more complicated, like, less complicated? What would? How would you compare it?
Chris Sower:It definitely had some anyway, the guy was a bigger deal. And I was doing a lot more middle market business. When I started and trying to grow the business, I would say, middle market, and private client. And, you know, those were private owners predominantly, you know, Boston based Boston focused. So you're getting a, you know, large deal in New Hampshire was okay, where do you start? Who are the buyers, who do you call? So it was an experience of, you know, figuring out the different buyer pool from what I've been doing kind of in the earlier parts of my career, and then also how these things get structured the financing. So it was a very different, different approach the middle market stuff had been doing, but it was it was a great learning experience.
Mordecai Rosenberg:Yeah. Is what do you say that it's, like$100 million deal is as difficult is just as complicated as you know, it's the same amount of work as a $5 million deal. Like is, there all the same amount of work?
Chris Sower:The existing product is, is one one avenue, I think, you know, when you're, when you're in the middle market, private client, I think, people are looking at the underwriting very differently. And a lot of the times they have their own operating, and they know how they're gonna operate the building, they know how they're going to structure it and capitalize it, you know, getting into the institutional space, it's a much different underwriting process, it's a much different, you know, looking at different return matrix, or the return requirements. So it's just, it's a different, it's a different level, obviously, it's more sophisticated investor, as you move your way up the deal size. So there's, it's a, it's obviously, there's still a lot that goes into it, different level of kind of underwriting and deal structure. You know, we've done a lot in our land our business over the last five or 10 years on the land side. And, you know, I would say, you know, the land business is probably one of the more time intensive businesses where we've, that we've developed, and it's a special skill set. But that's very time intensive, and we have deals that can take, you know, two to three years to close from start to finish. So that's a very long sales cycle, you know, compared to the traditional existing product, that's, you know, you know, whatever, three, four or five months, whatever that may be.
Mordecai Rosenberg:Yeah, yeah. So I wonder, you know, when you got that 400 unit deal done, right, there's something about you know, when you start off in sales, right, you don't want to you know, you don't want to go fishing for for, like Moby Dick Right off the bat, right, you know, to go for like, two or three pounds, you know, sail finished, right? It's a lot easier to say like, oh, let me just go fishing for like guppies and practice on that. The perception is that maybe those are easier. But I think also it's the idea that well, there's less on the line, right? If I, you know, if I screw that up, or whatever, but it's, it's not the worst thing in the world. Sure, I wonder if you experienced like, one of the things that experiences that when you get to do a deal, that's a 400 unit deal. It's a change in self perception. We're like, whoa, I'm someone who can actually handle an institutional deal. And get through it. And yes, it wasn't perfect, right. But I was able to get all the answers, have a satisfied client. And now when I talk to the next, when I'm when I'm now looking at the universe, I'm not looking at the next 400 unit deal as something that's that's out of its unattainable. You know, it's now something that I'm I can do, would you think you had that experience?
Chris Sower:Yeah. I mean, I listen, it's, you know, thinking back to when I was, you know, in that business, it's, when I was young, in the business. It was, you know, you have to find relevant stuff to talk about with people, right. And, you know, if you don't have sales, and you're not you're getting in the business, you're trying to learn it, how are you going to make conversations relevant to people, and, you know, if you don't have product to speak about, you're talking about, you're building relationships, you're talking about other comps, or sales in the market, whatever it is, but yeah, having that experience, and having that, you know, that case study, you know, on my resume, you know, if I wasn't able to intelligently speak to other owners in that space, that own similar product, and not only the deal size, but also again, a lot of my stuff I had done earlier in my career was in the city of Boston. So to have that experience of moving out into New Hampshire and kind of tertiary England, opened up a whole nother Avenue in terms of what potential business development could be out there. And opportunities. So yeah, it was, again, it was it was definitely life changing from a career perspective at that point. But it also opened up a completely different avenue for me in terms of who I could look at and potentially reach out to on the business development front and build relationships with.
Mordecai Rosenberg:I think also, you know, I've done media training before, you know, for interviews, right, and one of the things that they train you on is to have certain, like safety zones, right, that, that, you know, you decide kind of the questions that you want to answer. And then you go back to like, you know, if you're not totally comfortable with the question, or you kind of bring that question back to your safety zone, you see, you see in the in the in, in political debates, or like in presidential debates, you see them do this all the time. Right, that they, they, you know, that's a great question. But here's what I want to talk to you about.
Chris Sower:This is what I want to get back to my safe zone, right? Yeah, get back to my dog.
Mordecai Rosenberg:Yeah, sure. Yeah. So in some ways, like having a couple of deals, right? You don't, you don't need that many deals, but having a couple of them that can become your safety zones, like, well, let me tell you about this deal, this 400 unit deal that I did, right, it's enough, once you have a couple things under your belt, now you can use those as safety zones. It's like, well, you know, let me just tell you about this, you know, $60 million deal that, you know, that he just closed, and now you're establishing credibility with the client, you're not kind of just, you know, throwing air to them. Yeah.
Chris Sower:It's funny when I'm just in just thinking about this, and I haven't thought about this in years. But, you know, when I used to, you know, stay late. And, you know, after my, you know, my day job was done as an analyst and making calls and reaching out, you know, I remember I had a, I had a call list, you know, I think I had like the expectation to do 100 or 150 calls a week or whatever it was, and the call list was, you're right, you have the guys that you've done business with that you're just checking in with kind of keeping that, that safe zone, so to speak, continue to go and can build on that. And then they're, you know, you're out there pushing the envelope a little bit, but that base, there definitely gives you the, the confidence in the skill set, to be able to go out there and share, right and, and we use the same thing with with with our team, right. And you know, we've got a seven person team, we've got four people on the production side, and you know, connecting the dots for stuff that we're out in the market with and even if it's something you're not working on, you're getting that deal and making sure you're reaching out to someone that owns a similar type of asset. And again, it might not be necessarily business development, but, you know, facts and information and data points, especially in this market are so important that that naturally builds relationships and you know that information and that those touch points, help grow relationships and business naturally out of that. So it's an important thing and again, you've got that you've got that skill set, you've got that product in the market, it makes it a lot more relevant conversation versus calling and completely cold call with nothing to talk about, you know, and that's, you know, our goal is actually trying to make as many warm calls as we can, just in terms of how we look at the business and kind of how, where, how we think and where we think we can grow.
Mordecai Rosenberg:Yeah, providing valuable information. I mean, that's why a client wants to talk to you is that you have a broader perspective than, than they do. Or at least that's one of the reasons why someone might want to talk to you. So when you're now, given your experience, kind of coming through the, the ranks starting as an analyst, what do you look for when you're hiring a salesperson, let's say out of school, someone who, or someone onto your sales team, maybe you don't know if they're gonna be a salesperson or not, but like, given the balance of sales and execution, right, and maybe sometimes you don't know, which talents will develop or what their natural capabilities are, like, what are some of the traits that you look for when you're hiring a young person.
Chris Sower:So the the approach that we're taking, that I've taken with the business is, and everyone that's on ours, that's on our sales team, is they all have different skill sets, right? So it's not one set thing I'm looking for. And, you know, what we preach is you've got to be able to hit, you've got to be able to run, you got to catch you got to be a throw, got to be able to do all that to be effective in our business. So, you know, if we were going to hire a junior person, you know, either as an associate or as an analyst, honestly, you know, they might not have Argus training, they might not have this. But I think, really, what it comes down to is, and it's a seven person team, and we've got to make sure personalities really fit well. Because if we don't have a good kind of environment within the team, we're not going to be able to operate the level we need to be able to operate. So I think really what drives my thought process when looking at, you know, either partners or to grow the business or analysts or associates, it's, it's really personality fit is the one is the one of the biggest drivers. And two is the ability to see if they can interact with people. And if they think they can understand the business. So someone might be super, super strong on the analytical side. And they might, they might be an analyst further career, right? Someone that might, and it's a very rare person that has strong analytical skills and can have the ability to interact with a client on a relationship side. So I really kind of look at all of those pieces, to figure out where that person is going to fit in again, if the whole team is doing the same thing, we're doing something wrong, right. So and again, even on the business development side, right. Even within our team, we're all chasing different kinds of product, different locations, within the multifamily spectrum, which offers us a really, really diverse kind of sales base. Because if we're all calling in the same person, we're doing it again, we're doing something wrong, if we're all doing the same thing, me I'm doing something wrong as a leader. So, you know, try to have the set skill sets and the set, kind of, you know, team environment we have, but, you know, people need to find a way on the sales side. And you know, people find our team has been able to find it, whether they're really good at land, or whether they're really good at value add or institutional or private client, or Connecticut or Rhode Island, whatever it is, you know, people find their niches in the market, which is, you know, which is important, but I think work ethic and really personality fit within the team are major drivers for me.
Mordecai Rosenberg:One thing that I've noticed with your team and really with like, so far my experience with with Cushman is that there's a very high level of collaboration between across teams sharing information. And having grown up in a sales environment, like, you know, as an originator, and just living in the sales world for a long time, I see that it's very easy for salespeople just to be competitive with each other. And, you know, it's like, you don't want an athlete share your trick that you found, yeah. Because then someone else can take it in, you know, get business that you might have had a chance to in capturing. So, you've worked at a number of different brokerage firms. And I'm curious, if you had to say like, well, what are the things that make for a highly collaborative sales environment? What are those things? Is it incentive structure is it culture is what do You should be that too.
Chris Sower:Yeah. And I mean, to your point, I've, I've started CB and I went to the boutique world, at a private firm here in Boston, you know, to Colliers to Cushman. I think really, it comes down to the culture and the leadership is my opinion. You know, John O'Neill's been a great leader in kind of taking us kind of to the next step on the multifamily side. And, you know, really, when we look at, you know, our we call it our regional basis, so call the Mid Atlantic, whether it's working with Jorge, or Brian Whitmer done a tri state or Karen, Ironman, in Philly. It's, it's the collaboration, right. And we've been going to national multi housing for years. And it's always been an interesting experience going out there. And I think that that our experience that we had this year, so January of this year, obviously, the January before, I think we were still in COVID protocol. So we didn't go but this year, we had almost all of our meetings with our regional teams. So from mid atlantic to Boston, we were meeting as a team. So sometimes there was a lot of people at the table. But I think at the end of the day, it was good collaboration, it was good information sharing, and the client appreciate it, right. They didn't have to have five separate meetings with five separate markets, we were able to sit down and have a minute Atlantic, we represent the whole Mid Atlantic and northeast at one table. And they're all they're looking at deals and all that market. And I think that was great information sharing, right. And it was, you know, that kind of collaboration, and they and those guys, you know, Karen, and Jorge and Brian had been doing that long before we showed up. But they were kind enough to plug us into that right off the bat. But that really epitomize kind of where we are as a platform. And it's been, it's been great in terms of us growing our business the last year and a half. But I think that type of collaboration is huge. Because you can be your own island and be your own team and, you know, not interact with anybody. But you know, there's a lot of stuff that we can do together. And I think we all have the same mentality of we work together, we're going to make we're going to do more and make more money, versus being islands and trying to try to protect our turf, so to speak, or whatever it may be from a territory from a product perspective. So it's, it's been really good. And people talk about collaboration. But when you see that, and we get on the phone, every two weeks, we're comparing notes, we're talking about rates we're talking about product were out in the market with so it's a good, it's a good collaborative environment. And my you know, my young guys have jumped on and they've done those calls, and you learn a lot of stuff from hearing what everyone's saying across our Northeast market, which is, which is great, instead of just living in our own little world, only focused on the information that we know.
Mordecai Rosenberg:Yeah, were all the firms that you worked at, they all have regional divisions, as far as how they approach deals, or does some, like kind of everyone, go everywhere?
Chris Sower:Yeah, I mean, so you know, CB was obviously focused on multifamily, with the different spec perspective, different product types within that, that relevant market. When I went to the private, privately owned company, it was talking about eat what you kill that was, you know, you were basic people were trying to get whatever they could in terms of product, we were able to build that out pretty successfully. But it's funny comparing how people look at it from a product perspective. I think that's one thing, and I think they're specialists on the product side. But I think the real key to really playing at the level that C and W is on is being able to connect the regional and the National platforms. And some companies aren't able to do that, from our experience. And that national perspective for our institutional clients, is very, very important. You know, I think being able to do that and provide that data cohesively nationally, with offices and all the key markets and teams and all the key markets is really, really important. So I've seen the way it's been done. Not everyone's able to do that from a national perspective. And again, if you're a middle market, private client sales team, you don't necessarily need that. But getting above the middle market into the institutional space. It's if you don't have that presence, and that capability nationally, it's it's almost impossible to compete at the institutional level.
Mordecai Rosenberg:Yeah, I think even middle markets, though, right. I think it's very helpful to maintain a macro perspective. You may be in the you may just be in Columbus, Ohio, right but what's happening you're part of a bigger picture. You know, and it's you have to know. I mean, what, what are capital flow trends? And your debt trends that are that are happening in other markets that might come your your way? Right. So I think even in middle markets, that's probably an underutilized tool collaboration in middle markets.
Chris Sower:Yeah, absolutely. And in the land space to write comparing land stuff, and Boston, compare the land stuff, and Florida, you know, just how people look at it, how, what the, what the perspective is, how those things are being priced from a construction cost perspective, and where where developers are pricing in and where equities pricing in today's market? It's, yeah, absolutely. I mean, data is key, right. And anyone can pull a national report, but actually having the real time info about how that information plays out and what the detail is. But yeah, I think you've got to have that perspective to kind of be able to really know where we are in the New England market. But also give you perspective where we are from a national market.
Mordecai Rosenberg:Yeah, so going back to sales training. Yeah. And sales teams. Yeah, there's, I guess, a well known secret, I think in sales, teams, and sales development, you know, in our industry. And that is that training salespeople is a little bit of a double edged sword, it takes a lot of time to train a salesperson is to do it, well, you're going out on visits, right with them, your goal is for them to be independent, and to be able to operate without so much of your hands on participation. However, once they have that ability to transact independently, very quickly, they feel like person may no longer need you. And now they're like, Well, I'm just want to go on my on my own. Absolutely. And I've seen some very successful originators that have decided really like not to have Junior salespeople not to build out their teams, because that always happens, you end up kind of training your competition. So is that just kind of like this date of how things are right? Or is there a way to build your team and do the training and, you know, maybe how you sequence they're involved in in sales, where you can kind of build more long term loyalty to a team?
Chris Sower:Sure, sure. I mean, you're right, right. And I've gone through that, you know, when I was with CB, and C&W, the first time, you know, myself and a couple guys that were there, together, were training together, I went off to do my own thing on the private side and came back to the institutional space. One guy's in the institutional space and Newmark so it's inevitable, right? It's a nature, it's the nature of the beast. You know, and if I worried about that, you know, it'd be tough to run a sales team. I think at the end of the day, I think, you know, a couple of things that kind of helped drive that. One, I think it's, you know, having a really, you know, integrated team, such that everyone's involved in it, a lot of stuff we're working on. So no one's on an island, I think, you know, if someone makes it up the ranks and gets to the point where they can make it on the production front. You know, sometimes if they're doing their own thing, and they're on an island, you know, it's easier for them to move to a different path or a different company. So I think our team is very intertwined with, you know, different different people working on different deals all the time. But just like any team we've had are growing things. And I think what we've found is that if we give people the ability to we, if we empower the people in our sales team, give them the ability to get out there, build relationships, Chase business, and be fair about how the compensation structure works. It's probably not perfect, but we've gone through different iterations. And instead of, you know, set percentages on deals, we on the on the on the on the commission front, we do a deal by deal. And we sit down and say, who, you know, who sourced it, who worked on it, who did the tours, who did the calls, who ran diligence, you know, did you have to follow the contract? Did you have to do it again. And that's not perfect, but I think that gives people a fair perspective on what they've done within a transaction. And also it helps establish what their due. And I'm a little bit different, where, you know, there are a lot of teams and up to senior partners. And they're like, you know, we're we're the senior partners, and we'll bonus people out as we see fit. I'm a little bit different than that in terms of how our team is structured, but I think coming up with a collaborative fare structure on the compensation front. Again, it's not perfect, but we found that that has been really helped people, you know, one feel like they're being justly compensated, but to always want everyone on the team to feel like they've got the ability to grow professionally. And, you know, I never want to limit that. Because as they grow, the team grows, and we're all benefiting in that together in some capacity. So again, probably not perfect, but you know, with our growing pains, as our team has grown, we found that that's, you know, help people feel like they're, they're getting, you know, compensated justly for the work or the business production, they've gone into us into a certain transaction.
Mordecai Rosenberg:Yeah, I guess, like, part of that is, in some ways, is you're giving someone a feeling of equity, having equity in in the team, right, that they're part of. So I think that's, yeah, that makes it feel like it's not just your deal by deal, right, that you bring in, but that there's value given to different parts of the process that I think also gives upside potential to the execution person. They're not just kind of salary plus discretionary, that there's, if they feel some kind of an ownership, I think that's great.
Chris Sower:It also goes back to I mean, listen there. It also goes back to tape of Salesforce, yeah, there are some teams where there are absolute rainmakers, and the amount of production that they have, you know, can support and pay for everyone, compensate everyone, and some, for some people, that's a really, really good structure. But I think it just, it really depends on the team. But yeah, we've had, like, people feel like they're empowered. They feel like they're being compensated, you know, justly. And then there's a conversation. So it's like, well, you know, I really feel like this versus that, you know, not easy conversation sometimes. But I think it's, it helps long term in terms of how the team interacts with each other.
Mordecai Rosenberg:I think also, to your point earlier about how you structure the teams and how everyone is doing something else and adding a different kind of value, you're almost forced to create a team where the whole is greater than the sum of its parts. Right? If all you're getting is the sum of the parts, well, then yeah, you can just, you can, you know, someone can break out and still do just do their part and get in maybe make more money. Right. But if you if you're creating a machine that makes it easier for that person to do their job, because they're part of the of that cohesive team. Yeah. Right. Or it could be right, making it easier. It could be the ideas, like I always, I felt that if someone was on my sales team, like I could, they would continue to learn from me, right, because I was always thinking of new ideas, new approaches, new, you know, if it's just about like, selling T shirts on on a street corner, and without a lot of creativity, well, then fine. Once you learn it, you learn it. But you know, in our business, you have to always be recreating your yourself and reinventing what you're presenting.
Chris Sower:Yeah, I mean, we do. You know, we do just like a lot of teams, do, we do weekly pipeline meetings, which is really managing the existing, you know, things that are in our work queue, you know, the day to day stuff, that we're marketing stuff that we're under contract with whatever it might be. But I think more importantly, the five of us on the production side, we get together weekly. And, you know, we're talking about, you know, we're talking about trends, we're talking about different, you know, business development ideas, we're talking about what's working, and more importantly, we're talking about what's not working. Yeah, even it's like, I tried this, and, you know, I reached out to 40 people, and, you know, I didn't get anything, right. Yeah. And, you know, okay, hey, I reached out to 10 people, and I got this or, Hey, we're seeing, you know, a competitor do this. We should try that. So yeah, I think it's, it's, it's that collaboration, which we actually just started this year. But I think it's really kind of created a different kind of conversation piece within the team, which has been interesting, but then also gives ideas. It's like, oh, that actually, that's a great idea. That's, we should really figure out how do we do that? What resource do we have? How can we approach that? How can we do it? Or, Hey, I heard something about this going on in the market, and how do we get who has a relationship? How can we get in front of this group? So it's, it's, we call it business development, but really, it's it's, it's an hour week that we use to focus on where we think, you know, individual deal opportunities are but also kind of larger kind of macro opportunities in the market.
Mordecai Rosenberg:Yeah, that's great. So we're sitting here today, it's towards the beginning of June 2022. And there's a lot of uncertainty in the volatility in the markets, we have inflation at 8%. We have the interest rates having jumped by a good point and a half over the last 4560 days. Yeah, we have the ongoing war in Ukraine, adding other uncertainties. So I'd love to hear what you're seeing on the ground. What are some of the trends as far as like, Are people stepping on the brakes? Are they are deals getting retreated? What are you seeing on the ground today?
Chris Sower:Yeah, it's gone through a couple iterations. Right. So the first iteration was obviously rates made a move, and, you know, stuff that we were under contract with. That was non refundable. You know, that stuff was unaffected. stuff that was in diligence, but it was still in that process. Yeah, I mean, we had some, we had some deals that went the wrong way. And, you know, when when debt runs, you know, 100 125 basis points during your, your marketing or your diligence process. That that is problematic. You know, and I think when we look at New England, and when we look at other markets, I think we've seen retrace, from, you know, zero to probably, you know, probably eight to 10, eight to 10%, in some conditions. So it's been some of that on an affected, some have been affected. And that was kind of the reset that we went through, you know, in that initial kind of initial timeframe, when rates had moved, I think now we've got a little more transparency on where rates are. Obviously, it's still a moving target. But it wasn't as big of a jump in the last couple of weeks here, it's kind of been staying in that low to mid four range. So now, it's the conversation that we're having with people is gotta have some transparency on where rates are rates have been where they've been, you know, for whatever, whatever time period. Now, the conversation that we're having with people is, you know, how do you balance and at least this is a New England conversation? How do you balance what's going on with rates with what's going on with underlying fundamentals. And what I mean by that is, you know, rates are where they are, but we're seeing, you know, in Boston is really unique in that, you know, we had call it 14% rent growth last year, but that rent growth was really off of our COVID lows. So we were still catching up last year, this year is are going to be a real rent growth year for us. And I think what we're seeing there is, you know, people have some understanding of rates, but how do you how do you underwrite that environment where rents are going up 510 15%, whatever it may be occupancies are super strong. There's obviously a very, very strong demand for housing in the market. And I think what people are trying to figure out is the debt today, are you making a longer term bet? Are you doing shorter term? And are you floating to see where things are? But I think people are saying the fundamentals of at least the Boston Market, the New England market, are so strong, that we're willing to take, you know, some lower returns for the upside that that's associated with that market. You know, and I think we've had a lot of conversations with what's going to happen in the for sale market, and will that slow down. There are a lot of people that own homes and condos that have super low interest rates in place. So I think a lot of those owners aren't going to be motivated to do anything unless they have to at least get the pricing that they want. So that means the probably pricing holds on the housing front, but velocity drops. And for multifamily that's, that's only another benefit. In terms of strengthening fundamentals, it's going to be that much more pressure, put on the housing stock. If the single family in the condo market slow from a velocity perspective. So we're still going through a lot of price discovery. But again, I think people are bullish. I think it's not a liquidity issue. There's a ton of ton of equity in the market. There are ton of buyers in the market. I think there are some buyers that are watching right now and saying, Where are we really going and trying to get some transparency on kind of some some price discovery. But it's been it's been interesting. It's been an interesting 30 to 45 days for sure.
Mordecai Rosenberg:So in terms of that balance of rates versus fundamentals, what is the perspective that you're seeing people take? Is it any trends as far as like how the, I guess buyer groups or or selling groups are looking at this?
Chris Sower:I think it really depends on what kind of buyer profile you're talking to. And I guess the one the one positive thing is that Uh, you know, Boston particularly has not ever been a huge, you know, agency finance market, it's been a very significant, you know, kind of insurance company and bank market. So those market, those lenders are still there. Obviously, doing some agency deals as a reason it's been challenging with where pricing is, I think it's, we were hearing that's coming back in. But I think, you know, for the private group that has a long term generational hold type perspective, you know, they might be doing 60% instead of 65%. Groups like that, though, have different issues, they're solving for, you know, more tax issues and more long term appreciation, than they are that a group that has a fund that has a, you know, three to five year value, add, you know, kitchen and bathroom renovation, and they're going to look at it very differently. And then there are some groups that are saying, Listen, I'm willing to take some negative leverage in in in the earlier term of our hold of our of an asset, if we think that the fundamentals are going to outpace the, you know, the impact of rising interest rates. And I'll take maybe a year or two of that, but I can't take, you know, I can't take three or four years of that. And then the cash buyers, I mean, cash is king, right? If you're a cash buyer right now, or a low leverage buyer, I think, you know, you're you're more focused on the fundamental side of the business, than you are worried about your cash on cash or your leverage returns.
Mordecai Rosenberg:So that goes to show that right now, not all clients are equal, right? That you have to, they're not all the same, they have different considerations. So if you're selling to sell a product, you can't just sell it sell the product with the same pitch to everyone you have to know. You have to really understand from their shoes, what are they looking to accomplish with this investment? Yeah, and think about what you're selling at that point, just because just because you've got the product doesn't mean that that's that they want to buy it?
Chris Sower:Yeah, exactly. Or they're gonna buy into your business thesis with what their goals are long and short term. So yeah, yeah. And again, we we cover the gamut from land to institutional. So we see a lot of different perspectives of underwriting and return expectations in different drivers that sometimes impact people's business decisions. So it's interesting to compare those notes. But yeah, it's it's not a one size fits all approach. In terms of, you know, this is this product, this this is debt product, this rent assumption is going to be standard across the board.
Mordecai Rosenberg:So yeah. What about trends in land sales? You know, I guess you have, on one hand, you have interest rates. On the other hand, you have, you know, one of the one of the positive effects of of higher interest rates is, is lumber costs are going down, right, construction costs are maybe going down a bit. So, yeah, what any recent trends as far as land sales?
Chris Sower:Yeah, I think it's, I think we've seen the land markets stay very active. And again, we've got a housing crunch here in Boston, so we don't have enough inventory for the demand. And that was really has been compounded by what's happened on the life science front here in Boston, where we've got a pipeline, that's, you know, 30 plus million square feet of Life Science product. And those people are going to need somewhere to live. And a majority of that stuff is kind of inside the 128 belt. But, you know, I think if you, if you look, if you're a developer, and you see that trend, and how strong that market is doing in terms of lease up and absorption and product getting built, I think people are looking and saying, okay, the fundamentals for development are very strong. It's interesting to see how you underwrite it, and are you looking at trended rents, or unfriended rents? And where that is and how you underwrite construction costs, and you know, our costs gonna come in? Are they going to stay where they are? Is equity going to keep their return thresholds where they are, and they can expect more? And again, I think it really depends for the best of the best. I think people will probably still take those same return expectations because it's the best of the best. Some of the other stuff, we've seen return expectations shift, maybe 25 basis points, something like that, and then return on cost. But again, I think people are finding that development is is you're going to be developing and delivering product into a raising arising rate environment rental rate environment, not well, maybe interest rates too but rental rate environment. So your rents today versus where your rents were you deliver in two years could Be very, very different. I think they're sizing them and on on on trended rents today, but you kind of peek behind the curtain and say, okay, you know these untrue, these trended rents look really interesting, but we got to size down the unfriended today, but I think that's the way a lot of developers are looking at is, it is tough. It is, you know, Boston is a two year process to get approved. So it takes a lot of time to get through that and then go through the construction process. So it's, it's been it's kept our supply pipeline in check with how difficult it is to develop.
Mordecai Rosenberg:Yeah, I remember in in the in New York City, this is in Oh, 08/09. It was a post Lehman Brothers collapse. There is a building that Estelle was developing across the street from us, which is now the the Grand Hyatt or I forget exactly what it's called. But it's a it's a premier building in the city. I remember them breaking ground, like months after the Lehman Brothers collapse when they when the market was like, total garbage, like there was not, you know, you did not want to get anywhere near the condo market. I think they may have actually, the first maybe five, six $700 million of cost they actually did in cash because they couldn't get a construction loan yet. Yeah. And I remember thinking like, wow, like, what courage and conviction to go into the ground at this point, but like you said, it takes, you know, it takes two years plus for them to develop. And by the time they were selling, they were selling very, very into a strong market. You know, so it's always, in some ways, it's like, I don't know, maybe it's better to start development. And if you believe in just the cyclical nature of it, maybe it's better to start in a weaker market.
Chris Sower:I mean, listen, it's we, you know, seeing what happened in, you know, with where we were with COVID. And where, and again, we get it, we understand it, you know, there was a lot of questions that were going on the market, a lot of, you know, unknowns. But if you look at what happened as a relates to people that bought through that, you know, that unknown period, people got some really good buys. And, you know, the banks were given the banks were still active here. I think people have to have a long term conviction in Boston. And I think that's, that's not a huge bet. But, you know, people, people that did that, I think, got some good opportunities. And I've seen some significant value appreciation in the last couple of years from from buying it that remarkable. It wasn't, it wasn't for the wasn't for the faint of heart, right? Because, you know, there were buildings in Boston, there were 50% vacant, right. So it was it was scary. But those groups have benefited. And I think we're some people may be sitting on the sidelines, I think some people are going into the market, seeing where the opportunity is, and taking advantage of it. So yeah, I think it's it's all relative.
Mordecai Rosenberg:Yeah. I think perhaps our last question, but I'm curious, you meant you're mentioning investor return targets? Have? Have you seen any change in terms of waterfall structures that that GPs are looking for? Yeah, I would imagine that let's say, I don't know, if you're structuring something with a 6%, press 7/8%. Press right before you start hitting the waterfall. That is, it's a lot more challenging to do that when you're buying something at negative leverage. So anyway, are you seeing any changes to waterfalls?
Chris Sower:Not so much. On the waterfall side? Again, I think we've where we've seen is we've seen some of the some of the LP equity, kind of return their change their return expectations. In terms of, and again, I think it's case by case, the best of the best, I think is going to remain fairly unaffected. But the best of the best, the stuff that may be one tear down, I think you're we've we've heard that equity has pushed back in some cases, to you know, not so much to deal structure as it relates to prep, but more about where they're willing to go in on a return on cost basis, you know, in a locked in GMP, so, I think that's where we're seeing, you know, where it may have been four and a half, maybe it's a four, three quarters. Yeah. So I think there's been some pullback on that. I think that's I don't think it's fundamental related I think its cost and, you know, kind of cost of, you know, floating rate reg debt as it relates to development projects is my sense.
Mordecai Rosenberg:Awesome. Well, Chris, this has been a really educational conversation for me, so I really appreciate it. Yeah, and The final if you just to leave off any final words of advice for someone new coming into the market, you know, as a salesperson, I mean, talk about having some headwinds, you know, if you're starting to sell, if you're coming out of college today and selling into this market, a little challenging, any advice you would give, give someone like that.
Chris Sower:My biggest piece of advice is you need to make up whatever any one young person in the business is looking to get into, whether it's brokerage or anything else in the real estate business, specifically brokerage though, is team is TEAM and environment. And you succeed with your team. You go through rough parts in the market with your team. And you know, those people will support you and the good and the bad. And everyone, you know, might want to be an independent person. But there's no way to succeed without having a good team and good people around you. Otherwise, you got an uphill battle for sure.
Mordecai Rosenberg:That's phenomenal advice. Well, Chris, thank you so much. This was really delightful and invaluable. So thank you for your time. It's great to have you.
Chris Sower:Thanks for having me. Appreciate it.
Mordecai Rosenberg:All right. Talk to you soon. Thanks, Chris. Yeah, thanks.