The Private Equity Real Estate Podcast – Show 27

   

   

Summary

On this week’s episode, we discuss building a world-class real estate team. Our guest this week is Chris Palermo. He is the co-chairman, managing principal and founder of First National Realty Partners, one of the nation’s leading commercial real estate private equity firms.

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Announcer:
You’re listening to The Private Equity Real Estate Podcast, brought to you by First National Realty Partners, where investors learn from private equity experts and insiders. We share our own real world experiences so you know exactly what it takes to be highly successful at investing in passive commercial real estate opportunities.

Eric Murphy:
Hello, and welcome to the Private Equity Real Estate Podcast, which is brought to you by First National Realty Partners. I’m your host, Eric Murphy. And on this program, we like to sit down with the experts in commercial real estate and we talk about different topics across the commercial real estate landscape. And this week we’re going to get into the topic of building a world-class real estate team. And here to discuss that is Chris Palermo. He’s the co-chairman, founder, and managing principal at First National Realty Partners, one of the nation’s leading commercial private equity firms. Chris spearheads, the firm’s marketing initiatives, and he’s the head of First National Realty Partners’ investment and disposition committees. He has over 18 years of experience in investment banking in the financial services industry, and we’re happy to have him on the show here today. Chris, thanks for being on the program.

Chris Palermo:
Thank you so much for having me.

Eric Murphy:
As I mentioned in the intro, today we’re going to talk about building a world-class real estate team. So let’s start with, when do you know it is the right time to start building your team?

Chris Palermo:
Well, from day one, when you have the vision as an entrepreneur to do something, to disrupt an industry, to get involved in an industry, the first thing that you have to think about is building a team. And quite frankly, the most important thing in any business are the people, the teammates that work within the organization from day one.

Eric Murphy:
And how do you get started? Are there particular stages you should follow when bringing on personnel?

Chris Palermo:
Reflecting on my own experience in starting First National Realty Partners, I think that sales drives results. So if you want to talk about what’s the first division that you would want to build, you would want to have an overall vision, and I think that you would want to start to build out your sales and marketing team. As you get more sales, you get more revenue. As you get more revenue, you’re able to build on your team. And when we were in the business, we were doing everything that our secretaries do as well.

Chris Palermo:
We were our accountants. We were everything. And of course, our number one salesman. But again, if you’re going to start out from the beginning, building a sales team can help get you to the next phase faster than anything.

Eric Murphy:
So would you say sales is the most integral part of building a team, or are there more aspects to it?

Chris Palermo:
I think it’s sales. Before the sales, you have to do a lot of research. I’m sure you’ve heard a lot of successful scholars or even Elon Musk say that you get paid and compensated based on the problems that you solve before even going out and building a sales team. You have to fill that gap. By filling a gap in whatever industry you’re in or making something better, you have to do a lot of research, a lot of due diligence.

Chris Palermo:
And then once you find that angle, that gap, or that value proposition, or that need that’s able to be filled, then I think that you want to hit it full force. And being able to resonate with the customer, the end customer, the end user, whether in my case, my business, whether that’s a tenant or let’s say a partner that’s looking to invest in our deal, we have to make sure that we cater to whatever pains or needs that they may have. And if we’re able to do that, we’re able to generate business. From generating business, you grow the team, so on and so forth.

Eric Murphy:
Well, based on your experience at First National Realty Partners, what would you say are some of the biggest benefits of having that team in place?

Chris Palermo:
I would say collaboration, vertical integration, a strong amount of enthusiasm and a desire to get better, idea flow, and mutual alignment. You want to make sure that the people that are within your organization have the same DNA characteristics up and down the line. It creates a positive atmosphere, a competitive atmosphere, and everybody’s in sync. And I think that being organized, being in sync, all driving for the same goals, relatively the same vision, same DNA, you’re able to get a lot more done than the average person or organization, so on and so forth.

Eric Murphy:
Yeah. You said you’re looking for that similar DNA. Are there particular values and attributes that you are looking for in a team member?

Chris Palermo:
Coming to work at First National Realty Partners has become as hard as… If I were to give you an analogy, it’s like trying to get into an Ivy League school, Harvard or Yale. It’s highly competitive. We have a very, very long and arduous hiring process. Our process is designed to make sure that we isolate the right candidates from day one. Because again, the most important thing and aspect in any business are the people that are within that business.

Eric Murphy:
And where exactly do you find talent? Do you have a network in place that helps you recruit?

Chris Palermo:
We use every single source possible. We use all of the top recruiting agencies. We have some industry leaders in HR that we brought in on a consultant basis, and we’re able to buy short lists of people, talent that are out in the market. One thing I’ll say is not many of the right candidates are sitting home on their couch looking for a job. Many of the people out there that we want at First National Realty Partners are working at some other company and they’re highly desired and highly valued. Recruiting firms are key.

Chris Palermo:
Being able to get short lists and reaching out and having confidential meetings is key. And another strong way that we’re able to get candidates, believe it or not, is from within our own network. We always like to say that there’s two degrees separation in the real estate industry. What does that mean? That means that within one or two people, we can pretty much get in touch with everybody in this industry, and everybody knows who the players are. A players, top guys, heavyweights in our business know other top guys and other heavyweights.

Chris Palermo:
We’ve been able to from within our own network, and it’s been absolutely rewarding. Not only are you able to get great candidates that are let’s say currently working, but there’s a working relationship with let’s say the person that’s bringing them in. So they’ve already been in sync together. They’ve already been on the battlefield together. They’re already in sync and it works out really well.

Eric Murphy:
Right. Chris, what role do you think technology plays in building that team? Do you use specific tools?

Chris Palermo:
Absolutely. We use Facebook, Instagram, LinkedIn. We do a lot of social media posts. We try to integrate technology into every facet of our business. I’m sure you’ve heard the phrase “you either adapt or die.” At First National Realty Partners, our company essentially is a technology company and our product is real estate. We use technology in every which way, whether it’s sourcing candidates, grading candidates, finding candidates, chronicling candidates. We basically do it all.

Eric Murphy:
And when you are assembling that team, if you’re trying to put them in the best position to succeed, are there certain systems or structures that you think you need to have in place?

Chris Palermo:
I think that you have to have for starters an incredible HR and hiring process. You have to have an incredible vetting process. And when eventually a candidate becomes an employee or somebody comes into First National Realty Partners, you have to have an incredible indoctrination process. You just don’t want somebody to come in. You throw them to the walls and say, “Okay, kid, go to work.” You want to create an atmosphere of consistent learning.

Chris Palermo:
Making sure that for the first couple of months and first two weeks, they understand emphatically what our mission is at the company and organization. We’re essentially trying to drive mutual alignment as fast as humanly possible without overloading. Let’s say over a period of let’s say two months, we’ll completely indoctrinate from beginning to end all of our employees, and they will know how to navigate in and out every single facet of what their role is. That’s our goal. I always refer to our company as a learning organization.

Chris Palermo:
You have to be constantly training and you have to be on a constant path to get better. The things that we’re doing today, sure as the sky is blue, are going to be different in some form or fashion tomorrow or next year.

Eric Murphy:
It really sounds like it’s important to build a solid managerial team. How would you recommend putting together a strong managerial structure?

Chris Palermo:
I believe it’s having an incredible training process, a visual training process. And for us over at First National Realty Partners, the fastest way that you’re going to get somewhere is by partnering or acquiring or joining with somebody that has had experience doing it. So again, for First National Realty Partners, when we’re bringing on managers, we make sure that we isolate the right guys by following an exhaustive hiring process. We confirm and prove each and every hire, and then we leverage off of that individual’s ability and experience.

Eric Murphy:
Chris, how do you go about establishing goals for your team?

Chris Palermo:
We start from the top down. We talk about our overall goal. What do we want to hit for the year? How much money in acquisitions? How much money do we want to save on property management? Is it possible for us to come in under budget? Whatever which way and metric that we’re looking, we start with the main goals of the company. And then from there, we reverse engineer it.

Chris Palermo:
We break it down into each segment of the company, and we meticulously break down how each person, each role, from leasing guy to asset manager, to accounting, to property management, how their goals align and how what their job is and what their mission is will align to the overall and contribute to the overall big organizational goal, which means breaking it down on a quarterly basis, a monthly basis, a daily basis. Another important factor on there is the power of repetition. Within our organization, we have huddles within our own units, within our own divisions.

Chris Palermo:
We talk about what we’re working on, where we’re stuck, and we make sure that we have constant communication, especially in times like these where a lot of your employees are working remotely. So making sure that you have that transparency. You have that communication. You have that repetition. And when I mean repetition, on a daily basis in our meetings, we talk about what our yearly, quarterly, monthly goals are every single meeting. It’s ingrained in every single one of our employees from the bottom all the way to the top.

Chris Palermo:
We want our people to visualize our goals through unconscious osmosis, if you will. They subconsciously visualize and do what it takes to get there. We break it down department by department. We’re constantly looking at it. And it’s the basis, it’s the scorecard from what we use to judge to see how, what, why, what happened within a particular quarter so that we can improve. And again, for us, it’s not perfection, it’s constant improvement and constant positive progress.

Eric Murphy:
Okay, great. I’m curious. Say someone doesn’t have a large budget, but they’re trying to build an entire team, are there creative ways that you can assemble a team on a limited budget?

Chris Palermo:
Absolutely. We did it within our own business. What we did was we reached out to all the local colleges. We’re in New Jersey. We reached out to Rutgers, literally guys across the country. You would be surprised at how much talent there is out there. Some of these college kids know how to do things with technology that grown men would take years for them to understand. So leveraging off of students and leveraging off of interns, and they get an incredible experience within let’s say our organization. They’re working at a private equity fund.

Chris Palermo:
They get the real life experience and we’re able to leverage off of their expertise. And in life, we always have a saying, you can’t do anything unless it’s a win-win. The win for us is we’re able to leverage off of this bright mind and leverage off of what they consider easy, what we consider hard. And they’re able to also see the big picture on how we plan stuff as a real live private equity firm. And it doesn’t have to be private equity. It could be any business up and down the line. In life, there’s always a trade-off.

Chris Palermo:
And being able to leverage off of young, hungry talent and get that win-win is you can fill up your room with 10 or 15 interns.

Eric Murphy:
And is that how you would suggest scaling up your team responsibly, or are there other ways?

Chris Palermo:
I think that the most important aspect of scaling up is planning a viable venture, whatever it is,.whether it’s real estate or creating widgets, seeing a scalable, measurable business and be able to prove that if you’re able to do this, you’ll be able to get that result. From there, if there’s a way that you can drive that, create sales, create business, raise money, whatever it is, then you’ll be able to scale up. You have to be able to create something that other people will be able to identify with the vision and buy into it.

Chris Palermo:
If not, I think that you’re going to have a very difficult time scaling any business if it’s not viable.

Eric Murphy:
Chris, what do you think are some of the biggest mistakes that someone can make when they are building their team?

Chris Palermo:
I think trying to not pay for the right talent. I think people try to cut corners. I also see on the opposite side of the spectrum where people get into too much debt and they can’t get themselves out of the cycle. What I would say is, is that you have to be measured in your approach on everything that you’re doing, number one. Number two, you get what you pay for. And then number three, and most importantly, and what I was saying before, you have to make sure that what you’re doing is viable.

Eric Murphy:
We’ve talked a lot about training today, Chris. Can you elaborate a little bit on the training that you provide at First National Realty Partners?

Chris Palermo:
We provide training in every aspect of our business, from the employees, the vision and goals of the company, general real estate practices, compliance, employee benefits. We really try to bring the entire firm in from beginning to end. We even do what are called teach ins, which teach in is about a 45 minute lesson on the new acquisition that we’re buying within the organization. So everybody from the top to bottom understand exactly what our new asset is, why we’re buying it, who we’re buying it from, what made it a successful deal in our mind, and ultimately why we did it.

Chris Palermo:
Because again, within any organization, the most important thing is to have that open line of communication, to have the mutual alignment, and to have everybody on the same page. On top of that, we do 30 minute trainer videos. We’ve done five minute trainer videos. We’re very big on creating videos to be able to teach guys. So that in their free time they could go back and reference what it is that we were talking about and the point can be pushed back into their mind, not just on that specific time when we’ve had the actual Zoom call or the training to begin with.

Chris Palermo:
I think by bringing in the video training has allowed our team to absorb all of the information that we’re throwing at them and all the different initiatives much more efficiently.

Eric Murphy:
If you had to pinpoint one thing, what would you say makes the team at First National Realty Partners unique?

Chris Palermo:
I think the collaboration, the enthusiasm, the drive to do better. Everybody’s on the same level. Tony and I aren’t walking into the office and beating on our chest with a God complex. We’re all on the same level. We all have the same DNA characteristics. Again, we were very, very meticulous on not only what type of qualifications somebody had, but what type of person they were. And we did an incredible job doing that. There’s just an air about our company. If you go to our Glassdoor Reviews, you can see the employees’ feedback.

Chris Palermo:
And when I read all the feedback and all the reviews, there’s a great sense of loyalty, a great sense of enthusiasm, and incredible amount of humility. We just want to make each day better than the next. We want to be able to create an organization where we can do the work within a quarter of the time that it takes the normal people because of how cohesive and cooperative our unit is. We love hearing idea flow from, again, from the bottom up and everywhere in between. We think that everybody has a voice.

Chris Palermo:
In our mind, 50 minds thinking about ideas is a heck of a lot more productive than five or six. And sometimes working with people that are specialists within certain divisions of your company, by them being involved in that specific role can create and articulate better ways of doing their job. It’s the commonality. It’s like a SEAL team in the military. There’s just an incredible amount of loyalty, enthusiasm, cohesiveness, and a desire to get back.

Eric Murphy:
Before I let you go, Chris, it sounds like the culture at First National Realty Partners is very important. How essential do you think culture is both in your business or to anyone who might be listening who may be in the process of building their team? How important is that workplace culture?

Chris Palermo:
Culture is the most important thing in the business. People are the most important thing in any single business. What makes First National Realty Partners are the 50 folks that dedicate their lives to making our organization what it is. So having the proper culture, having people that see things the same way, that think of things the same way makes lives a heck of a lot easier.

Chris Palermo:
Having a positive attitude, not thinking that you’re the best or have a monopoly on all ideas, willing to listen and implement from everybody that works within the organization regardless of stature or where they are makes First National Realty Partners or any company out there a better company. We don’t think that we’re the best. We want to get better. We want to consistently adapt. We want to be able to use technology, and we want people coming to work. It’s like the Sam Adams commercial.

Chris Palermo:
I don’t know if any of your listeners have ever seen it, where the CEO comes out and he’s so enthusiastic and happy about making all the different craft beers. He says in the commercials it’s not even like working a day in their lives, in his life. That’s the same feeling I want and we get from the people that work within our organization. And when you have that type of atmosphere, people are able to get a lot more done. They take ownership in what it is that they do and ultimately perform better.

Eric Murphy:
If someone wants to get in touch with you, Chris, how do they do so?

Chris Palermo:
They can email me. My email, it’s very long, so brace yourselves. I’ll say it’s slow. It’s cpalermo, that’s P-A-L-E-R-M-O, @firstnationalrealtypartners.com. Please go to my website. That’s fnrpusa.com. It was a pleasure speaking with you today. I appreciate all your listeners. I appreciate all the support and let’s go kick some butt.

Eric Murphy:
All right. Fantastic. Chris Palermo, co-chairman, founder, and managing principal of First National Realty Partners. I appreciate your time. Thank you for being on the show today.

Chris Palermo:
Okay. Have a great day. I’ll speak to you soon.

Eric Murphy:
My thanks again to our guest today, Chris Palermo, and thank you for listening to the Private Equity Real Estate Podcast, which is brought to you by First National Realty Partners. If you haven’t already, please remember to subscribe, rate, and review the podcast. I’m your host, Eric Murphy, and we’ll talk to you next week.

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