After working in the industry for 30 years, what are the best pieces of advice out there? Chris Rising, co-founder of Rising Realty Partners, a real estate investment firm that manages 5M square feet of assets worth $1.5B will share his extensive list of lessons learned.
What are some of the scariest things besides COVID that you have dealt with? And how did you get out of them?
I do have a couple of stories but one that sticks out, it still makes me want to throw up. We were buying an asset in Pasadena, it was in office, it was after the GFC, and I got introduced to a tech celebrity who was a wonderful person, I like him a lot. He made a ton of money twice but had never been in real estate. He had hired someone to do his real estate because he wanted to diversify. We found his project that we were buying, it was a bit distressed, we were bringing in at the time a competitor to We Work, so we were going to have some leasing and the whole deal made a lot of sense. I talked to him on the phone and I said, Look, we've been underwriting this, our money goes non refundable on Friday, but if you're not there, we're not going to go non refundable. And he said, Yeah, we're going to, I think, yes. It was mumbling "yes" and I said, okay, good. I remember calling the broker and saying, let's let the money go non refundable. It was a million dollar deposit. Literally about an hour after I called the broker and the escrow, I get a call from one of this guy's representative saying, We're not 100% sold, we're going to want to look at this deal longer. I said, no, no, no, that's not how real estate works, I just relied on a commitment from your boss, and I just put a million dollars at risk. He said, Oh, what are you talking about? You can't do that on that. I had a good 24 hours before the principal called me and said, Chris, I apologize, I didn't realize that, of course I'll honor what I'm going to do. And then his advisors come out the next day to meet me and they say, We screwed up, we didn't realize that this has happened. But these 24 hours...what are you gonna do? Sue them? Yes, you probably would have sued over a million dollars. So that was something. He is still someone I respect greatly. And we got through it, and it's all fine, but it wasn't fun.
What would you do differently next time for this not to happen?
Our company is based on this concept that we need an SOP for everything, a standard operating procedure. Anytime we make a mistake, it needs to go into Asana as a new SOP. And we have to update the Excel spreadsheet, etc. But as it relates to this, we would never take an investor conversation as gospel. We have to have it in writing before we would commit to do something like that. I think for anybody who's an entrepreneur, the ideas are always fun, but whenever you're starting a business, you have to have operating procedures, and I think a lot of entrepreneurs miss that. You start when you can keep everything in your head or on your own computer, and then you evolve, or you have to communicate with the team, but I think that a lot of people forget that you should be writing it down. Everything should be like McDonald's, you go to work at McDonald's, and you know every step to make a burger. And I think that that gets lost on people.
I had a mentor who was a lawyer, Mike Meyer, he was a leasing guy. When I first started to work for him, he said, Chris, you see that I have a dent in my forehead? That's for all these "Oh, my God, I didn't think of it". Then he writes it down on a list. And he pulled out an old legal pad that probably had 400 pages of handwritten notes. And every one of those was a mistake that he didn't want to repeat.
Thank God for the internet, podcasts, YouTube videos, because we don't have to go through these mistakes ourselves, we can learn from people like you.
I'll tell you another bad experience, it had to do with culture. My father and I worked at a public company called MPG Office Trust. And the prior management was different in so many ways than we are, but it was very toxic. What I learned out of all that was if you're in an environment where yelling and screaming is okay, you have to live with it, and just be in it. And I swore that when we started our company, we would never do that. I can't tell you how many times I'd hear people down the hall screaming at somebody, a broker, somebody, and the rest of the company would come out and high five them. And I remember saying to my dad, I feel like we're in The Lord of the Flies, who wants to live this way. So when we started our company, one of the major rules is you treat everybody with respect, that doesn't mean you don't lose your temper sometimes, but you apologize, and you cool down, and we do not accept yelling. It's just not acceptable. And it's a better way to live. But it took going through a very toxic situation that was not fun and to learn the lesson of what we didn't want it to be. Our mission statement and our value is we treat everybody with respect. And we listen, we try to solve problems. That's what our business is. And that's what any business is, you have to solve problems. And the best way to do that is to be respectful to people.
If you were starting from scratch, knowing what you know now, what asset class would you pick? And why?
I was going to start with no, I wouldn't start over again, you have to be naive to start a business. But what asset class? The easy answer is is industrial. One could argue multifamily, but to build multifamily, to own it, you're dealing with lots of different tenants, things break, and it's residential. There are lots of regulations. When I started in the business, industrial was the broker who just couldn't, in my mind, deal with working in an office and wanted to wear work boots and drive a pickup truck and go, which is all fine. But it wasn't real estate the way I knew it. But when I was a young broker, my father was running a company and I got to meet some of these people, I was impressed. But let's just look at the size of the commissions industrial is triple net, smaller commissions, you have to do more deals. That whole world has changed. I don't think the pickup truck and not wearing a suit has changed, that's what being an industrial broker and industrial investor is. But the size of the commissions, the size of the deals, the development fees have changed immensely.
When my dad sold the company to Prologis, we could have started Rising Partners with industrial deals, but where we were in the cycle, offices coming out of the GFC, we didn't have all the technological advances that we have coming out of the pandemic. We wrote a really good wave of office investment. In hindsight, I wish we bought an industrial deal or two along the way, but we didn't, we're doing it now.
When I was working for John Cushman at Cushman Realty, we were a very entrepreneurial real estate firm before we merged back with Cushman Wakefield, and we were doing some business in South San Francisco, life sciences, so much so that I even had a card made that said, Chris Rising, Life Sciences broker, San Francisco and San Diego. So life science has been around a long time. But it is the flavor du jour right now. When I talk to the big private equity firms, the KKR's, Angelo Gordon's, the Goldman's, they all say, Hey, what's your play on life science? We've looked at it long and hard and having experienced it 20 years ago, I think it's so dependent on startups and VCs, they're so dependent on entrepreneurial businesses, and the costs are so high. And then you have to compete with someone like Alexandria, who's the biggest and the best in the business, they are good at what they do. I just don't see us doing life science. I think continuing in data, doing industrial, identifying good multifamily, those are all things I wish we would have done out of the gate. But we had credibility in office at the time, so that's where we started.
I think that's great that you are diversifying and moving along with whatever is happening in the economy, there is the case for focusing, which is also a great thing. But it's great to see that you're doing that.
When you're young, you need to get an expertise. And the only way you get an expertise is if you focus. As you mature, and you have more resources, you can bring in that expertise so that you can grow. We really did have to pick an asset class when we started. I had not done industrial, nobody believe that my father, who had been former chairman of Federal Reserve and ran two public companies was going to be out in the City of Industry trying to find industrial deals. It just was a harder sell. Now, we've brought in a team leader on industrial who's been an expert in the business and has been in it for a long time. We've supported that person with analysts and such, we've done the same thing in multifamily.
As we got more mature, we could do that. But when you're young, I say this all the time to young people, If you don't come out and have a skill that's worthy of being paid for, the "I'm young, I'll hustle, and I'll work real hard" argument just doesn't work. You have to add value from day one. I would always tell young person to get a specialty. I started as a lawyer, I went to law school and when I moved into brokerage, I had a value to Mr. Cushman because I could read every lease, so that allowed me to get into brokerage. But when we hire young people, and it's a pretty interesting world we live in, we're hiring an analyst who's going to be based in Nashville, and come out and see us once a month. But they just had the skill set we wanted. And we figured we could do that analyst job remotely for a year or two and see how that goes. But that person has a skill set. They can use Argus, they can do spreadsheets, and that's what got them hired, not because they're going to work really hard. We kind of expect that.
What are the top three biggest lessons learned in your career, or best pieces of advice?
The first one I learned, and it took me a while, is that most times the smartest person in the world is asking the most questions. And those questions sometimes come across as dumb questions. When I was young, I thought asking questions was annoying, and I shouldn't have a place for that, I should just be there and take my notes. What I realized is that people that aren't asking questions are not engaged, and probably not someone I want to do business with. Having that self confidence when you're young, to be willing to ask what may be a dumb question, and knowing in your mind that part of asking the question is to see what the answer is, and not because you have to ask a smart question. It took me a long time to learn that. People who know me know that I go nuts when we have meetings and people don't take notes. John Cushman taught me, I don't do this but, we would leave every meeting and he'd sit there and dictate exactly what happened in the meeting, put into files, and then the next time we go to meet with him, he knew exactly what happened, and people thought he had the greatest memory in the world. No, he just took great notes. They said that about Richard Branson, too. Number one is ask questions, take notes, be engaged.
The second one is, you don't have to be a jerk in business. However, you also have to understand that business isn't personal. That took me a long time. We're a family company, I want everything to be great. But as long as you treat people with respect, and you're ethical, and honest, that can happen in business and it's not personal, deals can blow up. I'm always amazed how people don't realize that a Pro Forma is just a guess. We don't have crystal balls. We try to make it as educated as possible. But it's just a guess. Just recognizing that it's not personal allows you to sleep at night a little bit better. Now, if you scream and yell at people and you cheat and lie and all that, then it gets very personal, but I try every day to make decisions from a dispassionate point.
The third lesson is that no matter how important all your business seems, and all that stuff, it's all very fleeting. If you're not enjoying your family, your life, it's a hard road to get to your 50s and realize that you don't have a great family, and you don't have a great thing. My father is 80 years old now, he pretty much moved on from the business. And I think of things that were so important 15 years ago, and they're just not now. The people that were important aren't in the business anymore. You keep that perspective. Yes, you want to make money. And I know there are all these people out there will be haters and say, Well, it's easy for you to say that. But I look around the world and I have a different perspective 30 years after I've gotten into business. It's fleeting, it just is. We're all here on borrowed time. And all these experiences, no matter what you think you own, you really rent it, because there'll be a reason why you sell it someday. So enjoy it while you're here, and don't let it pass you by.
The more people I know that are super successful are saying and doing the exact same thing. They say, things are things and what matters is the people around you. And are you really happy? Those are the smart ones, but there are also the keeping up with the Joneses out there. Is there anything else that we haven't covered that you think is important for our listeners to know?
One of the things that I'd put this out to all of your listeners is to really think about what life is going to be as we reopen, it is not going to be what it was in 2019, no matter how many people want it to be. I also don't think that it's the Jetsons and it's a whole new world, and we'll never communicate in person again. It's just going to be different, and that's going to affect all asset classes, leasing brokers, if they are representing the tenant or if they are representing a landlord. It's going to affect architects. And I don't think anybody has it figured out because we're not back yet. Our occupancy downtown for One California Plaza is well over 90%, but our daily occupancy, people coming in the building is 20%. We have started to see parking go up, people are coming down, if you drive anywhere in LA, you can see that traffic is up. People are doing things. They're just not coming in the office. I think they will come back, and the tech companies that say that people can work from home all they want are the ones scooping up real estate right now. Ultimately, I think they're going to have people come back, but that new world isn't defined yet. And because it's not defined, there's going to be opportunities, new ways to get business, new ways to find deals. I encourage people to think about it that way. Don't think that Okay, finally in January, it's going to be like it used to be and I go work at the office, etc. It's just not going to be that way.
The Real Market With Chris Rising
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