Posts tagged "integrity"

JC 020: Having a good reputation matters in real estate with Peter Nintcheff

August 9th, 2017 | no comments

Being fair and honest in business leads to results

Peter Nintcheff is the in-house legal counsel for The Goldberg Companies, a national multifamily real estate developer headquartered in Cleveland, Ohio. GCI specializes in developing, owning and managing high-end apartment projects in Northeast Ohio, the Carolinas, Florida and Texas.

As general counsel, Peter is responsible for handling all legal matters for The Goldberg Companies.  His primary duties are preparing and negotiating all legal documents for the acquisition, development, financing and disposition of real property.  Peter also advises the company on leasing, zoning, tax and litigation matters and works closely with the executive team on all business aspects of property due diligence, financing and management of the company’s real estate assets.

As in house counsel, Peter is involved in every step in the development, construction and management of each project. He’s a transaction attorney who writes fair and neutral contracts to get deals done.

Peter believes that in order to have a highly successful business, you must maintain a good reputation in the market and always be fair and honest in dealing with buyers and sellers.

Operating with integrity allows Peter to build teams in multiple markets to accomplish the mission. Working with a strong team that includes complementary skills sets and different approaches makes accomplishing the job fun.

Five key points:

  1. You don’t have to be the best or strongest, or smartest in your field. You just have to utilize your natural skill set to the best of you ability to excel.
  2. Think of attorneys as guides who are able to help real estate professionals navigate the variety of issues that arise during due diligence and property transactions.
  3. Ensure that your purchase contract allows for an appropriate due diligence period. Give yourself plenty of time to do your due diligence on each property and the option to get your money back if your criteria are not met in that time period.
  4. Include a seller default provision in a purchase contract to ensure that the seller cannot negotiate / search for a better offer from a third party during the due diligence period.
  5. The buyer with the most money is not always the best buyer for a deal. Do your due diligence on buyers and on sellers to ensure that you are dealing with reliable, fair and honest people.

Favorite athletes: John McEnroe and Wayne Gretzky.

Favorite book: Running with the Kenyans by Adharanand Finn

Peter trains for success by planning ahead and being prepared.

Check out The Goldberg Companies online, http://www.goldbergcompanies.com and connect with Peter on LinkedIn or send him and email, pnintcheff@goldbergcompanies.com

Thank you Peter for taking time out of your busy schedule to share your insights with us today.

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonline.com

 

POST GAME REPORT: Episode Transcript

JC 020: Having a good reputation matters in real estate with Peter Nintcheff

Being fair and honest in business leads to results

 Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

 

John Carney: Welcome back to The Real Estate Locker Room Show everybody. I’m your host John Carney, coming at you again today from the sunny west side of Cleveland, Ohio. Joining me in the locker room today to talk about commercial real estate development and multifamily ownership development and operations, is the in-house legal counsel for The Goldberg Companies, and my cousin, Peter Nintcheff. Pete is the general counsel for The Goldberg Companies, which is a national real estate developer headquartered in Beachwood, Ohio, which is an eastside suburb of Cleveland, for those of you who are not from the northeast Ohio area.

GCI is a developer, owner and manager of high-end apartment projects in Northeast Ohio, North and South Carolina, Florida and Texas. GCI also owns and manages approximately 500 square feet of office, retail and flex space.

 

Prior to joining The Goldberg Companies, Peter was in private practice for six years. Now, as general counsel, he is responsible for handling all legal matters of the company. His primary duties are: preparing and negotiating all legal documents for the acquisition, development, financing and disposition of real property. Peter also advises the company on leasing, zoning, tax and litigation matters and works closely with the executive team on all business aspects of property due diligence, financing and management of the company’s real estate assets.

 

In recent years, The Goldberg Company’s focus has been on the development of Class A apartment projects in high-end suburban markets, primarily in the southeast. GCI is the developer, general contractor and manager of all new projects and Peter is involved in every step of the process. The goal is to own the property long term. So GCI pays particular attention to detail in order to produce the highest quality product in their respective markets. Sounds like The Goldberg Companies keep you pretty busy Peter!

 

Peter Nintcheff: Yes, we’ve been very active in the past few years. As you know, multifamily has been a very strong sector. We’ve developed several projects and currently have about 1000 units under construction. So yes, it’s been very busy and it’s been an exciting time.

 

John Carney: Yea cool. Can’t wait to dive into that. But before we kick off your day-to-day expertise and knowledge of what you do for The Goldberg Companies, I like to just get the show rolling with a stretching question, sports related of course. Who is your favorite athlete and what, if anything, have you learned by being a fan of that athlete and applied to your career?

 

Peter Nintcheff: My two favorite athletes of all time are Wayne Gretzky and John McEnroe. I admire them the most, I think, because if you look at both those guys, neither of them were the biggest, strongest, fastest athlete in their respective sport. Wayne Gretzky had a vision like nobody else. but there were people who were bigger, stronger and faster than him. I don’t know what he’d be like in today’s game—today’s hockey is a lot different. But he used his vision and his intelligence and his incredible skill to overcome any speed or strength deficiencies he may have had. And the same with John McEnroe. He was just a wily guy on the court and really knew the game and understood his opponent.

 

Those two guys were at the top of their sport, and again, not given probably the best physical tools. So I think if you step back, what you can learn from them is they had a very strong skill set, and they used that skillset to become the best. Maybe they weren’t the best or had the strongest skillset in everything, but they used their smarts and what they did have to be the best at their respective sport.

 

John Carney: That’s interesting too. Wayne Gretzky, at the end of the day, had a team of people supporting him. He had a great cast in his younger years with Edmonton. And then when you’re playing tennis, that’s a gladiator sport. There can only be one winner. You have your coaches, your trainers and your nutritionists and a whole cast these days. But probably back in John McEnroe’s’ day it was a thinner team. That’s pretty cool and interesting.

 

Peter Nintcheff: Yea, two different sports, like you said. One’s team and one’s individual, and they are actually two sports I played growing up and really enjoyed. So, I think you can learn from sports; both doing a team sport and working with your team mates, and an individual sport and really learning from yourself and relying on yourself out there. Like you said, you’re on an island and you’ve got to be the one.

 

John Carney: So, let’s jump into the exciting world of developing, owning, and operating a multifamily/commercial real estate business and being a critical player. I always stress with people who are starting out in real estate (the seasoned people playing at the high level know this very well) that your accountants and your lawyers, are important team players for any size real estate business. Even if that business only owns one rental property or an Airbnb. Because they’re part of the initial structure and the protection. So, from the legal side of it, can you just talk a little bit about how you use the law to protect your client and to work towards the best outcome?

 

Peter Nintcheff: Sure. So, as an in-house counsel, my role is a little bit different than an outside attorney that somebody would engage. You take a development process and if there’s ten steps, I’m involved in step one through ten. Whereas, if you’re engaging an outside attorney, you may bring them in in step seven, and have them guide you kind of towards the end.

 

So when I say I’m involved in step one with our company, what we do is we try to go out and find land, do our due diligence, purchase the land, then we’re going to obtain a construction loan, build it, own it, manage it. So it’s a long process and I’m involved in every step. So that keeps me involved in the due diligence (i.e. is the zoning in place?) and possibly meeting with municipalities and meeting with even local attorneys to understand the zoning and the due diligence on the property, and going through all those steps.

 

Like you said, I do agree that relying on an attorney is, even in a small transaction or a big transaction, very important. Because there can be certain issues in any real estate transaction that can arise, where they can kind of guide you through the process, whether it be a title or a survey issue, a zoning issue, or a tax issue. I was a real estate attorney before (in private practice). So I view myself as a very good real estate attorney and know the legal aspect well, but I don’t know other things. So I have to go out and rely on outside counsel for tax advice, which plays a very big role in our business. Because we’ve been in business for about 50 years, we have smaller assets that we have sold off in recent years, and we’ve had to go out and 1031 those assets (1031 exchange). And then we use the proceeds from those assets to acquire new assets. Because it’s a very tax-driven method of doing it, I’m going to rely on my outside tax attorney to guide me through that process. So there’s a lot of different issues that could come up, and there are different people and different types of attorneys that can help guide you through those issues.

 

John Carney: Alright, just to further that, you do a lot of contract work. I would imagine reviewing contracts and drafting contracts. What would be, if you’re, say, going to purchase a property, like The Goldberg Company is going to purchase a company, and you’re given a purchase agreement by the seller, what are the things that you look out for or that you could advise our listeners to look out for if they’ve never seen one of these before, or if they’re reviewing it? What are the highlights: good points, bad points, that you might want to look for in a purchase agreement?

 

Peter Nintcheff: Sure. Number one, it depends on what you’re buying. I’d like to say that I’m a transactional attorney. I have form contracts that I start off with that I think are very of neutral. Both the buyer and the seller theoretically want to do the deal. So I want to do something that’s fair, something that’s pretty straight forward. But it really depends on what type of property you’re buying.

 

So right now, we’re doing more land purchases. We’re not going out and buying existing apartment communities. So those are two very different purchase agreements. So for a land purchase agreement, I’ll talk more about concepts. What I’m really looking for is an opportunity to have a due diligence period. I think for our group that’s probably the most important thing. Initially I’m going to ask for about 90 days to do my due diligence and have that be a free look. We’ll put money up in an escrow account, say $50,000 to $100,000. But in that 90 days I get to do my due diligence, and if I’m not satisfied with the property, I want to have the ability to get my money back.

 

And during that due diligence period, we’re going to be doing our soils testing, our environmental, our title, our survey, all of our due diligence, to really get our arms around the property. So that, number one, is one of the first provisions that I’m going to ask for, is a due diligence period.

Other than that, I think what the contract really has to do is just kind of spell out what’s going to happen: who is responsible for payment of the transfer taxes; how real estate taxes are going to be pro-rated; what’s going to happen at closing; when that closing is going to be. Another real big issue for us, is when that closing is going to be. So, I’m going to have a 90-day free look. If the zoning is in place and everything is in place, I’m willing to close within 15 days after that.

 

I’ll give you an example. We’re looking at a property in Michigan which has significant environmental issues, so my due diligence period is longer. And we’re looking to get tax increment financing money, so we’re meeting with the city. All that takes a lot of time, so I’m going to look for a long closing period.

 

Sometimes if my due diligence period expires in 90 days, I may not close on the property for a year after contract execution, because it takes a long time to get through the process to where we’re comfortable with the environmental and getting all the city and state approvals that we’re going to need. So, you really want to build those time periods in from the get go.

 

Because I’m doing my due diligence, I’ll ask the seller for certain representations. But oftentimes they’re not willing to give me too much. They’re going to say, “Hey buyer, you go rely on your own due diligence.” But I’m going to ask them to say, “Hey, yes, they’re not aware of any environmental issues, they have the authority to sell it, they own clear title”, provisions like that. You’re going to ask them if they know if there’s anything wrong with the property. But again, they’re going to try to limit that.

And with land, I’m not too worried about that. In purchase agreements, oftentimes you’ll see a condemnation provision or a damage and destruction provision. Meaning, if something happens to the property, if it catches fire during the contract period or if a municipality initiates a taking during the contract period, that they have the ability to get out. Usually those aren’t big issues, and I’m not going to negotiate those too heavily, but that’s something you’ll see in a contract.

 

And I guess the last thing that has been a hot button for us of late, especially on a deal that’s going to be under contract for a long time, is the seller default provision. Usually we’re in markets where there’s a lot of demand, so there’s a fear that the seller goes and tries to get a better offer, and tries to go to a different buyer. So, usually in a default provision you’ll see a specific performance; meaning that the seller has to perform, and that you can sue them if they haven’t. Or what we really want is: we’re spending a lot of money during our due diligence process, up to $100,000. If they default for some reason, if they don’t step up to the closing table, I want the ability to get out of my agreement and then come after them for the money that I’ve spent on my due diligence.

 

So, those are some of the provisions that I’m looking for in our contracts. And again, like I said, if you’re doing a built project, it’s a little bit different. You’re buying a property where there’s tenant leases in place, and you want to make sure you get to rent rolls. There’s different types of due diligence that you’re doing, and some different things that you’re going to be concerned about because there’s a physical structure in place.

 

John Carney: Right, so that’s all really good advice and a great summary of some of the things you want to be aware of when you’re making any offer. I suppose on a single-family home purchase it would be called an inspection period. But that’s — I’m not going to say it’s interesting — it’s a great explanation on the seller default. I would imagine that is something that you see included, or something that you add in your contract language. Just knowing that you’re trying to protect against something that could potentially happen? I’m sure it’s happened in the past. I’m sure there’s a lot of stories out there; people who have lost a deal because they didn’t have that provision, right?

 

Peter Nintcheff: Well, I think you’ll pretty much see both a seller and buyer default provision in every contract. And with the buyer default provision, you’re going to see that the seller will be entitled to the earnest money they put up. And again, for a piece of land, we’re trying to put up a small earnest money deposit because what’s the seller really losing?

 

In a built project, you’re going to see a much more significant deposit. And, maybe one contract execution and then another one after the inspection period ends (in between closing). So you’ll see both of those in pretty much every contract.

 

In a seller default, usually what you see is, the buyer has the right to either terminate or sue for specific requirements. But like I said, we try to add in a little bit more and just say, “Hey listen seller, you’re also going to reimburse us for our costs.” And we’re trying to hold their feet to the fire to bring them to the closing table.

 

Because if we have a property under contract for a year, not only have we spent a lot of money, but we’re getting ready to get our development team into place and we’re looking at this as a way to increase our capital for our company in a future ownership deal. And obviously, if we’ve invested that much time in it, we’re very excited about it and we want to close. So it’s just a little something extra to make sure the seller performs. But I think you’ll see both the buyer and seller default provision in every contract. We’ve never had an issue, knock on wood, and hopefully that continues, but certainly you want to protect yourself. There are times when a party doesn’t perform.

 

John Carney: Well you haven’t had an issue because The Goldberg Companies has such good in-house counsel, right?

 

Peter Nintcheff: That’s right. I’d like to say that, but we also have a good reputation and a proven closing track record. We’ve sold a few things—we’re usually not sellers of properties. But when we sold some smaller assets we are very selective in our buyers too, and I think that’s important. Sometimes the best offer isn’t really the best offer. If you have a known buyer who has a proven track record of closing, they may be your best buyer, even though they’re not offering the most money.

Sometimes, what we’ve seen is: you get a buyer who offers the most money, you get your due diligence period and they’re going to come back to you and try to re-trade on you and lower their purchase price. They’ll say, “Well, we found this, this, and this wrong with the property. We want the purchase price lowered by x.” So you’re kind of back to where you started. And maybe an offer that was lower initially would have been a better offer because it was a better buyer.

 

So you want to make sure you do your due diligence on your buyer and your due diligence on your seller. So it’s good to know who you’re dealing with. I think we’re known as having a good track record as owners and buyers and sellers. So I think that’s important.

 

John Carney: That’s a great point, and something that I believe in. And if you listen to Warren Buffet or anyone who’s running a highly successful business (Richard Branson) you want to have a good reputation in your business, whether you’re in the real estate business or retail business, right? Because it does matter.

What you’ve just said, I think is worth reiterating: it matters if you have that reputation for being somebody that closes. You’ll probably inevitably do more deals, grow your business, and be more profitable. As opposed to earning the reputation (reputations are earned), o trying to hammer in lower pricing at the end, maybe illegitimate concerns at the end of a due diligence period, or just not being able to get your financing in order and close a deal. Those are good points that you brought up.

 

It matters when you want to play at the highest level, to be entering the arena with a good reputation as a seller who’s fair and honest, and as a buyer that says what they are going to do. Is that a good way to look at it?

 

Peter Nintcheff: Absolutely. I agree, and I thank you; you hit the nail right on the head when you said fair and honest. And I think that’s the approach that I try to take from the get go when I’m negotiating a contract with a buyer or a seller’s attorney, or even just dealing with the buyer or seller themselves. If you’re fair and honest with them and you expect the same from them, I think you’re ultimately going to have a good result. And even when we’re looking at a piece of property where there are some issues, and we’re not sure if we’re going to be able to get through those issues, say from a due diligence standpoint, we always keep our seller informed of what we’re doing, where we’re at, and say “Hey listen, we have some environmental issues, and we really have to get our arms around them, and if we can’t, we can’t purchase the property.” And they’re saying, “Listen, we’re ok, because you’re being honest with us. We understand that there are issues, we understand that you have to get through them.”

 

So I think if you’re fair and honest throughout the process — like I say, we try to keep our sellers informed of what we’re doing and where we’re at — I think that goes a long way. Good communications, and so that there’s no surprises down the road and they know that we’re doing our homework and if we can’t get comfortable with it, they understand. And I think that helps our reputation out.

 

John Carney: Perfect. Well one question I wanted to ask based on, sort of, the John McEnroe conversation from earlier is: when you left private practice and you started out at The Goldberg Companies, which puts a lot of responsibility on your shoulders, was that like that championship tennis match? What was that experience like? And maybe you can talk just a little bit about the team you have around you internally, because we believe it’s a team sport at the end of the day, real estate.

 

Peter Nintcheff: So that’s a good analogy. When I left private practice — because I was at a medium sized law firm, I believe there were about eight real estate lawyers in our department. We had tax attorneys, other business attorneys, litigation attorneys. So if I had any questions — because I don’t know everything and I don’t pretend to know everything — it was easy to go down the hall and ask colleagues questions or for some help. Maybe they changed something that would help me out on something I was working on. And then when I came in-house, I’m still the only attorney here, so I was kind of on an island, so I kind of had to do everything by myself. But I didn’t do everything myself, let’s be honest.

 

So we set up kind of a team, I have a team of outside attorneys that I use. I have tax attorneys, I have local attorneys in the states that we are in that I use for guidance. So it took me a few years to kind of develop that network of people who I really rely on. I have a title company that closes all of our deals in North Carolina and they’re fantastic. I give them business and they pick up the phone anytime there’s an issue. So you build these relationships and you build these networks and you get a group of people that you rely on and trust, and it makes your life and job a lot easier. And it makes these deals that we do go a lot smoother, and that’s really what you’re looking for.

 

And since I’ve been here, we really have developed an in-house team as well. Like I said, I’m the only, I guess, practicing attorney. There are other people here with law degrees, but we have a due diligence team. We have a director of acquisitions who goes out and finds our property. We have an investment officer. We have a construction manager. The four of us meet every week, and we go through deals. We have very different ideas, and we’re looking at deals in very different ways, but we complement each other very well. The development manager, wants to close a deal, and I sometimes have to put the brakes on things and say, “Hey listen, we need to look at these issues.” Our construction manager can read the due diligence reports and understand what kind of soils we’re looking at. Are these right for development? Can we build here? He can read the environmental reports. And the investment officer, obviously, is looking at if will the pro forma work, will it pencil, are we going to be able to get the return that we desire?

 

So when you put the four of us together, we have very different skill sets and different personalities. But I think in a real estate transaction it kind of covers almost everything that you need, at least in house, to get us to analyze these deals well. And then we use our outside folks as well to help us. Whether it be with a zoning issue, or if you’ll use local counsel for that.

 

So when you develop these networks and you develop these teams, it really helps. Especially when you have people who have complementing skillsets and personalities and work together well. It makes the deal a lot smoother and a lot more enjoyable. It makes for good constructive discussion and it makes an exciting process.

 

John Carney: That’s good to hear, because it sounds like you guys are having fun. You’re finding great deals and you’re getting a lot done. We’re kind of at the point where we wind this down with a few final questions, Pete. I’m putting together a pretty extensive reading list now by asking all of our guests a few questions that we call our two-minute drill. Do you have a favorite book that you’ve read recently along the business lines, that you could recommend or a nonfiction book that you think is something that you turn back to once in a while? Maybe it inspired you or taught you something that you apply every day?

 

Peter Nintcheff: I’ll be perfectly honest, I don’t read a lot of books. I spend most of my day reading, and so then when I’m not in the office, I haven’t been reading a whole lot, so I’ll have to get back to you on that one. I don’t have a whole lot of advice. I’ve read a few running books lately, which I’ve enjoyed. There was one, “Running with the Kenyans,” that I thought that was very, very interesting, about an Englishman who lived with Kenyan runners for a period of time to try to figure out why they’re so far superior. That’s the only non-fiction book I’ve read recently. But you get good lessons from those as well. Good life lessons. No business books, sorry.

 

John Carney: Well look, it didn’t have to be a business book. Maybe I didn’t phrase that properly on my own list of questions. It could also be a sports book, so you ticked that off. But I mean, you are a runner, you’ve run multiple marathons, and we know you’re a Spartan.

 

Peter Nintcheff: Now I’m a Spartan. Thanks to you John. I enjoyed that experience as well.

 

John Carney: Alright. You’ve talked extensively about what you do day-to-day. Is there anything that comes to mind, like a come from behind victory where everything falls in line right at the zero hour to get documents signed and wires sent, that you can think of? And maybe an obstacle that you overcame to help bring a deal to the forefront? Or do you get everything ironed out smooth ahead of time.

 

Peter Nintcheff: Well everything has to come together at the last minute, and we’ve had quite a few of those. I guess I try to over-prepare. I try to really, really plan ahead and make sure, if I’m using local counsel, if I’m using a title company out of state, if the seller has attorneys out of state, that everything is going to come together without issue. And to do that, I think you really need to plan ahead. So I’m trying to plan weeks ahead.

 

I’ll just give you a recent example: my parents, my brother, my siblings, we were all in Wyoming a couple weeks ago at a ranch. We had no cell service and there was a dialup internet on the ranch and that was it. And during that time I was closing a transaction in Florida that we had been working on for about a year. So of course, it comes up, well, while you’re gone.

 

So the week before I was gone, I had everything that we could get done, done. And everything, using my team here to send things into escrow, to get all the documents signed that I didn’t have signed. But everything that I did have in my possession was signed. Everything was ready to go, gave detailed instructions, and it all came together on the Thursday that we were on the ranch. I was probably horseback riding or fly fishing at the time, but it’s nice — that felt really good to me, that I had a team here, that I was prepared, and I got our seller’s attorney on board and our seller on board, because they knew I was going to be gone, but we had to close. We had a tax deadline while I was gone, because of a 1031 exchange (your period ends 180 days after you sell, and you have to use your proceeds). And we were right at that period. So we had to get that done and with a lot of preparation, a lot of planning ahead, we got it done while I was without cell service and only had a dialup internet. I did check my emails a couple times on the dial up, which is certainly different than what we’re normally used to, but it was a good feeling.

 

John Carney: That’s a great way to exit this interview, Pete. I mean, always prepare. A good plan is better than a wish and a prayer, I suppose. Well, thank you very much for taking the time out of your busy schedule to join me in the locker room today, Pete. Is there any where the audience can find you if they have any questions? Is there a way to contact you? Is sending people to The Goldberg Company’s website the best place, or do you used LinkedIn or any social media?

 

Peter Nintcheff: I am on LinkedIn. That is really the only social media that I’m on. You can search my name, but it either comes out with me or my Dad, we’re the only Peter Nintcheffs out there.

Go on our website, check out our properties at Goldberg, just do a google search for Goldberg Companies. You’ll see some of the stuff that we’ve done, especially some of the stuff that we’ve done recently. I think is really spectacular.

I don’t think there’s any link to my information on the site, but email is my first initial and my last name @goldbergcompanies.com and I’m happy to shed further light on what I’ve discussed today, or certainly provide any insight that I can to you and your audience. And John, thanks for having me, I appreciate the opportunity to talk a little bit about what I do.

 

John Carney: Yea thanks. It was a great interview, and we will make sure that we have all the appropriate links in the show notes and the post-game report on my website. So there you have it folks. I truly hope that you picked up some actionable advice today from Peter Nintcheff, who is in-house counsel for the Goldberg companies.

Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher or Google Play, and hit that subscribe button to ensure that you never miss out on the pro tips from our great guests. The mission here is to help you elevate your real estate game by learning from the experiences of the people who are out there doing it every day.

If you like what this show’s all about I’d be grateful if you would leave us a five-star review on iTunes or whatever your preferred podcast platform is so that other like-minded real estate investors just like you are able to find this show online.

The post-game report show notes that I just mentioned, with links to this show and Peter Nintcheff will be available on my website: johncarneyonline.com/podcast and while you’re visiting the website you can look through the catalogue of past shows, or drop your email address into the newsletter sign up form to receive the occasional update from myself.

Remember to stay focused on your goals, have fun and stay in the game. I’m your host John Carney and until next week: work hard play hard and profit hard.

Thanks Pete. Have a great day and look forward to catching up with you and the family soon.

 

(Music Out)

End Audio

Connect with John Carney
Facebook: www.facebook.com/JohnCarneyOnline
Twitter: @John_M_Carney
Instagram: @johnm_carney

© John Carney 2017

JC 017: Apartments, Banking and Politics with Michael Gibbons

June 28th, 2017 | no comments

All people want to live in a nice property

Michael Gibbons is a highly respected investment banker with decades of experience successfully owning and operating multi family real estate. Mike is the senior managing director, principal and co-founder of Brown Gibbons Lang and Company (BGL) with offices across the USA and Global M&A Partner offices in more than 40 countries across 5 continents, which allows BGL to deliver their clients unparalleled access to corporations, investors, and opportunities globally.

Michael always had an interest in real estate and started out with a few doubles and a 4-plex. He learned how to install toilets and more importantly what it will take to run a real estate ownership organization effectively. The key is to build up the number of units that you are managing so that you don’t have to personally do all of the work.

Michael and his team are dedicated to providing well-managed, quality multifamily homes. Michael owns an interest in over 10,000 units and lives by the philosophy that each unit must be “good enough for mom to live in.” He believes that everyone deserves to be proud of where they live, and the apartment communities that he owns provide a safe, clean, well-maintained and friendly environment that residents are proud to call home.

Michael’s winning formula is to look out for undermanaged and/or poorly maintained properties and apply a high standard to maintenance and management. You must apply social responsibility to your real estate investments and success will follow.

Michael Gibbons is on a mission to save America. He is entering the political arena and running for a seat in the US Senate representing Ohio. He believes that “the government doesn’t create jobs, business creates jobs.” Michael doesn’t want to be a career politician. He wants to apply his business knowledge in Washington to serve the American people and accelerate the growth of the US economy.

Five key points:

  • Everybody has to start somewhere – Michael entered the business of real estate investing where many entrepreneurs start, buying single-family properties and working from the ground up to restore and resell them. The small details that Michael learned during his early days set him up for success in the future.
  • “If the unit isn’t ready for your mother to move into, it’s not ready to rent to someone else.” – people want to be proud of where they live. This applies to all income levels. BGL looks for undermanaged or poorly maintained properties and applies defined management strategies to improve the situation, providing people with a safe, clean, well-maintained place to live, somewhere they can be proud to bring their friends and parents to visit.
  • Find tenants that fulfill their side of their contractual obligations – always pay their rent in full and on time. It is dangerous territory for landlords to get into situations where they allow tenants to stay without paying rent for any period of time. This practice can quickly lead an investor to defaulting on mortgages. Retain high credit standards, source tenants that have pride in themselves and their property and they will in turn take pride and care for your property.
  • Utilize modern technology – install video cameras in your multi family investments. “We have found that with the technology that’s available now, if we put up camera systems, generally people behave properly if they’re always on camera in common areas.”
  • Every person involved in real estate is important – from the person fixing the electrical faults to the person vacuuming the hallways, insure that you have a team with the correct cultural fit and chemistry. Success comes when the work is fun and you’re surrounded by other people that “find it fun” and are also willing to put in the hard

Mike is a three-sport college athlete. These are his top three favorite athletes;

  1. Jean Gibbons – Michael father, world class athlete, wrestler & coach
  2.  Aaron Shea – former NFL player and Mike’s son-in-law
  3.  Tom Brady – NFL quarterback for the New England Patriots and godfather to Mike’s grandson.

Favorite books:

  1. God’s Gold: The Story of Rockefeller and His Times by John T Flynn
  2. The Constitution of Liberty by Friedrich A Hayek

You can reach out to Michael at BLG, http://www.bglco.com

For more information about Michael Gibbons US Senate campaign visit –http://www.gibbonsforohio.com

Thank you Michael for taking some time out to share your story with us.

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonlie.com

POST GAME REPORT: Episode Transcript

JC 017: Apartments, Banking & Politics with Mike Gibbons

Michael Gibbons is on a mission to save America

Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

 

John Carney: Welcome back to the Real Estate Locker Room Show. I’m your host John Carney, coming at you again today from Cleveland, Ohio. The goal for this show is to help the listeners raise the bar in their real estate investment game. Joining me today is a great guest, he is a mover and a shaker in the multi family world of real estate, specifically here in Northeast Ohio and I will let him talk to you about his formula for success in just a moment.

 

But I’d like to welcome Michael Gibbons. He is the senior managing director, principal and founder of Brown Gibbons Lang and Company. Michael provides an active senior role to client engagements and business development opportunities. Now Brown Gibbons Lang and Company, or BGL, is a leading independent investment bank serving the middle market. BGL specializes in merger and acquisitions, advisory services, debt and equity placement, financial restructuring advice and valuations and financial opinions. With global industry teams in business services, consumer, health care, industrial and real estate, BGL has offices in Chicago, here in Cleveland, Ohio, Salt Lake City and global MNA partner offices in more than 40 countries across five continents, which allows them to deliver unparalleled access to corporations, investors and opportunities globally.

So, we’re going to learn a little bit from Mike about when you scale up a business like BGL, and you get into real estate, you can certainly apply those business skills in that competitive environment of high finance to apartments.

Now, immediately prior to BGL, Michael was president and CEO of Underwood Newhouse and Company, a leading regional securities and investment banking firm in Houston, Texas. And prior to that he was senior vice president for McDonald and Company here in Cleveland. And recently, Mr. Gibbons has announced that he will be running for a spot in the US Senate right here, for a seat in northeast Ohio as well.

Welcome to the show Mike, thank you for taking the time out of your very busy schedule to share your experience with our listeners.

 

Mike Gibbons: Well I’m glad to talk to you John. I want to make one correction though, we’re no longer in Salt Lake City; we’re in Irvine, California, San Antonio and Philadelphia. And that was a brief stint in Utah where we were unable to really make it work there. And it’s kind of an organic process that you go through and as you staff various locations with various skills you take advantage of that, and we’re doing that.

 

John Carney: Your resume is extensive. We want to drill into the real estate, and we talk a little bit about sports, we call it The Real Estate Locker Room Show basically because there’s just as fierce a competition out there in the real estate market day in and day out, probably the same in the MNA market day in and day out as you would see in the super bowl, correct?

 

Mike Gibbons: Well, it’s a very competitive business. I was warned many times before I started it that the likelihood of success, particularly out of Cleveland — and that’s where I wanted a family, and really commuted to Houston for four years, in a very tough environment in Houston, and came to Cleveland and said, “You know, I can’t go back to where I was,” just wasn’t the right thing for me to do, and started BGL.

I had an early setback, far greater setback for my partner, as is noted in the name of the company Brown Gibbons Lang — well Kevin Brown was a wealthy entrepreneur and had a bit of wealth from an inheritance. We had become friends and we were going to set out, with his capital support and my deal skills I developed, and form a company. Unfortunately, Kevin was killed a month and a half after we started the firm in an offshore powerboat race. Actually, the Trump race in Atlantic City. I and a number of my friends were there to watch him and he came into the restaurant where we were sitting — and actually we were playing Blackjack. First time I was ever in a casino in my life. — And he said, “Go home guys it’s too choppy.” By the time we got home, sat around for an hour or two with my family, and we got a call from one of my friends and said Kevin had been killed in the race that he wasn’t supposed to run.

And it was an unfortunate occurrence, but it created the true entrepreneurial situation where I was left with basically my capital, which was relatively insignificant at the time, and a telephone. And that’s where we started. So it’s all worked out, and it shows you what you can do in America if you just set your mind to it. I’ve been very fortunate to have the opportunities I had, and we tried to make the best of it.

 

John Carney: So just can you just tell a brief — talk about how you went from investment banking and how you stumbled into real estate and what that looked like?

 

Mike Gibbons: Well it really wasn’t a stumble, John. I was very interested in real estate, literally from the day I got out of graduate school. I remember I read a book called No Money Down. Since I didn’t have any money, that was an important part of where it started from. And I began acquiring with very little down payment money, had a real estate license and used my real estate license. And the commissions I’d receive on the acquisition side helped acquire various things and would buy some double houses and eventually a four-suiter.

None of those were very successful but I learned a lot. Not only did I learn how to install toilets efficiently, but I understood what it would take to really run a real estate ownership organization effectively. And the key is to building the number of units that you’re managing to where you don’t have to do all the work. Because if you try to do all the work, you’re very limited in the scope of what you can know. And I started out that way, sold those off as I was advancing in my career. But again, I always had that interest and attraction to real estate.

I was in capital markets in the financing business, advising businesses, and I was always attracted by the relative certainty of the cash flows versus the various business I was working in. And I never really had any engineering training or I really didn’t understand how manufacturing worked early on. And obviously, I’ve been in probably one of every kind of manufacturer in the nation and got to learn about their processes and how they operated over the many years I’ve been in the business. But during that period I always had an attraction to real estate. And indeed I was part of a partnership in a regional investment bank where they permitted you to make investments outside the normal scope of everyday business. And I got a couple of partners and one of them ran the real estate. And at one point we got up to a relatively significant number of multi family units that we’d owned jointly. I owned a relatively small percentage of them, of the whole enterprise. But again, expanded my knowledge just from being around and looking at properties, buying properties, financing properties.

And then as my career progressed I found myself working with real estate enterprises. And I was always — my early days were public finance, I was using tax exempt debt to do financing for various enterprises. And at that point in time, under the tax laws in the United States where you created an increase to employment you could use tax exempt financing. And the firm I was with, McDonald and Company, was a very significant underwriter of that kind of capital back in that period.

So I just learned more about the financing markets, the mathematics of financing. And ultimately kind of left public finance and moved into more financial institutes in bank, corporate finance type activities; took converted mutuals to stock, in smaller institutions and worked with REITs – a few of them that worked back in those days. And then when I went to Houston, which was supposed to be a two-year stint that turned into a four-year stint, I did it largely because McDonald and Company had gone public. They didn’t have the same cultural fit that I had felt so comfortable in while it was a partnership, and really sought that kind of partnership structure where I could own a piece and help build a company, help build something that I own.

So in doing the thing in Houston I was already — I still had my real estate partners up in northeast Ohio; we were still acquiring and improving and selling multi family during that period of time. And when I came back to Cleveland and formed BGL I was all about MNA for 20 plus years.

And right around when the crash came, actually maybe a little bit previous to that, I had consented to doing a development deal while still at BGL. It was a multi family with an older gentleman that I had established a great friendship with. I did that, saw the deficiencies in the way that they were then managing the properties, and ultimately wanted to create an organization that I could use BGL and investment bank as a platform and create an organization where we had very fine management, and kind of fit my philosophy of investing in multi family. And we’ve done that now for seven or eight years, and we’ve achieved some pretty good milestones in that period.

 

John Carney: So yea, hardly a stumble in. That’s a correction without understanding the whole story, for sure. But so, I suppose the important take away I got from hearing the whole timeline was you started out with single family homes, a few duplexes, probably spent some evenings there applying paint and fixing plumbing without a license–

 

Mike Gibbons: Many, many.

 

John Carney: — so that your tenants could move in the next day. And that is a familiar story with just about every single real estate investor I’ve interviewed to date.

 

Mike Gibbons: You’ve got to start somewhere, you know?

 

John Carney: You have to start somewhere. And then what does that look like today? And where —

 

Mike Gibbons: Well, in a week — I don’t own 100% of very many things, I have a few I own 100% of, as far as real estate dwellings. But generally we’re operating in LLCs, oftentimes it’s the partners in the investment banking business, at times we’ll take in outside investors.

And I didn’t mention this, but early in the days of Brown Gibbons Lang, having been in Cleveland, I knew a lot of the developers in the region, largely stemming from my public finance days as a matter of fact. And I was in a very good position to — down a number of REITs formations, and we took them public while I was in Houston. And the real estate investment trust business changed considerably in the early ‘90s. Prior to that, you needed a separate enterprise to manage those businesses, or to manage the real estate homes that were owned by the trust. It was a very unwieldy, difficult structure to operate in and all that changed in the early ‘90s. And because of my relationship with some of those developers, because I had as much familiarity with REIT structures as anybody probably in the Midwest at the time — I wasn’t an attorney and didn’t work in those areas, I was really an investment banker that had worked with the formation of REITs –I was called on to use some of the expertise I’d developed to advise a number of REITs and their formation, and actually model those enterprises for largely a collection of partnerships; model those pre-excel. I was using Lotus123 back in those days. And created those models and took them to Wall Street, found an underwriting team and we took a number of REITs public where I acted as the advisor, BGL acted as advisor.

Around northeastern Ohio it was Associated States and Developers Diversified, both of those were enterprises that I advised on their formation. I ended up on the board of Associated States after about ten years, became an active board member, shared financial planning and really kind of studied where real estate performance was. Being in the Midwest, it’s very much different than if you’re in the coast or in you’re in the hot growth areas. We have a housing stock here that’s a bit older than most other locations, and I was always tied to Ohio and tied to Cleveland, this is where I love to live. I had spent four years commuting, coming back here every weekend almost. Coached my daughter’s soccer team, I was an assistant coach while I was working in Houston, so I was always connected to northeastern Ohio. So the natural place to invest was northeast Ohio. But the housing stock in a city like Cleveland or around Cleveland is very much different than you’ll see on the coast or in Florida or in Atlanta or in Dallas.

Having been on the border of public multi family REIT, I kind of studied what the differences were and where I thought I could make a difference and also do well for my investors if I had them. And kind of developed a plan. And generally we’ve stuck with working class housing, is what it’s called now. I think we were lucky enough to identify that earlier in the trend, and it’s now become a topic of conferences to talk about work force housing.

And I just have a philosophy about people and about where they want to live and how they feel about living in a certain situation. And I took that philosophy and applied it to my real estate investment. I believe that every single person in the United States wants to be proud of where they live, and they want their friends and family to come over and visit them and not be embarrassed of the maintenance levels of the property that they’re living in. They want to walk through a lobby that looks like they’re prosperous and they’re living in a well maintained, well managed facility. And I think that’s true across all income levels. I don’t think it’s any different, no matter if you’re struggling in a lower wage job to you’re a wealthy person that just doesn’t want to have any duties of home ownership. And I think every level of those you can do more and more, commensurate with the level of rents and the level of profitably.

So what we look for are properties that are undermanaged or poorly maintained, and our effort is to find those, buy those cost effectively and manage them in the way I just talked about. We have a rule with our management operation: if that unit isn’t ready for your mother to move into it’s not ready to rent to somebody else. And I think a lot of businesses say they have a social responsibility too, and I think anybody that’s operating in America in business should have a feeling of social responsibility. And one of those things is I want to make our tenants lives a little better, because we do the things that need to be done when they need to be done and provide with them with a safe, clean, well maintained place to live. And some place they can be proud to bring their parents or their friends and feel comfortable going in and bringing them there into their apartment. And I think that’s a solution that’s worked for us very well.

 

John Carney: So would you say your approach and your philosophy has to be in some respect a point of difference; do you see a dramatic change when you buy a property that’s under managed and in need of repair. And can you just talk about the turnaround that you see with existing tenants. And then how that would compare to someone across the street or next door that just doesn’t have that same attitude about providing an environment that you’d want your own mum to live in.

 

Mike Gibbons: Well, you know, it doesn’t happen immediately. I think you have to convince the tenants that live there that you’re different, and it takes a while to do that, you can’t just come in — we typically don’t come in with a total rehabilitation of the project, because in many cases we just can’t afford to do that.

One of the advantages of investing in workforce housing — and I might add, not everything we have is workforce, we have some higher end properties but we don’t really have the low-income properties. We don’t have any units that would be considered low income. It’s people that work; they may not make professional level salaries, but they certainly are hardworking and they have pride in themselves. And generally you want tenants to have pride in themselves because they are going to have pride in the property that they’re living in, and they’re not going to do damage or dump litter, or they’re going to keep the place clean and not fight the management company.

Oftentimes when you see these undermanaged properties, they’re just not well managed in a number of ways. If you don’t pay your rent, and you have tenants that don’t pay their rent on time — unfortunately we’re not the government where we’re responsible for making sure that everybody has their rent payment every month. So we have very high credit standards and the reality is, is I wish I was in a position to give everybody free rent. If I was in that position it would be a wonderful thing. I try to contribute a significant portion of my income to help those kinds of people, but you can’t do that and have a business. So unfortunately, you’ve got to have people who pay their rent on time. The minute you start allowing people to live there while they aren’t paying rent — I’ve seen a lot of property owners make that mistake; so they’ll try to negotiate with the tenants and they end up defaulting on their mortgage. And you wouldn’t be interviewing me right now if I’d defaulted on a number of mortgages over a period of time. And when a relatively small percentage of your tenants aren’t paying rent you can find yourself in that position.

I’ve never defaulted on a mortgage and I don’t intend to, and the only way to be certain that that isn’t going to happen is to make sure you get cash flow under the contractual arrangement that you have with those tenants. And it’s a win/win situation: we’re going to keep the property up in good condition if they just meet the terms of their contract, which is paying their rent on time.

And oftentimes we’ll move into a turnaround situation, under managed situation, sometimes even over managed situation, where they have a few other different characteristics we can get into. But that undermanaged situation, generally they’re letting people slide by, and you’ll end up with the tenants owing multiple months’ rent, that’s a recipe for disaster. That’s when you talk about the decline of areas and properties, that’s what usually leads to it.

Everybody talks about the terrible slum landlords, well in many cases they are terrible, but oftentimes it starts where they just don’t get their rent payments. And most if not all of these projects are leveraged and they need to make mortgage payments, and if they aren’t collecting their rent they can’t make those mortgage payments. You’ve got to have a discipline about making sure people pay rent on time.

We’ve also had very good luck, where we’ll find a property that’s in disrepair and has been neglected as far as the management, or maybe the right management techniques haven’t been used and they’ll have problem tenants. You’ll have tenants that are selling drugs, or they’ll be having gatherings in front of the building and will harass other tenants as they come out. We have found that with the technology that’s available now, if we put up camera systems, generally people behave properly if they’re always on camera in the common areas. When somebody breaks a window we know who broke it. When somebody steals furniture from the lobby, we know who stole it. When somebody comes in and commits a crime on the property we can generally trace when they come in and when they leave. So we had very good luck of just getting better behaved people living in our properties. Because all people want to live in a nice property that is well maintained, and if you allow people that don’t care about that to move in you’re not going to be able to do that.

So that’s one of our initial steps, is to spend the money on camera systems, spend the money on common areas; just the general condition of the property, the street appeal of the property is very important. People want to see landscaping and green grass and nicely maintained shrubbery and lighting and everything should be well lit. You cannot have a full-time security force, it doesn’t work at the level of rents that we run at. But we’ll have — particularly when we’re turning a building around, we’ll intensify security to a certain level and if somebody is on site that’s causing a problem, generally we can have security there in pretty short order.

 

John Carney: Well, that’s basically a long — for the listeners that are out there that want to be in the multi family game, or anyone who’s struggling managing their own multi family, take note of what advice Mike has given us. Because that’s generally, I would imagine, almost a weekend course in property management and multi family all wrapped into a ten-minute segment, so thank you for that.

 

Mike Gibbons: I’m happy to do it.

 

John Carney: That’s great advice, well we wrap this up with a few questions that we end up posting up on the show notes. But when you were growing up as a kid, you were also a college athlete, what sports were you into? And how did you see that team sport aspect of your childhood translate into success in business?

 

Mike Gibbons: Well, you know, I guess I didn’t appreciate how much participating in team sports — and some individual sports too — how much they helped. But I think it’s just a general attitude of being able to get along and work with people, where you have a particular function, they have a particular function, and when everybody’s doing what they’re supposed to do at the same time, things work a lot better. It’s that simple.

I played high school football and I wrestled. My father was actually a wrestling coach, I never quite achieved the level of capability that he would have wished. And I think he would have been a lot happier with me if I’d found wrestling to be my sport. But he was a great athlete, an all American national champion, and I just was never going to be that. And I also participated in track. And when I went to college, I really decided I wasn’t headed to the NFL, and although I had some looks by division one teams, I thought I was better suited — and again I wanted to stay around Ohio. The only D3 school I looked at transferring into, I waited so long to make my decision they’d already agreed to go to a school out of state. And ended up at a D3 school and was able to compete in three different sports while I was there and still go to class and maintain good grades. It was a great experience for me.

I played lacrosse and football in college. And the four years of football, and trying to compete in Ohio in football in a heavily academic school, where it was tough to get a lot of players to help this into the school. We were able to field a pretty good team. And a lot of those guys are still my friends and in each case they’ve all been successful — or I think all of them, I can’t think of any that haven’t been — but they’ve all been successful in whatever profession they decided to go in, and we often get together. We had an undefeated team in the college I went to, that was an unusual thing to have, it was the only one in the history of the school. And every one of those guys — we talk about how the coaches put us together and got us working together. We were always not as deep as the teams we were playing, as long as we didn’t have a lot of injuries we were going to do pretty well. We had people knew their roles and fulfilled them.

And it’s the same thing in real estate. It’s the same thing in investment banking. You have a job to do and you’ve got to do it as well as everybody else does their job, and it’s particularly important in real estate. You’re relying on the guys that vacuum the hallways as much as you’re relying on the people that are fixing the electrical problems or the plumbing, it’s all got to work together. And that kind of team atmosphere is the best situation you can create. And we have that right now and it’s not always that easy to achieve, you’ve got to have the right chemistry among people. But we’ve done it and it’s worked out very well.

So we’ve grown, and we’re one of the larger property owners in northeastern Ohio, and we intend to continue to grow in that area. I’ve got a couple of sons that seem interested in real estate, all of them are still in school, heading to law school and business school, but I think they’ve seen the fun I’ve had with it and the interest I’ve had in it, and I’m hoping one of those guys decides they want to follow and keep this effort going in the family. Like you’re doing John. Your family’s been in real estate for generations. I’m the first generation in mine.

 

John Carney: Right, and that’s just it though. It is fun. And I think it’s fun because it’s challenging, and it’s hard work and you get to surround yourself by other people that find it fun, challenging and are willing to put in the hard work. Three rapid fire questions before I let you go. We’re compiling a bit of a list. Who’s your favorite athlete – all-time?

 

Mike Gibbons: Well, it’s funny, because I actually know him, and this probably isn’t going to be a popular choice in Ohio. But my son-in-law, married to my daughter, played for Cleveland Browns, and so obviously, he’s probably my favorite athlete along with my father. My father was a world class athlete, just happened to be in wrestling. But my grandson’s godfather is a guy named Tom Brady. I’ve gotten to know Tom a little bit, and I’d consider him one of the — a guy with one of the finest characters — if you’re a Cleveland Browns fan, you only see this guy that comes in and destroys our team when he’s in here. I’ve gotten to know him personally and he’s kind of just a really great person. As is my son in law, as is my father.

So I guess I’ve got three of them. I would say: my dad, Jean Gibbons, and my son-in-law, Aaron Shay, and his big buddy Tom Brady. And I know each of those people pretty well, and it’s great seeing somebody in competition. Aaron’s not playing anymore, my father’s passed away, but I’ve heard the stories many times about how he competed and how good he was at what he did. And we can still watch Tom, usually in the super bowl every year. And for how much the fans of the opposing team seem to hate him, he’s really a great person and he’s a regular guy that just works harder than most everybody else.

 

John Carney: Yea, he works hard and he’s a leader. So I mean, two key ingredients to become a multi super bowl champion. Is there a favorite book that you have? We’re putting together a booklist out of this show.

 

Mike Gibbons: It probably is — I often say that there’s been a lot of books that have kind of shaped my — where I’ve ended up in life. When I was in 8th grade I read a book called God’s Gold about John D Rockefeller. I lived in a family that didn’t have a lot of extra dollars floating around the house, and I kind of set off to try to change my family’s trajectory, and I think I’ve done that to some degree.

But I can tell you what changed my whole attitude about politics. In college I majored in political science and economics, and just as most other college students, I didn’t read everything as carefully as I should have the first time I was asked to read it, but it’s become kind of a hobby for me over the last 20 odd years.

But a book called The Constitution of Liberty by Friedrich von Hayek, changed my world view. My grandfather was a labor union president, my dad, who was not really about in politics, pretended to be a democrat early on. I had a grandfather that was probably even to the left of that, my mother’s father. And I didn’t really form a political view really until after I was in college and got out of college. And I have to tell you, Friedrich von Hayek influenced me. It was a rational argument that really kind of convinced me that free markets and capitalism could change the world. It has, it’s taken more people out of poverty than any other system of economics in world history and that book changed my view.

I don’t read a lot of fiction, I read a lot of non-fiction and as my best friend says, “You read the weirdest stuff I’ve ever seen Mike.” But I think I’m curious, and I read a lot of things that aren’t best sellers. And it’s given me a great base of completely irrelevant and unimportant facts that I can talk about at length, and if you aren’t interested in that sort of thing I’ve got to be pretty boring. But it’s probably the book that changed my life.

 

John Carney: That’s good. And we’ll link that in the show notes on our website. Well we’ve run a little bit over. If you have a couple of minutes would you like to share your thoughts on your decision to enter into a big political campaign?

 

Mike Gibbons: Yea, and it took a long time and it was a decision that was very difficult to make. And I’ve said this many times, but I wish I could have found somebody with similar world experiences than me that would have been willing to run. My last son graduated from college a month ago, not even a month ago. My commitment to my children has changed as they grow up. I’ve got more time. I’ve got a son that graduated from Georgia Tech with honors in aerospace engineering, which if you know anything about Georgia Tech and having a degree in that field, he had great job prospects, and he went down and joined the navy and is in Pensacola now in flight training. And I think the combination of that and kind of having my last child graduate from college — I don’t need to focus on my kids as much as I used to. It got me thinking. And he’s adamant about wanting to help his country and defend his country, and I came to the realization that I’ve never really tried to do anything for my country directly. I’ve created hundreds of jobs over the years, and I’ve taken the risks necessary to create those, but I’ve never really given back to this country the way it’s given to me. And I’ve had — there’s been some opportunities, taken advantage of it that I hope everybody can have that same opportunity.

And I don’t like the direction our country is headed. I don’t like the politicians that we’re electing to office. I think we have too many career politicians who really have no experience and they’re very good at winning elections and raising funds to win elections but they really don’t have any day to day knowledge of what it takes to make this country thrive.

 

The government doesn’t create jobs, business creates jobs. And being a business man who recognizes his own capabilities and is not just out for some kind of an ego trip, that really wants to ensure that our governments can use the principles that made our country as great as it is, and not forego those and pick up on the latest ism that’s out there, the latest cause that somebody comes up with. And really kind of keeps the country directed where it’s — in a direction that’s gotten us where we are right now. And I’m going to try and do that. I promised my wife and my kids I wouldn’t change one iota. I tend to be blunt, and I don’t — I’m not a political soundbite guy. And I want to take that kind of an attitude. I’m going to try to get to Washington and actually tell the truth.

Because this country is in a very serious predicament right now: we’ve got national debt 105% of our GNP. The only time it’s ever been greater than that was after we fought a world war. And the difference is the end of that world war we hit 50% of the industrial capacity of the world. We don’t have that anymore. We have got to grow this country. If we don’t grow 3 or 4 percent over the next many years we’re in serious trouble. We’ve got to address that and there’s ways to address that that our politicians just don’t want to talk about. And they may have the soundbites, they really haven’t developed an argument and understand why we have to do that. Because right now we have enough debt that we’re either going to have to default on it, or we’re going to have to grow the country so that becomes a less significant portion of the GNP, that debt. Or we’re going to have to inflate our way out of it. And the very people that won’t allow this country to grow are the ones — the people that they’re claiming they’re protecting and representing. And they’re going to be the ones that are most hurt in that inflationary environment, if that’s what we end up doing.

 

But we’ve got to grow the country. I think I know how to do that. I think I know how businesses are formed. I think I know what stands in the way of their prospering. And I think our government has to ease off on those businesses. I think we have to lower tax rates for businesses and get people to create jobs and make sure that those lower tax rates are tied to people that are really taking risks of job formation. And if we do that, we can super charge this economy and we won’t head down the path that so many countries have that have tried this kind of foray into socialism. It doesn’t work. It hasn’t worked, ever. And they keep saying, “Oh well if we do it right..” There is no right way to do socialism. And even if you want equality in a country, you’re not going to have freedom. And I think that freedom and the fact that everybody gets a shot at opportunity here is what we need to make sure it continues in the future. I’m going to try and do that. And that’s really why I’m doing it.

I’m not a career politician, never thought about it before. If I could have found somebody better to run, I would have certainly supported them and would rather help them in their quest for office. But I can’t find anybody because they aren’t willing to take the considerable risk that comes along with running for office. And I just said –you know, they can make up stories, or they can come up with something they somehow will twist in my background that will make — try to make me look unacceptable to the voters, but I’m willing to take that shot. I think I’ve never done anything unethical in my business career and I’m proud of that, and I’m willing to take anything they can come up with because it won’t be true. So, long story short, I’m doing it because I can’t find anybody else that has my experiences to run and to support. So I’m going to do it myself. I’m the one that complains, I might as well take a shot. That’s what it comes down to John.

 

John Carney: There you go. That’s the American story. I wish you nothing but luck in your race for the US senate Mike. Alright, well that wraps it up. Thank you for joining me in the locker room today Mike. Where can the audience find more about you if they want to reach out or contact you online?

 

Mike Gibbons: Sure. Well I’ll give you our firm website is: bglco.com and we’ve got a good bit of information on there. We’ve been around for 28 years, just found out that we are among the top five most recognizable names in middle market investment banking in the United States. I’m very proud of that. They said it couldn’t be done in Cleveland; we managed to put it together and do it. And then my website for my campaign is: gibbonsforohio.com

And we’ve only been at this a couple of weeks, so positions aren’t filled out, but there’s a video on there that will pretty much summarize what I’m about. And I hope the listeners watch that because it’s — I want to be that new politician that our founders envisioned and not the career politician that unfortunately we’re forced to vote for now. We really have no choice because those are the only people that are running.

 

John Carney: Get in, get the change going, and then hand it over to the next generation. There you have it folks, I am sure that you picked up some actionable advice today from Mr. Michael Gibbons. Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher, or Google Play and hit that subscribe button to ensure that you never miss out on the pro tips from our great guests. The post-game report show notes, links and additional content for this episode will be available on my website: johncarneyonline.com/podcast when this episode is live next week. And while you’re visiting the website, feel free to drop your email address into the newsletter sign up form to receive even more real estate investing insights, tips, tricks, hacks and other good stuff. Remember to stay focused on your goals, have fun and stay in the game. I’m your host John Carney and until next week: work hard, play hard, and profit hard.

One more time, thank you very much Mr. Gibbons, for taking the time out of your busy schedule and your campaign to join us. Have a great day.

(Music Out)

End Audio

Connect with John Carney
Facebook: www.facebook.com/JohnCarneyOnline
Twitter: @John_M_Carney
Instagram: @johnm_carney

 

© John Carney 2017