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 37: Craig Branton, Vice Chairman with Cushman & Wakefield
Summary:
On this episode, Mordecai speaks with Craig Branton, who is a vice chairman with Cushman and Wakefield, recorded at the end of October 2022. The multifamily market is kind of in turmoil, interest rates are up by several points, and so sales have grounded to a halt and refinancing has slowed. So what do you do as a salesperson? What do you have, when you don't have something to sell at that current moment where the where the market is not very transactional. We dive into these questions with Craig, who shares really great ideas on what you can do during this time.
Timestamps:
0:15 - What Do You Do When You Don't Have Something To Sell?
1:41 - Craig’s Earliest Sales Experience
4:57 - How Sales Training Is Different From Sales Training
11:07 - The Importance Of Cold Calling vs. Networking
17:11 - Demonstrating Differentiated value
22:04 - What Is The Most Difficult Part Of The Business?
25:37 - The Importance Of Taking On Deals That Have A Reasonable Chance Of Going Sideways
31:35 - Selling People Like To Get High And Hope
36:21 - Why People Do Business With You
43:31 - Advice To Clients
47:40 - What’s Happening With FHA Financing
51:41 - What’s Going On In The Multifamily Market Today
56:35 - How To Measure The Success Of Your Database
lenders, market, people, loan, client, equity, selling, deals, screen protectors, year, calls, rates, business, borrower, easy, long, sales, chase, interest rates, debt
Welcome back to the Origination Podcast, where we speak to the top originators and brokers in the multifamily industry to try to understand what separates the top performers from the rest of the pack. On this episode, I'll be speaking with Craig Branton, who is a vice chairman with Cushman and Wakefield. We recorded this episode at the end of October 2022. And the multifamily market is kind of in turmoil. Interest rates are up by several points from six months ago. So sales have grounded to a halt. Refinancing has has has slowed a lot. So what do you do as a salesperson? What do you have, when you don't have something to sell at that current moment where the where the market is not very transactional. We dive into this a lot with Craig. And he has some really great ideas on what you can do during this time. So we'll talk about that. We'll also talk about selling Cutco knives and how transferable the skill set is between selling knives and selling mortgages. So you've got a lot to enjoy and dig into in this episode. Without further ado, let's speak with Craig. Craig Branton. Welcome to the Origination Podcast and so excited to have you on.
Craig Branton:Thank you. I appreciate the opportunity.
Mordecai Rosenberg:Yeah, so we were just before I hit record, we were talking about the exciting state of the multifamily world. And here it's October 2022. But the origination podcast is is a haven. And there's always good news. So we're gonna bring it bring some bring some light.
Craig Branton:Sounds good.
Mordecai Rosenberg:So, Craig, the question that I like to start off with it is to ask about your earliest sales experience. And if you had to think of it when I say that, like the earliest sales experience, you can remember and it might be grade school, it could be high school, it could be summer job. It could be college, it could be current role, but anything comes to mind when I think about early sales experience.
Craig Branton:So I have actually never been in a salaried type role ever in my career. So that's starting after college, I had never actually been in a position where salary was was the main source of income. It's I've always been a commission based employee. But going back to my high school days, I actually some people may remember this, but I actually my first job was actually selling Cutco's knives. So that was that was a kind of a friends and family door to door type deal. Where you'd go out and you'd learn your presentation. And of course, your selling. You know, your first sale is always to your parents. And then your parents friends. And you know, but you know, one of the things that I remember about it is that we you know, the knife was very quality, right? So I always felt good. And the one thing that I remember from that is, you know, it's always easier to be in a sales position when you're confident in what you're selling. And that's probably my first recollection of really having the competence in what I was selling, knowing that it was a good product, even though I was probably too early to know, what was good or what wasn't good and the knife business but, but I really did just from reactions to the people. And it just gave me a lot of confidence. And it put me in a position to kind of look and look forward to my future to know hey, I need to be able to be in a position where I can sell something that I'm confident in that I would want to buy. And that was that was my first experience. I believe it was 16 years old when I did that.
Mordecai Rosenberg:Okay, I'm having a flashback to you remember that those commercials that were on TV when we were kids were knives and Oh, can you cut to her credit card it can cut through your shoe. That's which wasn't Cutco? Not as but it but it was nice. Were knives were a thing. Yeah.
Craig Branton:Yeah. And they I think they still they still do it in a very similar way. I think there's more of a retail presence now but but we had the penny and the scissor and you cut the penny and also that was you know, one of the gimmicky things that I remember which is surprised I don't remember much from back then but I do you remember that?
Mordecai Rosenberg:Yeah. Do you remember what kind of cars they what kind of sales training did Cutco provide? You know, before they send you off? You know to sell?
Craig Branton:Yeah. So I mean, it was, I think it was about a week long training, you know, I, you know, they definitely took you through, you know, a training of the actual product. And then, you know, certainly there was like, you know, the demonstration phase where they kind of show you the different things like we discussed with, like, there was like a rope and petting cutting and things like that. And I think they gave you some basic tips of how to how to talk about it. You know, you're so young at that age. That it, you know, I think it really all is kind of instinctive, really, I mean, they, they teach you the product a little bit about what to say. And then I feel like, they kind of set you loose. Of course, they always give you the example of, you know, the superstar in the business and how they did it. And, you know, he's driving a Cadillac, or he or she is driving a Cadillac, you know, 25 years old, you know, just crushing the sales business. And of course, everyone younger kind of hangs on to that a little bit. It's a little bit of a rah, rah kind of environment where, you know, it's, you know, like the old movie Glengarry Glen Ross, right? Like, you know, first place gets a Cadillac, second place gets steak knives, and third place doesn't have a job kind of feels a little bit like that, where, you know, probably only about a third, or maybe a half of the people were actually even able to sell anything, right. But from their perspective, it was a power of numbers, they did get a bunch of people in send them loose.
Mordecai Rosenberg:Yeah. So is there a cohort? Like, did you have a class of people or a group that worked together?
Craig Branton:Yep. Yep, it was probably, you know, it's kind of one of those deals where, you know, you you go in a paper back then, right, like, this was back in the early to, yeah, you know, 9093 9294, you know, you go in, and you think it's a normal job, because you think you're going into some sort of a normal job, and then you get there. And then there's, like, 20, people in the lobby, that are all kind of look the same, and you're like, oh, what's going on here? Right, I thought I was going for a job. And then next thing, you know, they're, they're actually trying to sell you why you should be doing, you know, selling whatever product that it is, right. And so that's always kind of when you know that, you know, when you walk into a job, or you walk into something, you think is a job and they're trying to sell you when you know, you know, it's a little bit of a different deal.
Mordecai Rosenberg:When what what did they sell? How did they sell you on it on it?
Craig Branton:Well, I think I mean, honestly, you know, like, like, I think it's, it's about like, you know, some of the success stories, right. And like, I think in sales, you always need to have this kind of supreme confidence that, that you you can do what the top people are doing. And you may not have the experience, but like, you've got what it takes at least you feel like you've got what it takes with with actually with some real thought, right there, not just oh, this guy can do it, I can do it. But you actually think and you can observe and you know, and you listen to them, and you feel like I can I can do those things that they're doing. And for me, I've always kind of felt that way in certain sales positions. So if they put somebody up there that's had a lot of success. I think that's probably and I'm very competitive by nature. So you know, they put somebody up there that's got the, you know, success story, as a younger kid. And and the other thing was sales tours, it just gives you flexibility, right? Like a lot of summer jobs when you're in high school or servers, or you're working landscaping or some nine to five, whereas like, this particular opportunity promised similar money or more, but gave you flexibility, which I think is what all people in the sales field are looking for, you know, not only flexibility, but also not having a value placed on them by someone else, meaning that you earn X amount of dollars, this is your job. I think the one nice thing about the sales industry is that you can go out and create your own value. And that's kind of what I've always wanted to do.
Mordecai Rosenberg:Yeah, there's so much to dive into there, which I'm going to come back around to the flexibility and that being able to create your own value is really, really powerful concept. Do you remember when you were selling these knives? So are you start with your parent, your parents, maybe they introduce you to their friends, right? But let's say at some point, you're knocking on someone's door and you're saying, Hey, do you want to buy knives? And the natural response is no thanks every half nice. It's so how do you what how do you get into the in the door, you know, with an in and it's also perceived as a commodity. Right. So So what are the words that you say to get past that? No, I already have already gotten that. It's nice.
Craig Branton:Yeah, so I think that That's an interesting question. I mean, I think I've, I've never really been that comfortable in a in a cold situation, I have always tried to find ways to get out of a cold situation at least to get warm. And I think that's really kind of the art that a lot of people miss. It's like, I can go call 100 people and I get two responses. I, you know, you know, if I call 1000, then I'll get 10. You know what I mean? And I think there is a place for that for sure. But I think some of the art and the craft around the sales side is how do you leverage your network? How do you get into, instead of cold into a warm setting where you can have a good, least a good opportunity to at least have the time for them to hear you out? I mean, act, then, you know, we had been hit by 400 million spam calls, and you know, people knocking on your door and sending you junk mail, and all the different things that that you get today, or it just immediately turns you off to anything really, back then it was it quite a bit different. If somebody was walking door to door like, you know, in the neighborhood, you probably would somebody who would probably talk to you, but I don't think I ever really did that. I was always working to try to get more soft and more warm type connections, which I think in my view is a much better way to spend your time. And picking up the phone or working your parents or doing those things and spending your time trying to get to leads or places where business is a lot more likely to happen. So I don't know if I ever really felt comfortable and in a cold setting, like, like back then and trying to overcome an objection like that. I mean, certainly there's training that, here's what you should say, and some canned answer. But I think if you start doing that, you just become a commodity, and it's really difficult to really have any success.
Mordecai Rosenberg:Yeah, I think you're making a really important point. Because, you know, our industry, you know, multifamily. I feel like a lot of people. I mean, the way I grew up in sales, like cold calling was just how you did it, or you it's just the way the way in and you know, it's very easy for someone new to think, right? The only way to get into this business is to be really good at cold calling, right? And then you also have the idea of like, well, it's a numbers game, you know, you make 100 calls, you get, you know, five calls back, and maybe you have one conversation that just becomes like, you know, just chugging along. But the idea that you could be in excellent faith, the date you can you can take an alternative approach, which is to go war, right, and try to invest your time and trying to get that warm introduction. And all of a sudden, your one warm introduction is worth, you know, I don't know, 500 cold leads.
Craig Branton:Yeah, yeah, I mean, I think so. I mean, your odds, you know, we could talk about this concept, I think it's, it's one of my favorites talked about, which is fee versus likelihood. And I think as you're young, and you're getting into the business, people get fee blind, and on low percentage deals, and they end up spending a lot of time on them. And I don't want to go that direction yet. But I think that's an kind of an interesting thing to talk about. And one thing that I wish I would have understood better younger, and almost everybody I talked to feels the exact same way. But getting back to the warm. I mean, there's so many different ways today where you can find networks. I mean, obviously, you've got LinkedIn, which is still a fairly cold way to get around. But I just, you know, people, I think people when they look around, I mean, obviously, if you're brand new to commercial real estate, it makes it a little harder. But I can assure you that if you are younger, in commercial real estate, there's also a lot of younger people at different firms, maybe in different positions that you can start to network with that are in similar situations. And I certainly can't say that you can't do it without cold calling. Because I think that's a component of what you what you just need to do, because it's hard to fill your day 100% of the time, brand new in the business without being outbound. But I think the craft and the art is trying to build relationships. And in order to do that, you have to pick up the phone, you have to be, you know, willing to meet people and you have to be likeable because I think generally people, you know, they they really want to do business with people that they like and that they trust. And you don't have those two things when you're cold, right. Like you have those things when you're coming in through a referral or you have those, you know, things if you're dealing with a broker who's got a listing that recommends you right. And those two things to your point are much more powerful than getting somebody on the phone that may or may not Want to transact? They have no idea who you are.
Mordecai Rosenberg:Right? Right. And and, you know, 20 years ago or maybe even 10 years ago, I don't know that if you call someone call if you called someone cold and you picked up the phone, maybe they weren't interested. Right. But today, it almost becomes like it's offensive with the hall. You know, it can be you can it's just a different a different level of sensitivity that people have to Yes, certainly.
Craig Branton:Yeah. And I think especially like in, you know, especially in Denver, you know, I talked to, you know, people that own multifamily properties, and they try as hard as they can to get their numbers away from co star or a lot of these other groups, because literally, their phones don't stop ringing with brokers trying to ask, you know, explain to them sales that that were done, or rents that they're getting in the area, which, you know, I understand, like, you definitely have to come with information, or you've got no chance. But a lot of these, a lot of these markets have just got flooded with brokers, and I think, especially in the multifamily side of things, it's just been such a hot market for so long, for at least the last 10 years, that it's, you know, I think we've just got flooded with all kinds of brokers. And I think, you know, situations like are happening now, which a lot of brokers haven't been through any cycles, like this before, has a tendency to kind of weed out, you know, maybe the brokers that aren't as talented as some of the others. And, you know, I think it's part of the natural, just progression of real estate cycles in general. Yeah. But my point is, is that, you know, I think these people are fatigued, you know, by a lot of inbound, whether it be brokers or just everybody else that's trying to get hold them, especially as we all know, around election time with texts and calls that are coming in just 24/7. So I do think it's really important to try to figure out how to leverage your network and at at, you know, when you get going to try to find your way into these into these discussions and conversations with people through a warm channel.
Mordecai Rosenberg:Yeah, that makes a lot of sense. And you mentioned mean, I mean, a lot of time on the knives, but but one of the things about those, those nights is that you had the demonstrable differentiation, you could take your knife, and cut a penny cutter out, right? And you could say, alright, like, listen, Sir but can you take out your steak knife and do do this. Right. And and so that's so that's also powerful, right? So once you you need to the warm lead through the warm lead gets you in the door. But now you have a demonstrably differentiated product that you can offer.
Craig Branton:That's expensive. And that's the flip side to it, is that they were expensive. And I would say that, that was probably the biggest obstacle. I think back in 1893, I think first set of steak knives, you were probably over $1000 bucks. Wow. Yeah, it was like it's one of the more higher end knife sets I think on the market. Now. I'm sure that's changed. But back then, I mean, you were talking double or maybe even triple what the cost was. And, and that's, that's a tough thing to kind of sell when you're in your friend's parents kitchen table, trying to sell them, you know, $1,000 or more steak knives so that it gets you out of your comfort zone? Let's put it that way.
Mordecai Rosenberg:Yeah. So can you translate that at all to say, multifamily, right, where again, you have to sell a loan, you know, multifamily loan, or to offer investment sales services, but let's say on the debt side, that's also to a lot of people who you talk to, right, so you get the warm intro, but now you're you're in the door, and I say, alright, I have a knife to sell you, right, because it's perceived as a commodity. If it's Fannie Mae, Freddie Mac, you know, you need unless it's some kind of a specialty product. So is there any way to demonstrate like, how do you demonstrate differentiated value?
Craig Branton:So, yeah, so I think one thing that that we've always done is we first of all, we prepared ourselves to really understand our product. And, you know, one of the things that I've always told my team is that if you don't know the answer to a question, you say, you don't know the answer, but you're gonna go find the answer. The number one thing that you can get caught on early on, is if you're winging it, and because a lot of times when you're when you're getting going in this business, you're talking to people that have done these loans before, right? They may have more experienced than you in a lot of cases, right? And whether or not they're testing you or not. If they asked you a question and you don't have the answer and you say something that is wrong. You've lost all your credibility, whatever little bit you had, right? And so the one thing that we're very careful with is that we always do what we say we're going to do early in the in the relationship, whether or not it's okay, hey, could you get me some comps? Or Oh, could you provide me some, you know, a list of items that we need, everything we say we're going to do, we do it early, and we start, even if it's just little things, oh, I'll call you back between this time, or oh, I'll do this, just so you can demonstrate that you can do things. The one thing that I think this industry lacks, especially in the commodity, you know, is is execute, the execution is all over the place, right. And I think, as you get, you know, into bigger losses, and you get better, and you've been doing a lot longer, that becomes less of an issue. But going going back to our point prior to getting on the call, it's all about reps, and it's being transparent with people. And it's one thing to say you're going to be transparent, and you're going to execute and do all these different things. But setting expectations is one of the hardest things to do in our business in the beginning, right? Because those expectations may not always be what the person wants to hear, right. And so, but but a lot of times, you know, people try to set expectations too high, whether it be loan amount, or what how much they can get, or what how low of an interest rate they can get, and then they miss right and, and a lot of times, I think coming out of the gate, you have to be your ability to set reasonable expectations that both sides can agree are reasonable and fair as a good starting place. And then talking about ways that you can improve the deal or things that could potentially be risks to the deal, and being able to see those early and explain those to borrowers upfront. Early on in the deal. I think it is something that separated our team early on, I think people that really appreciate that. And they know that if I tell them something that generally they can, you know, they can count on. And I think that's, that's where we started to have a lot of success early on.
Mordecai Rosenberg:Yeah. Yeah, I've thought about that before that, that it's the product that we sell, I feel like there's so much variability in terms of where it can end up. And what can go wrong between the time that you're kind of signing up on the dotted line. And then somebody you're actually closing you there's very few products that have that kind of variability, like even some things are binary, like you could say, alright, I'm applying for life insurance, and they give you your premium amount. And then they if they do a health, they do a health tests and blood tests to check you out. And then they might say, actually, now you're not gonna qualify your but you know what, you kind of know that going in, here's the amount of things that can go go wrong. It's like, well, we didn't realize that there's this commercial space that has a little more square footage than we thought it did, right? Or cap rates could jump or interest rates could jump, like there's so much variability. And so that job of managing expectations, it's, um, right, I wonder if it's probably maybe some of the most difficult expectations to manage, you know, in our business.
Craig Branton:Yeah, and I would agree. I mean, I think the crazy thing about it, though, is that a lot of these deals kind of end up where you're where they're always going to end up, right? I mean, there's certain things right, I mean, it's your ability up front to kind of have be able to see where these deals are going to end up, whether it's looking forward on a rent roll, looking at expiration dates on a 20 unit deal to see all I'm all of a sudden maybe going to have more vacancy than I thought or going through the age receivables up front and seeing if there's tenants that are having slow pace or could have slow pace, or I'm just giving you a couple of basic examples like that we learned in the SPL space, a lot of those deals kind of end up where they were destined to end up there problem is, is that either the originator or the borrower, or the combination of the two may have saw it differently or didn't, wasn't weren't able to see some of the potential issues. And and certainly that's not a perfect science, but goes back to your point with just expectations that if you're unable to set reasonable expectations, and that deal ends up somewhere different, that's a difficult proposition.
Mordecai Rosenberg:Yeah. Right. And that gets into those reps, right? It's just the more you see, the more the more confidence you get, because you've just seen more things that can go wrong. So you can see around the corner more easily.
Craig Branton:That's 100%. Right. Yeah. I mean, and I think that's where younger people in this business originators, the like really can benefit from utilizing, you know, really asking a lot of questions on these deals upfront before you get in touch with the borrower. We always think, you know, what could this borrower possibly ask us and think about it from their perspective? And I would go and I would tried to figure out every answer that I wasn't sure of that they could ask, right. And as a younger guy and guy in the business, that's what we would do, I never wanted to get on the phone with the idea that they could ask me something that I just flat out wouldn't know the answer to within the underwriting or why we're doing something. And so I think utilizing, you know, internal support, and you know, if you have a mentor in the business, and when you're young, it's just really important that you really understand have a good grasp of what you're doing early on. So you don't have those issues with, you know, setting unrealistic expectations and getting caught. Because there's in this business, I mean, there's kind of goes back to the cold call, warm call thing a little bit as it relates to percentages. But if you've got 10 deals that are going great, but you've got one deal, that's a mess, that one deal takes all of your energy, more so than the 10 combined. Because you're worried about what you said, or what's going to happen, or what the brokers gonna say, or, you know, you've got a lot of people in these transactions that are counting on you, and the sleepless nights, and, and, and all of those things are all related to typically the one deal that's going sideways. And sometimes you can't, there's nothing you can do like in these markets that we're dealing with now. I mean, read trades and things, that's just part of what's happening right now. But in normal markets, you know, when things go sideways, because of the debt, it can stop you in your tracks. And so I think that's another thing that we have learned, as we've gotten a little bit more experienced is that we don't take on things that have, you know, a reasonable chance of going sideways. Because of that, right, I think you become more selective in what you take on, which is a skill. I think that brokers not only mortgage on the debt side, but in the sales side are going to learn now. If you've got sellers that are unreal, on realistic, and you spend a bunch of time and money on listing those properties, you've probably just wasted a lot of everybody's time that you could have been focused on something else.
Mordecai Rosenberg:Yeah.
Craig Branton:And that's, that, that's another thing that I think you'll learn as you've been in the business for awhile.
Mordecai Rosenberg:Yeah, it's, I think that touches on what you mentioned before that fee versus likelihood, um, can you can you dive into that a little more in sure what that means.
Craig Branton:Yep. So like, for example, like we started prior to really getting kind of deep into the multifamily business where it's a little easier to determine fee versus likelihood. Because you know, if you're in an agency space, you can kind of tell what, you know what the likelihood of a deal is a little bit easier. But when you first start off in the business, so let's say for example, you get that call, right, and you're cold calling, and you finally get a guy or gal that that as a deal that, you know, let's say for example, here's a self storage development in a tertiary market, and you're like, Wow, this is a $20 million deal. If I can close this deal, I can make a point, which is$200,000. Okay, my average deal that I'm doing right now is in the two to $3 million range, look at this opportunity, right? And then, as you peel back the layers, and you're like, well, there's a lot of land for sale in that market. That's a problem. But point is, is let's say you're taking that $200,000 fee? Well, you may only have a 10% likelihood of that deal closing, which equates to a$20,000 fee, right? Versus you go into your normal sweetspot. Let's say you go to an agency deal that you know, you can sign up, that's a 30 $30,000 fee, let's just say a smaller deal. That as an 80, or 90% likelihood of closing. Well, that equates to about a $20,000 fee. Well, which which one do you want to do? Right? Do you want to spend all of this time and energy on a deal that's got a very low likelihood of closing just and I think you get you get, you can get the blind. When you're starting that, whoa, I got this big opportunity. This, I'm going to make my name here. But what you don't yet realize is that this deal is got a pretty low chance of going whether or not you're actually going to win the deal because there's 10 other people that are looking at it, or if it's even financeable, or if the borrowers or buyers expectations are even close to what the actual market would produce for a loan. And so there's all these things that that make this deal challenging. And I think when you're younger, you hang on to that, right you hang on to this big fee, you want to make your name you want to make that big fee. And then now you may have spent who knows how much time instead of trying to go after your core business on deals that have a much higher likelihood where you may have been able to go originate or execute multiple deals in the time that you've spent looking at Blue Planet blueprints have a self storage deal in a farmland somewhere, right? And I use that example because one of the guys on my team, Chris, he had that same situation where I was like, Chris, this deals with chance, you know, it was a self storage development deal. And you know that when you're trying to do a deal like that, and you're young, guess what, you're not the only person that borrowers talking to they're talking to every other bank, they're talking to everybody that'll talk to them, right. So. So I think as you as you, as especially now as we head into times that are tricky. We all know that time is your number one asset, right. And I think your ability to protect your time is right now is very important in keeping all the clutter in the mess and the deals that go sideways, out of your head working and focusing on deals that are solid, that you know that you can, that you can close, with a high likelihood, which are deals that you can rate lock right now is really the best use of time. And I think as you get into this business more and more, and you've got more and more loan opportunities that are in front of you, and you're not just looking at one maybe once a week or once a month, and you've actually got options, you really start to see that more clearly. But I think a lot of people when they're just starting, I think it happens to all of us, you know, just get fee blind and potentially, and maybe that's a process that you just need to kind of go through on your own. But it was one thing for me that we always kind of think about before we take on a project. That's one calculation, we always kind of have in the back of our mind.
Mordecai Rosenberg:Yeah, I heard a sales coach one time say that salespeople like to get High on Hopium,
Craig Branton:Yeah, yeah, yeah.
Mordecai Rosenberg:Yeah, just like, you know, hoping that that is I've got this $20 million deal or $2 million deal, right, that that someone's talking to me about? You're already counting your your commission check.
Craig Branton:Yeah, that's right.
Mordecai Rosenberg:Yeah, I think it is a good exercise for people to do like a lot of people, they'll keep their pipeline, maybe it's in a spreadsheet, or however they keep it. And, and lots of times, it's just Alright, what's the dollar amount of the loans? Okay. But to, to then go and say, Alright, first of all, like what's expected, you know, revenue off of this, this this deal, but then to apply that percentage of likelihood. Right. When we went when I was when I was running, you know, that FHA division at Greystone, we applied that with our with our pipeline, right, because we'd have this huge pipeline, and we'd say, Oh, this is amazing, this huge pipeline, but then we go and we'd apply likelihoods of closing. And until something was actually in closing, we didn't give it 90% chances of, of closing, yeah, even if it's an underwriting, or it was that it was that at HUD, right. And if you're just having I mean, I hear lots of younger salespeople, they'll say, oh, yeah, I'm talking to these guys, they've got you know, they have this $9 million deal are gonna give me a shot at it. If you're just having talks about a potential deal that someone might send you numbers on, like, that's like a .05% chance?
Craig Branton:Right. And I think that's part of the trick is trying to figure out what that likelihood is. And without, you know, having gone through that process, it may be a little harder to see, right, because as a younger originator, you know, maybe you haven't closed a deal with somebody. Well, that's, that's the first thing, right? If you've never closed a deal with anybody before, your likelihood goes way down, right? And then, but a lot of what you're uncomfortable asking early, I'm don't even think twice, like, for example, like, you know, you get you get an opportunity. I mean, we know what we can do we know what the banks can do, why not have a conversation about it? Right? Like, who else you know, are you talking to in this in this situation? Right. And I think it's really important to do it when you're dealing with the agencies. Because, you know, one of the things where you've gotten caught, we'd gotten caught before when we didn't ask that question is, we may be in for a discount for Friday. And then all of a sudden, two days later, somebody else comes in for a discount. Well, you just did your client a disservice by not clearing the market, because Friday is now like, well, we're pencils down on that deal, right? Because now we've got two sellers that are chasing it, teller services that are chasing it. And so I think even though that conversation is maybe a little harder than what people want to have up front, I think understanding your competition and is is a really important part of trying to figure out what that likelihood is. Because at the end of the day, like there's there's definitely plenty people out there that are not afraid to waste your time, right? Like I mean, they're not afraid to send you something and go have you dig yourself up just in the event. You know, maybe you can find something maybe they've done a deals with 10 of your 10 deals with another one of your competitor but they're okay with you going out and trying to see if you can find that one better deal. There's certainly people like that. And I think in Anytime that we find out that there's another seller servicer involved in a deal, and we can't get the exclusive we stop, yeah. Because if you can't make your case as to why in a commodity business as to why that group should go with you or not go with you, you're kind of fighting a losing battle, in my opinion. And so I think that's just kind of important is trying to figure out what they're doing who they're talking to. And a lot of times, you can kind of tell right, you don't even necessarily need to ask the question in some cases, because if they're asking for a deal that's got no prepay, and you're taking it on in an agency role well, in the hopes that maybe they'll take your deal anyway, that's the other thing is kind of learning, you know, younger ones, especially in the commercial businesses. They'll tell you what they want. And a lot of times, you know, you just go think you know, what they want, and you go get them a bunch of stuff that you think they want, which isn't exactly what they want, and then you've just wasted a lot of your time, right? Whether or not they say they want flexibility, and you go get him a deal with 10 years a yield maintenance, or whatever the case may be. But I think it's getting back to the point of the competition. And just the likelihood i i just think it's important that you have open and honest conversations with with your borrowers early on to just really kind of understand where you stand on the deal.
Mordecai Rosenberg:Yeah. Yeah. The You said earlier that, you know, why people do business with you? You know, a lot of it will come down to trust also. Yeah. And I think another interesting framework for any conversation you're having with a prospective client is this is an, it's a trust building exercise. Yeah. And I remember there is a book that Sean Covey wrote Stephen Covey's son called The Speed of Trust. He talks about how to build trust and how to rebuild trust. And he says, it comes down to a very simple formula, which is make a promise, keep a promise. Right? You do that once, right? You do. Like you said, before you say, I can give you these cops deliver the cops, right? And so if, if you realize that that what you're doing here is your goal is to is to make a promise and keep a promise. Right? Then Then, then you can. That's what you can offer, right? You can offer those things. And if you don't, if you're not sure, you can make a promise and say, Look, I can't make this promise. But here's what I can I can do.
Craig Branton:That's right. That's right. I think that that is the most important thing, when you have a new relationship is being able to build that trust one, like you said, one promise at a time, right. And if for some reason you missed that, you do your best to explain why, or you maybe a circumstance that got in the way, or just be communicating, you know, along the way, and I think just people appreciate just transparency, it's much better if you promise something a week later, and you know, you're not gonna hit it just to have that conversation, you know, in between, even though maybe it's a little harder to have than, you know, dropping a bomb the last day.
Mordecai Rosenberg:Yeah. Yeah, so switching gears a little bit. So the other one part of sales is client retention is maintaining that relationship with with with clients. Normally, there's a way you know, when you're in a transactional environment, when, you know, loan rates are low, and they're operating, you know, that they have loans that a refinance bubble coming down the pike, or maybe they're looking to buy or maybe looking looking to sell, there's a basis for those conversations. There are other markets, like the markets where the market we're in today, a bit, which is where he's sitting at the end of October 2022, which is a bit frozen, you know, their interest rates have have jumped by by your several 100 basis points over the last six months. So you don't have a lot of sales happening. You don't have a lot of refinancings happening. How do you think about client retention and staying in touch with clients in in, in this kind of an environment?
Craig Branton:So I think now's the like one of the best times to really get yourself educated on the market. And in staying away from making predictions, I think that's one of the things that everybody wants you to do. But really, I think just educating based on facts like here's where the Feds at, here's where the expectation that that's going and really becoming a resource for your clients. And that is where you're going to. I think if you find that you're talking to a lot of clients right now that they find you a good resource, if you're not talking to clients right now. You probably need to up your game a little bit right and really understand what they're thinking and what what you can do for them because at the end of the day, we are acting as advisors in a lot of ways to our clients, and that may not just be an advising on an on a given loan. Right. I mean, the other thing is, at least on the Cushman side is Cushman Greystone side is learning what our competition is doing talking to as many local banks and lenders that are in our space and in our competition set to really understand how they're doing business as well, if they're doing business. And again, becoming more and more important to your client, because a lot of times these people especially syndicators, or maybe, you know, groups that work in small companies, they don't have the amount of data and the amount of exposure to the markets that we do. Right. And, and I think that a lot of them just, they kind of just want to get on the phone and talk about it, right, and maybe what they're thinking or trying to figure out how they want to be thinking. And I think being able to really kind of dig in and educate yourself, whether it's just reading the Wall Street Journal, or Bloomberg, or whatever it is that you want to read. You know, and just really trying to be educated, you know, without making predictions, of course, because that's where I think you can get in trouble. And just talking to brokers and talking to clients and just really trying to stay relevant. Because eventually when it turns on the people that are a good resource for their clients, those are going to be the first people that they call.
Mordecai Rosenberg:Hmm. Yeah, that's a great point. So in some ways, this is a great opportunity, people are willing to pick up the phone, they're right, they're not, they're not getting the same number of cold calls for refinancings.
Craig Branton:Right? And yeah, and it's it, maybe it's cold or warm, but it's I think it's, you know, I think you got to somewhat take your sales hats off in certain situations where, you know, deals are not likely to happen, because it can make you make yourself a lot more approachable. If you have a conversation with somebody, but it's, you know, it's a call just to kind of, hey, check in, how's this deal going? You know, or Hey, aren't you happy, you did that 2.6% rate last year, like, I mean, and just kind of staying in front them without the sales hat on, and trying to build that relationship so that they feel comfortable in calling you if they've got questions, or maybe they've got questions on their loan, or they've got questions just on the market in general, I think it makes you a lot, a lot more approachable. And a lot of market cycles aren't really like that you don't really have time to have those kinds of conversations with people that you maybe aren't transacting with at the at the time. So I find myself doing that a lot, and just reaching out to clients and just having discussions. And, and I think the other thing is, what's really powerful in our business, is if you can advise a client and to maybe maybe it's your deals, not the it, whether it's not the right time, or just whether it's not the right deal, based on what they're looking for, if you can kind of help them guide them to that decision. And you can, it's okay, if you don't get every deal, right, it's much better to, again, be seen as an advisor versus somebody that's constantly trying to sell you something. And so I think that that's one thing that I've always tried to do with my clients. And again, I mean, we were doing Freddie Mac SPL, when Freddie Mac SPL was the best deal in town. Most cases, right, so we were pushing that hard. But it wasn't always the right deal. And so I think being able to, you know, have that relationship with someone just builds trust. And I think that builds, that's where that's where the referral business starts. And everything kind of comes from from those types of relationships.
Mordecai Rosenberg:Yeah, you know, interesting is, I think, to be an advisor, I think that is, that's incredibly valuable if you can be a real adviser to to a client. But I think the other role that you can take, because some people might say, Well, yeah, but what am I going to advise, I have no idea where the where the markets going, like, where's that right? The other way you can do it is that you can ask them to just the client advisor to you, right, because I think, you know, people like to receive advice. But sometimes even more than receiving advice, they like to give advice. If I recall, if I were giving you ideas on on Oh, like, you know, you're wanting to try selling this, I'm that's fine. But if I called you and asked me, I said, Look, I want to get your opinion, like, you know, where should I be focusing today? Like because, you know, we're where the market is like, but to look at the climate thing. You know, here there's talk of the recession or recession. We have all this inflation, you're experiencing it in the multifamily market, like what's going through your mind like what are you thinking about? How are you preparing for a recession? Like what are the things that you're worried about? What are things keeping you up at night? And then let them kind of like tell you to open up to what they're what, what is a multifamily owner worried about an inflationary environment? Are they worried about their low maturity? Are they worried about payroll costs, skyrocketing insurance costs, fuel, you know, gas costs right and get them to, if I advise you, and you can, depending on the relationship, like you can say, like, look, you know, you see what I'm what I'm, how can you how can I be if you're in my shoes like how can I be of service like no Given that, what else can I do have value, but really letting the client be, the adviser to you? What do you think about that?
Craig Branton:Well, so I agree. And I think everything that you just discussed is, is typically when you have an open ended conversation, I think with somebody right now, there's so much stress, like, I mean, the fundamentals of multifamily are obviously very good right now, right. And the people that are concerned are the people that have floating rate loans or loan maturities. And what I find is that all of those topics that you just described come up in just about every conversation that I have prompted or unprompted, because a lot of them just kind of want to send it to somebody that's like, their, you know, somebody that they you know, is in the business that understands, right. So it's, it's a little bit of that, and one of the things that I really like to try to do is talk to them about how their underwriting deals or how they're looking. Like, to me, that is like the most kind of powerful information, you know, like, how are you dealing with rent growth in your pro forma? Like, why right, like, how are you underwriting, you know, potentially increase in expenses? I've noticed that a lot of management companies have slipped a little bit here, at least in Denver, how are you getting your arms around an exit cap at all? Or are you getting your arms around? Can you, you know, are you how, what, what types of challenges are you seeing in raising money? Right, I like to hear those kinds of things, right. Like, there's a lot of fixed income alternatives out there that are low risk, a lot of these multi deals are still even at IO are still very, very thin on cash on cash. And I think IRRs are, you know, one of the things that everybody looks at in a pro forma when they're thinking about investing in a deal are, are really hard to predict right now, I think the only thing you can really count on is the cash on cash. And so I love to be able to open up the pro formas with people. And really, because I think that's where you can really get into their like mindset. How they're thinking, right? And you know, are you thinking short? Are you thinking long? Like, if you talk to anybody a year ago, everybody was like, well, we're doing a bridge deal. We're a two or three year deal, like, What are you talking about? We've got 20%, rent growth, like rates are two and a half percent, like, you know, we're gonna turn this thing with a exit cap of 475. And we're gonna bump rents, and you know, we're gonna make it 20 IRR, 2.2, multiple two years?
Mordecai Rosenberg:yeah.
Craig Branton:That's unfortunately not going to happen right now. At least.
Mordecai Rosenberg:Yeah. Yeah. This is how I always would sell FHA financing. There's a lot of people. I mean, there's a lot to complain about with FHA financing. I mean, it takes it takes six, nine, twelve months to get your loan. Yeah, there are, you know, the reserve requirements might be higher, but it's 35 year old self amortizing debt. Yeah. And what what, you know, what I used to say, you know, is that your multifamily? The fundamentals are good, right, like the one risk that you have his loan maturity, okay. And your your hope is that when your loan matures, it doesn't happen to be at a time where there's no liquidity in the marketplace.
Craig Branton:Yep.
Mordecai Rosenberg:So and so now I'm calling everyone up and saying, See, I told you so.
Craig Branton:Exactly, I know!
Mordecai Rosenberg:Yeah, that is your to remind people also of like, what like, remember what your mindset was, like, two years ago, when he said, when I asked you about longer term debt, and you said, No, I'm just doing a bridge loan three years, it's gonna be it's gonna be fine. There's something to be said for even, you know, even in this environment, let's say if you wanted to be selling FHA debt, the bottom line is like, you're not getting your loan for another, you know, it could be not nine months or twelve months, who knows where interest rates are at that time, really bad, then you don't have to close up on that loan. But the business plan or having some amount of your debt that's that's long term self advertising, that that allows you to sleep I mean, that allows you to sleep at night even in maybe you have to take some lumps today, but I don't know sleep is a pretty valuable commodity.
Craig Branton:I know! Yeah, I mean, it's, it's, you know, I think, generally speaking, you know, it's multifamily is always a balance of flexibility or or certainty, right. And I think, pretty much just about everybody that's had flexibility or floating rate loans or less prepays over the past 10 years is probably done better. Just because they can access capital easier, paid less than prepayment penalties, maybe had more flexibility to sell. But we also were in this unbelievably low period of interest rates. We I did a presentation for some good has been commercial brokers last week. So we're doing some digging on interest rates, but kind of goes to some of the conversations I've had with investors. But from 1992 to 2012, the day over day, 10 year Treasury rate, average up, I literally scrolled every single day, from 1992 to 2012, the average tenure interest rate was 5.08%.
Mordecai Rosenberg:Wow,
Craig Branton:From 2012 to 2022, that was 2.08%. So in the last 30 years, you've got two very, very different sets of circumstances related to interest rates. And so a lot of the conversations I'm having with people that have been in the business a lot longer, they have a much different viewpoint of where things are going. A lot of people think that, you know, you know, interest rates are just too low for too long, right. And we're used to dealing with four or 5% 10 year treasuries, right. And then there's maybe some people that haven't gone through that, that are along the mindset of Well, hey, you know, we've just risen 400 basis points or whatever, 500 basis points, if you're talking about the Fed funds rate, in the last 12 months, well recession, we're going to come back down and you know, maybe we want shorter debt, right, versus some of the older school folks that may say, Well, you know, we may be here for a while. So those are just kind of some different conversations. And people that have dealt with different market climates, have different risk tolerances, or just maybe never expected it to go up this quickly. But, again, just kind of some interesting kind of viewpoints of people that have maybe been around for a little while versus, you know, some of the people that are just, you know, within the last 10 years in this last cycle.
Mordecai Rosenberg:Yeah, yeah, I heard an interesting statistic, actually, by the Cushman economist, but that that the CPI growth, if you look at CPI, and you strip out shelter costs, you know, renting what it costs to live, your expense costs have actually gone down has started to go down, but rent costs that have been keeping it keeping it high. Right. And I was thinking about that, because in some ways, every time you have a transaction on a multifamily property, like after every time it sells, that means there's gonna have to be another rent bump, because someone's buying it for upside. Yeah. So like, you could say that, that you could see how keeping interest rates high, like they, if they were trying to slow down multifamily transactional activity, like there would be, you can see how they can come after multifamily, specifically given the percentage of the cost and that, you know, but that kind of gets to Alright, well, what can you do today? Right, immediately another thing that you that another, another avenue of conversation, which is alright, look, we know, we don't have interest rates at two and a half percent anymore. Okay. But you have, but what are your options today? Right? Like, first let's let's, you know, it's like radical acceptance. Like, let's just accept that this is the environment that we're in right now. Yes, interest rates are higher, but does it make sense to put on tenure money for three, five, your money or whatever, you know, I'm in this market, and maybe you have to maybe have to put some cash in it, but is there you know, maybe scenario playing, just see how they're thinking in different scenarios, helping them think through those options?
Craig Branton:Yeah, I mean, I would tell you that like, just in my conversation, it's really hard for people to stomach six and a quarter 10 year deal right now. It's just, that's a tough, tough thing to do. Just based on how quickly this has gone up, right? I think we've been living in this 30 days CPI cycle, as I like to call it, it's like, it's like the the levels of grief. Right. So like, the CPI report comes out on whatever the 13th of every month and the first like, five, six days, you're just in disbelief, you're shell shocked, rates just went up 3040 basis points. And then all of a sudden, you're you're having new conversations. So instead of a, you know, 3%, right, now you're talking in the fours, which is people haven't seen in a while. And then a couple months later, now we're in the fives. And you know, but point is, is as you get through that 30 day cycle, the market starts to adjust a little bit, adjust, adjust. And then at the end of that, the last 2025 days in that monthly cycle, you're like, alright, I can finally do deals. Again, people are kind of aware, like, you know, we could still make this deal kind of stretch and work. And then the next one hits, and you're right. And then it's like, now you're in a new world, right? Because now the Fed doing whatever they're doing differently based on that data. And so it's like we've been in this like, horrible like, from just horrible in the sense of trying to do business, this horrible cycle of this, just the CPI world that we live it and how that changes how it changes the climate it literally every 30 days, and it feels like we're in a new place, and we haven't had that time just to settle in. So we're hopeful that maybe we can find had time sometimes.
Mordecai Rosenberg:Yeah. So you want to sign up deals on like the 20 a day, 20 to 25th day after...
Craig Branton:That's like the only time you can sign up. You know, because when rates go up 3040 basis points, people don't do anything then Right, like in the first few, like people are like, shocked by it, right. And it just creates this like shock in the market. And then people need to hear it enough over and over again that yeah, there's still not this bank that's at 475, when rates have now moved to five and a half they need, you know, it's just such a processing thing that we've had to go through over and over and over and over again, with Yeah. And 2022 Ever since really, since January, February, I mean, it's just been this, this very, very challenging cycle of, and I think, you know, to your point earlier, just about, like, you know, the two different approaches you can take as an originator, you can, you can go take a vacation right now, a long one, but you may, you may never make it back. Right. And so like, I think the best thing that at least we're we're trying to do is we're trying to stay here, we're in the office where we're trying to talk to as many people as we can, trying to just absorb data, be a sponge, and try to be a resource for our clients. And I think that is, you know, sometimes it's hard to fill the days and it's frustrating. And it's, you know, it's tough, right, but like, we're all dealing with Wailord loan volumes that we're used to, but trying to find creative ways to stay positive. Stay in front of our clients. We can't always be positive. I mean, the information isn't positive, but we can try to have a positive spin, like you said, right in the beginning.
Mordecai Rosenberg:yeah, and maybe that's like, you know, come to a close, maybe whatnot. Another thing that that salespeople should think about is maybe establishing other alternative goals also to help to their day, right? It's not, because if you're if you're measuring the success of your database on how many deals you sign up, you know, these are going to be you're gonna have some disappointing days. Months, right. But if it's like, how many valuable conversations, how many clients, can I add value to, you know, in conversation, and where you're at where that I can learn from or provided by suggest, you know, it's because that I think you're right, this is, this is a great opportunity, because a lot of people aren't going to go on vacation and say, you know, what, I'm out like calling, you know, call me, check back in a year, see what was going on. Right. And this is a time when you can, you know, it will separate the wheat from the chaff. And you can you can, if you're able to add value and be there consistently for your clients during now you can you know, when the market comes back, and then we'll come back, it's always cyclical, you're then then you're they're gonna remember the value that you provide it.
Craig Branton:I agree. I agree. And I think, yeah, trying to find creative ways to add value to clients and find ways to talk to them and open up to them. And, you know, I think now's a better than anytime to find ways to build relationships. There's more time for lunches, there's more time to you know, get together than what what is normal, and it may not be directly, you may or may not be able to see a way to a deal by what you're doing in the short term. But those like you said, it is cyclical, those deals will come but the relationships now you can build and I think that's, that's what our focus is and trying to stay positive. You don't want to always be negative on everything you say, because then nobody wants to talk to you, right? You know, you need to try to be able to, you know, do the best with what we've got, and I think that's what we're trying to
Mordecai Rosenberg:Yeah, and maybe brokers can also sign up to sell Cutco knives, you know.
Craig Branton:It's a good side job.
Mordecai Rosenberg:Yeah. Cuz like no matter what the economy is, it really feels great to cut through a shoe.
Craig Branton:Yeah, it does, it does...or a steak!
Mordecai Rosenberg:Yeah. Craig. Well, thank you so much. This was really invaluable, especially during during this wild time in the market. So so tremendous amount of insight. So thank you so much for your time.
Craig Branton:You got it. Thanks for having me. I appreciate it.
Mordecai Rosenberg:All right. I'll talk to you soon Craig.
Craig Branton:Take care. See ya, Bye.