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Commercial Real Estate feat. Jeff Allen
120 Plays3 years ago
Today’s episode is about Commercial Real Estate. Commercial real estate refers to business retailers like office spaces, hotels and strip malls. When banks lend money for CRE, it heavily influences wealth distribution, via raising property values and determining the location of businesses in a community.
Today I’m thrilled to have Jeff Allen, Director of The Economic Equity Advisory Group at BMO Harris Bank to share his experience navigating CRE for over 14 years. Jeff has worked at the largest CRE Lending banks and has been instrumental in determining who his employers lend to and how they lend. His experience negotiating with investors, business owners and city planners are invaluable and I’m thrilled to learn from him today.
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Transcript
The Creative Landscape of Commercial Real Estate
00:00:00
Speaker
like a horse shack where it's the eye of the owner, right? It's up to the eyes of the owner. What you see can be translated and received in different ways.
00:00:11
Speaker
And so although commercial estate can be very specific to asset types and industries, it allows for a lot of creativity, creative latitude, I should say. Take a bit wherever you want it to be, particularly the future commercial estate. It's not going to be past. It's going to be very different. You have to be very creative to provide certain amenities.
Introduction to 'Take Your Homeboy to Work Day'
00:00:35
Speaker
What's up, world? I am BA Urbaba. You can call me what you feel. And this is Take Your Homeboy to Work Day Podcast, the career forum to hear about others' careers. Here's what you can expect by tuning in. Each episode, I'll dive into a new career path. We'll learn the arc of jobs that build into careers. I'll also ask how these careers impact our everyday lives. And finally, we'll discuss the intangibles, such as motivations and passions.
00:01:04
Speaker
So for anyone interested in hearing the first-hand experience of another person's life and what they go through in their day-to-day, I hope you enjoy these convos.
Exploring Wealth Distribution through Real Estate
00:01:13
Speaker
So today's episode is about commercial real estate. Commercial real estate refers to business retailers like office spaces, hotels, or strip malls. And when banks lend money for commercial real estate, it heavily influences wealth distribution via raising property values and determining the location of businesses in a community.
00:01:34
Speaker
So today I'm thrilled to have Jeff Allen, the director of the Economic Equity Advisory Group at BMO Harris Bank, to share his experience navigating CRE for over 14 years. Jeff has worked at the largest CRE lending banks. It has been instrumental in determining who his, who his employers lend to and how they live. His experience negotiating with investors, business owners, and city planners are invaluable.
Insights from Jeff Allen's 14-Year Career
00:02:00
Speaker
And I'm thrilled to learn from him today. Welcome Majee.
00:02:04
Speaker
Thanks for having me, bro. Yeah. How are you feeling? How's your day been going so far? You know, productive so far. My day is set to start early, and so I'm pretty excited to have a productive half day so far. How about yours? Awesome. Likewise, well, I won't say they start early. You know, I'm really on my eat, pray, love thing right now, so I can't say early, but it's been a productive day so far, and I'm enjoying getting this idea off the ground, and I appreciate you making time for it.
00:02:34
Speaker
Yeah, my pleasure, man. My honor too. So, man, I gave a quick introduction about commercial real estate and that you were in lending in it.
Understanding the Real Estate Industry
00:02:45
Speaker
But just from a macro level, you know, what is commercial real estate? How would you explain it to somebody? Let's say they're 18 years old, thinking about different paths, maybe engineering, maybe going into medicine and they're considering commercial real estate. How would you describe it to them?
00:03:03
Speaker
You know, like any other industry has so many facets, right? So commercial real estate as an industry includes what you explain it to be, right? It's physical touch. So you look at apartment buildings, you look at retail strip centers.
00:03:17
Speaker
You look at office buildings, you look at self-storage, you look at student housing. Commercial real estate includes all of these asset types, but it also includes all types of jobs within this larger industry. You can be on the banking lending side, which I've done. You can be on the development side as an actual developer building these buildings. You can be in finance.
00:03:37
Speaker
as an actual CFO or an accountant. Like any other industry, it has all these facets, marketing. The list goes on and on, project management. And so a lot of different jobs within the commercial real estate industry. And so it's pretty broad. But from my perspective, it's really the tangible part that I enjoy about it, right? So physically touching real estate assets when you walk out your house.
00:04:04
Speaker
or physically seeing apartment buildings that you may live in or an office building you may work in.
Jeff's Journey into Real Estate
00:04:09
Speaker
To me, it's a part of everyday life that makes it so interesting. That's great. At first, what initially drew you to this? Did somebody specific invite you or was there a single event that happened that drew you to this career? How did you get interested?
00:04:29
Speaker
Yeah, so I had the opportunity to have three internships at a bank in high school and in college. And so this internship exposed me to, first of all, banking. I was first exposed to banking and commercial real estate second after that. And so
00:04:46
Speaker
that exposure at a young age really intrigued me, right? To learn about banking, which clearly everyone's interested in, right? How the market works, macro and micro economics, how it all works in concert. And then you layer on commercial real estate. When we graduated college, our condos were hot, right? So everyone was building condos. And so I was really interested in how that worked, right? How's that math work from a banking standpoint? So that drew me in.
00:05:13
Speaker
in terms of my banking career and what industry I want to focus on within real estate or banking, I should say. And so it was relevant. And everyone wants to buy apartment buildings. Everyone wants to understand how it all works. How do you underwrite an apartment building? And so I had a lot of the same interests.
Real Estate in Everyday Life
00:05:30
Speaker
So that allowed me to gravitate towards real estate within banking on the dead side. And that's what's kept me in it for the last 14, 15 years now.
00:05:40
Speaker
Very cool. Very cool. And you did a great job. You actually did a great intro to the next question because you brought up some examples, some of the physical examples of how people can see your work. So you brought up office buildings and then you brought up developers who create condos.
00:06:01
Speaker
I guess if I'm driving around town in my local suburb and I have somebody in the backseat and they wanna know what is commercial real estate in a physical sense, what could you point to? How could you bring it to life for them to see, okay, this is what commercial real estate is and where I would play a role in it? Yeah, so it's everything you see built and constructed.
00:06:27
Speaker
in your neighborhood or in cities is a function of commercial real estate. So if you're a member of a gym, that's commercial real estate, a developer built that gym, he may still own the real estate, but he leases that space to a gym, right? You may work in an office building where your company occupies three floors of a 12 floor building, right? That's commercial real estate.
00:06:52
Speaker
that somebody owns that building and companies have leases with that owner and pay him rental income. That's commercial real estate, right? You may live in an apartment building that you pay your rent to the owner of the apartment building or the property manager. That's commercial real estate. So the cool thing about it and what attracted real estate was attractive to me was how relevant it was to everyday life.
00:07:20
Speaker
Awesome. And that's really what it did for me. I mean, in a way, you were kind of the inspiration for this because I was actually with you when it finally clicked, which you did with your job. And so that's why I like asking that question. So I appreciate that answer, and that was a good answer.
00:07:37
Speaker
I'm going to switch things a little bit now. Thank you for sharing some high-level things about what commercial real estate is and what you did within it. I want to ask some numbers questions next because I'm sure people are interested. The first one would be about entry-level salaries.
The Reality of Entry-Level Salaries
00:07:58
Speaker
So when you first started getting into lending or your first jobs that would get you into commercial real estate right after college, you got your bachelor's degree. What is the salary range of jobs for somebody who wants to get into commercial real estate as soon as they graduate college? Yeah. So like most industries, you're not going to kill the game.
00:08:20
Speaker
coming out of college with high salaries, for the most part, right? There are outliers. But I would say, if you're in banking, you can start anywhere from $60,000 to $70,000 today. If you're in development, it could be lower. The thing is, anytime you learn a lot and, quote unquote, cutting your teeth in a business, they rationalize paying you less so you can learn a lot about the business. However, you can take that low salary
00:08:50
Speaker
and learn, get a skill set, and really the sky's the limit as you continue progressing your career. Whether it's in banking, whether it's in development, the upside really is in, you know, after the first four or five years, after you get that experience and pick that with you wherever you go, it becomes invaluable and allows you to earn a lot more relative to your peers as you progress in your career.
00:09:14
Speaker
particularly if you decide to get a master's in real estate finance or go to business school. There are things you can do along the way to bolster your earnings, but respectable wages 60 and 70 give or take, depending on what firm you work for and what you're doing.
00:09:31
Speaker
Awesome, thank you. And now looking at money from a different perspective, we live in a capitalist society
The Role of Lending in Bank Profitability
00:09:38
Speaker
where companies create jobs and they expect those jobs to return at a minimum, maybe 10 times of what they're paying in salary and costs for benefits. So your job specifically, or lending, not your job, but lending in general, how does that contribute to the profitability of the bank that you work for?
00:10:00
Speaker
Well, it's pretty linear. So as a lender, you produce, right? So you go out and source deals, you close deals, and say you close $100 million worth of deals in one year or six months or whatever it is, you can measure how much income you've provided to the bank relative to your salary, which oftentimes I've used and my peers have used as negotiation. For example, if you if you let the bank at the cost,
00:10:30
Speaker
$3 million for a year, for example, and you're making $100,000, that's a pretty big delta, right? So you can use that as an argument for maybe a higher bonus, right? A higher base salary, or just more fringe benefits in general. So it's pretty cool in that regard that you can use it as a negotiation tool, whereas I don't think it's that linear in certain industries. And even if you're on the, that's the banking side at least.
00:10:57
Speaker
On the real estate side, if you're in development, you can also quantify how many deals you may have worked on as a developer. What's the income from the buildings that you've built or helped build? You can also quantify your value, quote unquote, value on that front too, which makes it a bit easier to negotiate and validate, warrant more money from your employer.
00:11:21
Speaker
Gotcha, gotcha, gotcha. And as I think about my jobs, I love how you said through this job, you can actually see your impact on a company. You can have some pride in what you do because, hey, I know I brought this amount of money in. And I've held a bunch of sales jobs.
00:11:41
Speaker
And I've always enjoyed the direct sales jobs and not necessarily the sales where I was in a matrix environment or I share customers with other people because then, you know, while successes I'd have to share with other. Well, I just enjoyed the one on one ownership of the direct sales versus having to work in a matrix environment. So I guess for personalities out there who love the control and love taking pride in what they do, that this is maybe a great path for you to go down to.
00:12:11
Speaker
I totally agree and real estate for Maya is twofold. You can see your impact, but you can literally see your end product being constructed. So if you're a developer, it's not ambiguous, right? You have layers and you build on the land and it's really fulfilling and impactful to see that end product at the end on both fronts.
00:12:34
Speaker
Yeah, so since you brought that up, I guess I imagine after something, let's say you work to put a business into a strip mall. Just one example, I'm sure it's other things bigger than that. Maybe you go and you take a picture in front of that strip mall, like say, hey, I was instrumental in bringing this business to this community. What's been the proudest achievement? What's been, I guess, the most exciting opportunity you worked on where you connected a business with the community?
Impactful Community Projects
00:13:04
Speaker
That's a great question. And I have a lot of examples, but one sticks out in my head more recently. And that was last year, I have the opportunity to fund a small business on the South side of Chicago. And it was part real estate, part an operating loan, but I was able to help the bank approve a small loan. I'm saying small, it was over a million, but I relatively small loan for the bank.
00:13:29
Speaker
but very impactful loan for a new restaurant to come to the South Side of Chicago. Those that know the South Side of Chicago knows that it's not a bunch of amenities. It's not a bunch of restaurants that we can go to that are nice, nice build outs and great food and great service. And so I'm really proud. I was able to help facilitate that deal through the bank to source the meal and also to get it approved and funded. And so that business now is open
00:13:57
Speaker
thriving and provide an invaluable resource and demand to the South South Chicago.
00:14:04
Speaker
Hell yeah, that's great to hear, man. I know one of the things I said in my intro was that commercial real estate impacts wealth distribution because of the businesses that will or can be put into community. And without your vision and the work in working on a quote unquote small deal, some people wouldn't find value in putting in that much time for a small deal like that. So, salute for your focus on wanting to improve South Side of Chicago.
00:14:32
Speaker
I appreciate that, man. I think it's absolutely necessary. Yeah. So let's get even more abstract really quickly. While we're talking about achievements and some of the work you've done, imagine that you wanted to commemorate your job and what you do with lending within commercial real estate. There's a payment right there, and they aren't going to put it in words. They're going to put it into a picture.
00:14:59
Speaker
So how would you describe a picture or a scene of what you do to give instruction to the painter so that they can, you know, I guess bring it to life through an abstract way? What would that scene look like? That's an excellent question. And being the non-creative person that I am, it's quite a challenge for me to think abstractly. But that said, commercial real estate is so broad and it can be abstract to a lot of folks.
00:15:29
Speaker
So I would say to a banter if you have a blank a blank canvas I would almost create almost like a What's the thing where you you can look at and it's you can see it and you can interpret it any way you want to? a Rorschach Okay, yeah like a Rorschach where it's
00:15:53
Speaker
the eye of the beholder, right? It's up to the eye of the beholder, and what you see can be translated and perceived in different ways. And so although commercial real estate can be very specific to asset types and industries, it allows for a lot of creativity, creative latitude, I should say, that it can be wherever you want it to be. Particularly the future of commercial real estate is not going to be the past.
00:16:16
Speaker
to be very different, we have to be very creative to provide certain amenities, whether it's retail, whether it's affordable housing, whether it's senior housing, whether it's addressing homelessness. As I see it, I see a blank slate that I see it one way, and my colleagues and peers may see it a different way. So I almost say a painter to present sort of Rorschach type of vague painting that allows the interpreter or the person to interpret as they see fit.
00:16:47
Speaker
Yeah. That's a visual. Okay. Okay. That really put it together. Man. Thank you. That was, that was, that's a good visual. And I'm going to try to work with an artist to actually bring that one to life. Cause that was really creative. Yeah, sure.
00:17:01
Speaker
Let me see.
Importance of Mentorship in Career Growth
00:17:03
Speaker
So I guess you have been on this 14-year arc within your career. If we take a step back to some of the early years, maybe year three, year four, year five, how did you know that you were on the right path? Was there a feeling inside of you? Was there a click moment that happened maybe in the early years?
00:17:30
Speaker
that cemented that this was going to be a path that you wanted to invest in long-term? Honestly, man, I thought I wasn't going to make it. I thought this was not the industry for me. I was tired of being the youngest and the darkest person in the room everywhere I went. But that's a lot of our experiences that we've all gone through in our respective fields. I would say it was maybe year four after working the long hours.
00:17:56
Speaker
after not getting paid what I thought I should have gotten paid. It was year four where I worked for a bank and discovered a mentor that really, really a mentor and a sponsor, a series of them that put me in the room or put me in certain rooms that I wasn't in before and provided me opportunities that I didn't have access to before. So they, those guys and ladies were responsible, I think in part,
00:18:25
Speaker
were probably responsible for my knowing that I was worthy, quote unquote, or that I could do well in the industry. And they believed in me, and they gave me opportunities to succeed and show off my skillset and grow my skillset. So I would say it wasn't until I had reliable mentors and sponsors is when I finally realized that this is the industry for me. I've always enjoyed the work
00:18:50
Speaker
I always enjoyed, again, tangible buildings, underwriting, and understanding macro and micro occurrences in the market. But it wasn't until that year, I think it was 2011 or so, that I knew that I was supposed to be here, part Baby Imposter Syndrome, part something else. But it was, I combined my work ethic and the things that I learned with really reliable sponsors and mentors at that point.
00:19:19
Speaker
And it's where it's worked out. And it provided you a sense of confidence that stuck with me since then. That's awesome. That's awesome. When you hear stories of mentorship, giving people that level of confidence, it inspires you to do more also. So that's great to hear. Now, in terms of within the job,
00:19:42
Speaker
So we talked a lot about the good of commercial real estate and the support of things. But as we all know in life, nothing is 100% good. So I just really want to quickly understand maybe two negatives that you've experienced throughout your time. And so the first one, and this can be whether it's the people that you run into, the hours, I don't know, working for an institution like a bank, but
00:20:12
Speaker
What would you say are the bad or the ugly side of the industry? Do you run into any jerks within the business? Watch out, would you give for somebody before they come into commercial real estate? Sure. Lots of jerks.
00:20:32
Speaker
A lot of jerks. With a lot of money comes a lot of jerks, huh? I was just going to say, anytime you have a lot of money or big numbers involved, a lot of jerks involved. But so to that question, commercial real estate, like most industries, is not diverse. Even still, fast forward 15 years from now, the rooms are not diverse, as diverse as they should be. They've gotten a smidge better.
00:21:01
Speaker
but the rooms are not filled with people of color. And so it's still fairly monolithic in that regard. And so it's a lot of work to be done. And there are a lot of efforts to increase diversity. Again, it's the time of the world we're in. There are a lot of efforts to increase diversity in commercial real estate, like every other industry that we see. So that's the first thing I would say. Second thing is it's long hours. It's a full contact sport.
00:21:29
Speaker
A lot of guys and ladies are working six, seven days a week, right? If you're doing a project, you have to get it built. You know, if it's a Sunday, you have to do some work. That's what it takes. If you're on the banking side, you may have what's called a fire drill, right? Where something needs to be addressed, whether it's compliance related, or fuel related, or credit related. And you can't say, oh, it's Saturday, I'm busy. You have to
00:21:55
Speaker
react and be proactive and address the concerns accordingly. And so it can be long hours when you're doing a project or working on a deal. So those are the two things. It's not diverse, long hours, but candidly, those two problems I think are universal to lucrative industries. Anytime there's money, as we talked about, circulating, it's going to be long hours. It's not going to be a whole lot of black and brown people. That's just the nature of the business, but I'm glad to be a part
00:22:25
Speaker
of the change in these rooms as we look to diversify. And also on the other end, be mindful of that life work balance, which at this point in my career, I can balance that a little bit better. Awesome. Awesome. Thank you for sharing that. And then, I guess,
00:22:45
Speaker
Now that you are 14 years into your career and maybe there is one time you may have made a mistake in your job, I guess what advice would you give yourself? After you made that mistake, you realize that you may get into a little trouble. What is the best advice that you would get to somebody when they make their first mistake at a job or any mistake at a job? I would say give yourself some grace.
00:23:14
Speaker
We often are very hard on ourselves. We being brown and black folks who are under a lot of pressure in the world and at work and at home, give yourself some grace. There are some mistakes that are severe, right? And there are some that are not. And to the extent it's a recoverable mistake or mistake you can learn from, just give yourself some grace and understand that we're human.
00:23:43
Speaker
And mistakes will happen. Now, I would simply say along with that, own your mistake. Don't make excuses. Don't hide from it. Right. Look for a solution and be part of that solution. So give yourself some grace and be part of the change or a solution to fix that problem. Nice. Respect, respect, respect.
00:24:04
Speaker
And then let me ask you, as you look at commercial real estate moving forward, maybe five, 10 years from now, we're coming out of a pandemic.
Automation Trends in Real Estate
00:24:15
Speaker
There's been a lot of talk of fintech and that changing, changing any type of real estate and really all forms of banking.
00:24:27
Speaker
I guess, what is your outlook for commercial real estate, specifically lending, if you'd like to share five to 10 years down the road? Does it look more attractive, less attractive? What are you thinking? I think it always looks attractive. But from a trend standpoint, like a lot of industries, a lot of things will be automated. So you'll see algorithms to help calculate lending formulas instead of a person.
00:24:57
Speaker
or consumer loans, especially on the banking side, much more of those, even already today, have been automated. Instead of going to see a person, you feel an application online now. So I think that trend will continue upmarket to commercial and larger deals along the way as well. It's already happened. You already have a lot of winning outfits, fintech to your point, where you can go get a five million dollar loan by feeling an application online. You have to talk to a person.
00:25:26
Speaker
That said, like I started with earlier, I think the future is bright. I think there's a lot of space for innovation, whether it's on the deal side itself, developing and building stuff, right? Affordable housing will be a huge crisis. A senior affordable housing will be a huge crisis in the coming years. So those that can solve those problems in an innovative fashion while keeping costs low, it'll be a huge market for those type of folks, whether for a firm,
00:25:55
Speaker
or as an entrepreneur, there'll be a huge opportunity for those folks to make some coins. As it relates to banking again, specifically, things will be automated and folks will be out of a job. We've already seen it to some extent the last several years. Banks are always, they have a lot of overhead. They can't focus a lot of money and they can automate a lot of this work, whether it's underwriting,
00:26:19
Speaker
whether it's sourcing smaller deals, I'm saying small, I mean below 20 million, below 15 million, right? A lot of these things can be automated. And I think that is the future and a lot of FinTechs are focused on how they make the process more efficient and take out a lot of the human biases too, right? And so computers in some respect have already started to do that or people have already big programs to start to do that work. So I think that's the future of both real estate and banking.
00:26:50
Speaker
Awesome, awesome. Man, this has been such a great conversation about commercial real estate. I really appreciate you sharing so much. And thank you for your time. I only have one more question for you.
Musical Preferences and Personalities
00:27:03
Speaker
And this is just so the audience can just see a little bit more about who you are, your interests, and it's about music. We've actually already had this conversation one time before when we were hanging out in DC.
00:27:16
Speaker
So, and I'll give you a little bit of time to think. So let's say you're the A&R of a music company of a record label. I'm giving you an unlimited amount of money to put together any four artists on a song. Actually, let me say three artists and one producer you can choose.
00:27:38
Speaker
Take as much time as you need. Yeah. Three artists, they can be R&B, they can be hip-hop, they can be from any genre. The producer can be from any genre also. And you're able to create your dream song with your favorite artist. Who would they be for you? Three artists and one producer.
00:27:57
Speaker
man this is a great question one two two depending on the day you might get a different answer on any given day so today's answer today today today's answer is my three artists are uh kanye oh kanye the oh kanye right uh common two and three little brother i think a track with those three
00:28:47
Speaker
And this may be cheating a bit. I will one night. I was going to call you out on it. It's really a question, right? I will kind of hear a comment, right? And then I'll still get a producer pick because, you know, that's all I say for real. Obviously, if I had to, I wonder to produce instead for real. But I would love that energy that they will all bring together.
00:28:49
Speaker
would be beautiful and fun.
00:29:16
Speaker
Respect, respect, respect. So don't worry, man, there is no right answer. And you're 100% right when you say, tomorrow, my answer could be something totally different. Because music is so subjective, and especially depending on your mood and what you've been going through. So don't even, you know, everybody's going to love your answer. The only question I have, old Kanye, up to what album does that count? Is that dark twisted fantasy? Is that going back to graduation? What is considered old Kanye for you? Yeah, now we're getting into weed, too. I would say dark twisted fantasy.
00:29:44
Speaker
I would say pre-dark twisted fantasy. And every album I don't love, but pre-that album for sure. If we have a moment, I'd love to hear your answers to the question as well.
00:29:59
Speaker
Oh, man. Jeez, we're off the top of my head right now today. I mean, today, Timberland is the producer, Eminem, Fonte, and I'll probably go with Lil Wayne. So that'll probably be my answer today. Yeah, yeah, yeah. I mean, I've been, well, I don't know, Wayne hosts a special place in my heart, man. I don't know. So yeah, yeah, I think I'll go with those three, and then Timberland. That's all the options. Timberland was actually,
00:30:29
Speaker
to my brain too for producer. Well, this was so much fun, man. Thank you again for joining the show to take your home board of work. The audience really appreciates you sharing. And until next time, sir, man, I wish you nothing but success with your family and your career. Same as you can, brother. Thanks for having me.