How I came to Love Industrial Real Estate
Getting Started in the Commercial Real Estate Industry
People often ask me how I got started in the commercial real estate industry – in the industrial sector, specifically. Truth be told, my foray into the industry wasn’t a linear path. I grew up in Highland Park, a north shore suburb of Chicago, where I spent my teenage years recruiting upwards of 60 other kids to help me cut lawns, plant bushes, and do other small landscaping jobs. After high school, I headed west to attend San Diego State. Drawing on my experience back home, I started another landscaping business in San Diego. I spent a lot of time in people’s yards, and soon realized, I was more interested in their homes and the real estate side of it than I was the landscaping side.
As you can imagine, I was a bit distracted by my landscaping business. Or maybe it was San Diego’s notorious sunny weather. In any event, I wound up spending more time outside than in class. After two years, I decided to transfer to the University of Michigan, where the cold, miserable weather forced me to stay indoors – and in class. I had some catching up to do, but still managed to earn my Liberal Arts degree in four years. The day that I graduated from Michigan, I started looking for a place to land as a real estate property manager.
Looking back on it, I have to admit that at the time, I had no idea what the difference was between property management and brokerage. I was interested in real estate, but I didn’t know anything about it. I knew a lot about cutting lawns and planting trees, but I didn’t know anything about real estate beyond what I had learned about landscaping.
A friend of mine introduced me to someone who specialized in industrial real estate. I went in to meet with Randy Podolsky, whose family had a very well known and successful real estate business. Their company was one of the top industrial shops in Chicago. They had six million square feet of property in their portfolio across about 80 different buildings. When I sat down with Randy, I just went off the cuff. He told me he was looking for a property manager and needed me to start right away. They had a backlog of property management work that needed my attention.
I was jumping to get started, but just as I was leaving the interview, Randy called his father in to meet me. Randy wanted his father to meet the 22-year-old kid he was hiring. His father, Milt, talked to me for about five minutes before saying to Randy, “Are you stupid? He belongs in brokerage! He’s not going to be a property manager. You can’t have him. I get him.” But Randy was desperate for a property manager. He tried to negotiate with his father. “Let me teach him property management for a few weeks until I can find someone else,” Randy pleaded. Milt had just about agreed when he asked me one last question: “Do you take no for an answer, or are you one of those guys who when you want to get something done, you just get it done?”
I said, “Milt, I went out and got 60 lawns lined up for a landscaping business when I was 14 years old. I went up and down the street, selling door to door. There was no such thing as no.”
Randy was out of luck. His father won over and said, “Randy, he’s not working for you for one day. I have vacant buildings, I need them filled up. The kid is working for me.”
This conversation catapulted me, head-first into the industry. I worked for the Podolsky family for ten years, during which time Milt really took me under his wing. I started as a broker, but after learning from Milt, realized that the ownership side of the business was where I wanted to be. And Milt realized his own sons weren’t interested in that side of the business, so he taught me as though I was his own. He suggested that at some point, maybe we’d even invest in a deal together.
Investing in My First Industrial Deal
Milt made good on his offer to invest together. I started lining up my own investors who I thought might be interested in joining me if I put a deal together. Milt offered to join in. He brought both his own capital and other investors to the table. Together, we bought a seven-acre piece of land in a fancy new business park way out in suburban Chicago. We built two buildings: a 20,000 square foot industrial building and a 30,000 square foot industrial building. We leased one of them to an office furniture dealer who needed a warehouse, and the other to Maytag, who needed a parts distribution facility and an office in that location.
This was the taste I needed to realize that brokerage wasn’t for me. I liked the investment side much more than brokerage. After this first bit of success, I went on and bought another piece of land in a town north of Chicago. I built another industrial building, brand new and with all cash. I immediately leased the property to a building supply business, and with no mortgage on the property, the cash flow came rolling in. Being a developer was a great thing, indeed.
Working Through My First Economic Downturn
Then, the music stopped. It was 1991 and the nation was thrust into the Gulf War. Lenders drastically pulled back. If you wanted to get a deal done, you’d have to fund it with your own cash. While I had realized some initial success as a developer, I was in no position to continue doing all-cash deals. So I took a break and didn’t do any business for a little while.
A few years later, I decided that it was too difficult to be a developer. Developing takes too much time and energy. You have to put all of the pieces of the deal together. You have to find the land, hire an architect, go to the city to get your zoning and permitting approvals. Where we live in Chicago, you also have to get approval from the water district because of flooding issues, which often means installing expensive on-site stormwater detention systems. Now you’re having to coordinate with civil engineers. It’s a lot to manage.
Buying a building is much, much easier.
