Today’s business climate is unflinchingly complex, puzzled with uncertainty and needs a heightened amount of physical, mental and emotional resistance. For a Chief Executive Officer, this landscape is challenging, particularly when such an individual is supposed to be the captain that steers the ship in the right direction. As such, the leader needs to develop a broad range of proficiencies that match such difficulties head-on.
We have Brian Nelson, previous co-founder of Nelson Brothers, who sets the perfect example of a successful entrepreneur. Nelson Brothers Professional Real Estate (NB) was founded in the year 2007 by Brian Nelson and his brother, just before the crash, which was not the right time to start a real estate investment firm. However, they focused solely on an asset class that they felt would be less impacted by a recession - student housing. The idea is that they’d acquire brick-and-mortar off campus properties near major universities and leverage historical stability of the schools to keep the properties well-occupied, cash flowing and growing in value.
When these buildings are acquired, they arrange the structure for investors to be able to own a fractional interest in the entire property. While an investor can take ownership through a 1031 exchange or just with as little as $25k, they can participate in the direct benefits of ownership. According to Brian, that’s what a lot of savvy investors are seeking; something that is tangible - brick-and-mortar; an investment opportunity diversified from their current portfolio. Investors are interested in alternative solutions that may see them through the next recession and provide monthly income and great tax benefits while growing and appreciating in value over time. The company historically acquired well-positioned student housing.
Since 2007, Nelson Brothers had built up a portfolio of over $800 million in student housing properties around the country. The firm had over 1500 investors with most of them as repeat clients. In late 2017, Inc. 500 named the company the top #129th fastest growing private company in the country and #4 in real estate. It had been a terrific and impressive run.
With the rapid growth, Brian recognized non-performance at some of the assets. Concerned about growing too fast and losing focus on investment returns and communication, Brian worked with his brother to split up the company. This enabled Brian’s team to focus on in-depth underwriting and investigation of new, forthcoming assets.
Brian formed NB Private Capital with most of the staff from Nelson Brothers Professional Real Estate, with a pure focus on one aspect of the business: finding properties that they believed boasted a sustainable, competitive advantage in a student market. Brian selected a crew of a dozen employees from Nelson Brothers. Although this was a new firm with a new stronger focus, this team has been working together for several years. The team is responsible for the major growth and achievements of Nelson Brothers.
According to Brian “The strength of this team was a huge advantage for us. We all enjoyed working together. It’s a fun, diverse group. Over the previous three years at Nelson Brothers, this team had achieved world class feats. The Inc. 500 designation was terrific. Who doesn’t want to be listed as the 4th fastest growing private firm in your industry? But this time it is different. Our focus isn’t on growth. It is on performance. We want to change the culture and the priorities to be more investor-centric.”
Within a few months, NB Private Capital worked to double and in some cases triple the personnel in some of its largest areas of weakness; accounting and investor services.
Mistakes happen, but a CEO must have the ability to learn from past experiences and instill lessons for the future. Any such experience?
The key is to always be humble. If anything has led to our success, it’s that we’ve been intellectually honest with ourselves in what our strengths and what our weaknesses are.
It’s not always easy to admit a mistake or a shortcoming-- especially for a leader. Some might be afraid that recognizing mistakes may be construed as incompetence. I think in some cases, it’s the opposite. Someone who can admit they were wrong or who is willing to listen and adhere to the feedback of others, can demonstrate strength and security and do a better job in the future.
If you’re well aware and open about your shortcomings, you can make it easier for clients, employees and others to share candid opinions with you. It’s a lot easier to be a resource for others and find solutions in a culture of open and honest dialogue, where learning takes priority over blame.
A good example of this is in real estate. A property may hit all the cylinders you’re looking for – location, amenities, modern, well priced. For us in student housing, sometimes if you buy a property that is well located i.e. within walking distance to a growing university, the property usually leases by itself. We bought a property just like that. It had the best amenities in the entire market with the most modern, chic design and an “A” location. But it had struggled to lease. We took it over at a discount because it fit all the right criteria on paper. Sure enough, as we tried to work our magic in getting leased up and fully occupied, we hit a brick wall. We had daily discussions, ideas on how to sell and how to close on traffic. We focused on pricing and the value of the amenities and how important they were to the students. Still…a brick wall. So we reacted the same way many firms would - we cut prices and threw out attractive giveaways. That worked, but not nearly as much as it should have.
We didn’t get it. The property was better located with upgraded amenities that set it apart from most of its competitors. We decided to visit the property and walk the tour that the leasing agents were giving. In the tour they didn’t touch on any of those features and almost seemed to avoid those areas. Turns out, the sound on the movie theatre room was broken, the bowling alley had a huge technical glitch and the hot tub had been drained because the chlorine levels hadn’t been maintained properly. The complex was also dirty/messy everywhere. Unbelievable….but telling! Instead of us dictating to the team what we thought they needed, we never stopped to ask or to walk a mile in their shoes. Because the property wasn’t leasing well, they were nervous about job security, and afraid to ask for the resources they needed to help the whole team succeed.
This could have easily been avoided had we fostered the culture of open, honest, accurate dialogue. Within two days we hired a cleaning crew to make the property sparkle and look pristine. We had each amenity fixed and running like brand new. It was a valuable learning experience.
What is the role of a CEO in building Mission and Vision statements?
Every company, culture and team should have a definite purpose. If you’re crystal clear on what your key vision is for the firm, you give your team members, executives and others a cogent, concise statement that illustrates that vision as it serves as a compass for decision making. It helps all of the associates – individual and collective – see how their efforts, no matter how small or big – fit into the broader goals of the firm.
For example, in our vision statement, one of our biggest priorities is on communication. In the investment community, if investors feel like they cannot get in touch with someone from the firm they’ve invested with, imaginations start to run wild. If folks who’ve invested significant money feel like they’re not getting red carpet treatment or feel like their investments are too small for us to care…then we have failed miserably. These things happen. And it can be as simple as responding to an email or answering the phone.
This is something we have struggled with immensely over the past year or two as we’ve hit rampant growth. We just haven’t maintained the support staff to keep up with the growth in our customer base. And it has hurt us in spades.
One of the greatest traits of a CEO is the ability to read people and adapt management styles accordingly. What do you believe in, happy and satisfied employees or strict management rules?
Both. But the emphasis starts and ends with results, in my opinion. The most difficult management situations arise when performance assessment is arbitrary and lacks clearly defined and tangible objectives. From there, I prefer group-based accountability. This includes meeting with the team often, articulating the high level goals and being open and honest about current challenges. Even if a problem or a struggle falls under one person’s area of expertise, by discussing it together as a group, we assume responsibility as a group and usually we’ll find that we’re able to resolve the situation in a positive manner.
For example, we had a situation where we were late in getting tax documentations out to investors. Extremely late. Investors needed guidance and specificity as to when they could expect information. They had to file their tax returns, file extensions, plan time with their CPAs, etc. This isn’t something you can afford to be late on. We’re just a small piece of our investors’ tax returns. We shouldn’t be the single bottle neck holding them back from filing their returns in a timely fashion. But we were. And it was upsetting a lot of our clients. It was devastating to our brand and to our credibility as a firm. The investor relations team was tasked with communication of the delays and ongoing issues. Every time they’d share what the situation was, they’d get blow back from frustrated investors. Naturally, investor relations started taking things personally and stopped communicating which made things worse.
As the situation worsened, investors were starting to blame the communication. Naturally as leaders, that would call for a rebuke on the VP of Investor Relations. Instead of blaming her, we called a group meeting with all the departments and outlined the crisis, how it impacted us as a firm and threatened each one of us and each department. Before long, the accountants realized their struggles were having a huge impact on investor relations’ personnel and on our sales efforts. But they pointed out they were behind because the legal department was pushing them to focus on an issue in another matter. I accepted the responsibility and thanked everyone for being open and honest. We sent a letter to all of our investors and highlighted where we were falling short at each level. We offered to send daily updates so they felt completely in-the-know and up to speed and where we were, what was causing the delays on when they could expect a deliverable.
As a CEO, what advice would you like to give your peers considering your past experience?
No matter how valid the excuse or how tempting the need is to blame someone else, own it. As a leader, it’s your responsibility. If you don’t own it, improvement will never happen. When problems occur, and they will, spend more time analyzing what you could’ve done better… and less time pointing your finger.
Manage your expectations. Very few of the great successes in life come easy. Go into business expecting to see rough roads ahead. When you hit the rough patch, go through it with the confidence that you’ll beat it, get past it and grow from the experience. Your stakeholders will admire your confidence and determination during the rough patch…and will follow your confidence and determination through the next one.
Where do you visualize your company in a couple of years?
In my opinion, performance and communication are central foundations for an investment firm. Our higher level strategy is to find investment opportunities that align with what we feel most investors want – a balance of stable cash flow, long-term growth and tax savings. We can hit all of those on an asset class that we feel is less correlated to the greater economy. In my opinion, not many investment vehicles can offer that. If we deliver on a benefit set that is important to our investors, we could return to the explosive growth we’ve experienced the last 3-4 years. We’re not sure that’s in our best interest. I’m confident our investment will stay in high demand but by demonstrating discipline and composure, I visualize us having steady, measured, strategic growth over time. More specifically we’d steadily climb to over $1 billion in assets under management by early 2020.
Greet the luminary
As President and Founder of NB Private Capital, Brian has been working in the real estate industry for over 10 years. He has provided research, property analysis and consultation for a variety of sponsor firms and helped manage syndication for more than eight years. He was directly involved in the launch of three other sponsor firms that have acquired real estate projects cumulatively at over $450M including over $190M of investor equity. Previous to the launch of NBPC, Brian was instrumental in the raise of more than $800 million in equity for the company’s predecessor, Nelson Brothers Professional Real Estate. He currently holds series 7 and 63 registrations and has a B.A. from the University of Utah and an MBA from Brigham Young University.
“We align our strategic investment opportunities with your investment goals.”
"We strive to provide exceptional service and personal care from an experienced team of professionals."
"We perform high-level on-going due diligence on every property we’re involved in and have over 1,200 investors in our 1031 exchange programs."
"We specialize in developing, acquiring and managing quality purpose-built student housing assets."