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.