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When you joined Behringer Harvard in late 2002, they were not a household name in the packaged product space the way that you are now. Arguably, you were somewhat of a creative hire in that you weren’t a President of Capital Markets with a competing real estate firm. What was in place when you joined, and what were your goals?

I think the Behringer Harvard organization was looking for an individual with proven build-out experience first and foremost. I believe the reason that I was originally sourced was that I was known as a build-out guy and back in 2002 it was a start-up in the truest sense of the word. Behringer was a very well known institutional manager of real estate, and had been sponsoring real estate investments going back to the late `80’s, but when I came on board, the dealer manager was a shell with regard to distribution in the retail channels. My first job and target was to write the business plan for Behringer Securities start to finish, and then implement it. This encompassed a soup-to-nuts build-out including establishing and developing all of the sales territories, hiring and training all external and internal wholesalers as well as the national accounts team; developing the budgets for all divisions within my side of the organizational chart as well as all policies and procedures; consulting from a fund development perspective; design and creation of the sales and marketing materials, both sponsor and fund level; leading the due diligence process and the building out of the selling group and distribution channels. My broad goal was to leverage the expertise and reputation of the Behringer organization and help build Behringer Harvard into a leading real estate investment management firm in the Broker-Dealer community.

Was there a watershed event such as signing a big Independent Broker-Dealer, a specific economic event or a series of events, or a particular product launch that, looking back, really helped establish you as a company that was ready for prime time?

That’s a good question. I would say that there were a few contributing milestone events. Clearly, the addition of a handful of power Broker-Dealers into the selling group was key to the successful launch of Behringer Harvard. Secondly, the sourcing of top wholesaling talent with not only solid existing relationships, but also the experience to articulate a sophisticated message in a simplistic call to action way. And you know Dan, you were there. The DAK organization was instrumental in assisting Behringer early on and helping us to source the highest quality securities talent. That was a mandate of ours to have top producers with significant experience. I think it was really a combination of a Jim Collins, Good to Great philosophy of putting the right people on the bus, coupled with the execution of building a broad and diverse selling group. It was, in retrospect, a very methodical crawl, walk, run, slow growth and penetration to success.

Where there any speed bumps along the way that you perhaps didn’t anticipate, or didn’t think would be as big as they turned out to be in the process of building a business?

In building an organization of this size, now just under $10 Billion under management, there are always speed bumps so when they arise, you manage through them. I guess one of the things that we pride ourselves on here is trying to be chess players, and looking 2, 3, or 4 moves out in advance before making a move. If you are going to move this piece, you better be prepared for each of the different permutation of events to take place. Would you like me to speak specifically about an example of a speed bump?

Yes, that would be terrific. I understand, as you said, that you are paid to play “three-dimensional chess” and you are good at it. But maybe there is something that you knew was going to be a speed bump, but you thought it was going to be a five-inch high speed bump, and it turned out to be a five-foot high speed bump.

Yes, I would say that perhaps the largest speed bump is a testament to the quality of our existing selling group. Specifically, that the due diligence analysts in my space are extremely scrutinous and thorough in their reviews. 25 years ago when I started in the business you could go and see a friend of yours and go through a due diligence process in an expedited manner. In today’s highly regulated Sarbanes compliant world due diligence is a lengthy and intensive process, and there were some very important BD’s that we approached who said, “We like what we see. We see the quality of your management, but we want to see you get your first $100 Million or your first $1 Billion under management, and then we’ll take a stronger look.” The timing of some very significant power players coming into the selling group, because they wanted to take a wait-and-see attitude, was probably the largest speed bump.

What new products or new business opportunities or channels are you excited about nowadays?

The shake-up in the debt and equity capital markets has presented some incredible opportunities. I would say first and foremost multifamily as an asset class and the opportunity to educate the broker dealer community on this favored institutional sector would be the thing that I am most excited about. The institutional world largely comprised of the STERS and the PERS, police and firemen’s and union based pension funds, endowments and foundations, the smart money, is more heavily weighted in multifamily than any other sector, but there has never been a high quality institutional product available to the Broker-Dealer community. We’ve recently introduced one and it’s been received with a great deal of success..

Tell me about your distribution model: Our distribution model is a little bit different than the average competitor in our space. Internally we have a total of 28 wholesalers, 14 in and 14 out. They service 7 regions and 14 territories across the country, and we also have a highly seasoned National Accounts team made up of a department head, as well as Senior Key Account Managers and Internal Key Account Associates. We distribute through a diverse selling group of Independent Financial Planning oriented Broker-Dealers, Bank Broker-Dealers, RIA’s, some Regional and Specialty Member firms, as well as an Institutional division.

Is there any channel that you think has been underserved, that you see as a big “hole-off tackle” opportunity for your firm?

Sure. The largest channelized selling group members in the non-traded REIT space are clearly the Independent Broker-Dealers, but we are penetrating into the Registered Investment Advisory channel, pretty successfully with somewhat of a proprietary model. Just as in the Capital Markets world, and in more structured, packaged, open-end products you’ve seen a shift towards wrap programs and assets under management fee structures. We believe there to be untapped opportunity for RIA’s and fee based planners to allocate to direct investment real estate similarly. Broker dealers are addressing the challenges to entry within their wrap programs and umbrella RIA platforms and I believe this to be a huge area of growth for alternative investments.

Switching gears-- you have an interesting background in that you ran your own successful Financial Advisory firm before getting into the manufacturing business, right? And you spent the better part of your adult life figuring out how to distribute products through the Financial Advisory professional. The question is, what characteristics do the really successful Financial Advisors have in common, in your opinion?

That’s a great question. First of all, the best advisors have a specialty in one particular High Net Worth niche, be it wealth transfer, or estate planning, or retirement planning. They tend not to deviate from their core competency. That would be number one. Number two, many of the most successful advisors go where the money is, and they consider retail capital sort of the kiddie pool, and they want to be in the Olympic pool, so they are doing a lot of corporate structural work, stuff like deferred comp, 401(k) representation, captive life insurance, key man and business continuation buy/sell stuff. As a result of managing hundreds of millions if not billions corporately, they inevitably achieve a clientele of the senior management and highly paid executives of the corporation and manage their personal assets. That seems to be a common denominator of the successful advisor. Secondarily, I would say that the best advisors are the best listeners, and they approach things in a back engineered fashion where they sit with a client and say, “Ok, I don’t need to analyze this statement or this tax return. Tell me what your dreams are. What are we trying to retire with, and how big do we want the boat to be?” Then they make the plan relative to the needs of the client as they have described it to them. Lastly, the most successful advisors don’t get bogged down in administrative issues and are constantly marketing themselves, their practices and generating referrals. They do seminars or radio shows or a number of other business building practices which constantly bring in new assets under management. I would say those are the three most important common denominators that I’ve seen in the formula for success.

Having been a manager and leader of people for many years, and someone who coaches and runs a very successful organization, give us the tenets of your management philosophy, and how you get the best out of your people.

Well, I’d say first and foremost Dan, leading by example. I have a goal that I want to attend at least two times the number of industry or Broker-Dealer events as any one particular member of my team. So, number one, being a player coach and getting out into the field. Number two, I don’t micro-manage. I’ve never micro-managed, but I am a believer that autonomy is earned. I partner with the people on my team as much as I possibly can. I am a huge believer in the power of data and information, and use it for the betterment of each territory, region and campaign that we put in place here. Basically, I try to provide as much ammunition, support and guidance as possible to empower individuals to achieve the highest level of success that they can, and simultaneously the highest sensation of personal accomplishment because that’s what really drives people, when they feel great about what they’ve accomplished, they just want to go and do it again.

You’ve been a Senior Executive and an entrepreneur for many years, but there had to be some bosses/mentors/managers along the way that you’ve learned from, even when you were a 23-year-old kid. Who are the people that you’ve learned the most from in a business context?

There have definitely been mentors which were hugely influential in my life. Speaking of when I was a 23-year-old kid, as a kid out of school, the very first job that I ever had was as a leasing agent of office space. My first sales manager, the day I was hired, took me out in the field. Actually, the first place that he took me was to a clothing store and bought me a nicer tie. He then drove me to the largest office park in Orlando and he said, “Jeff, that’s the Koger Office Park. There are 140 buildings representing several thousand tenants, and several million square feet. Here is a clipboard. Go knock on every single door, find out when their lease expires, what their space needs are, and when you are done, and I estimate that to be in about six months, come on back to the office.” That is something that I will never forget, and it was the most invaluable lesson in persistence, sales and introspection that I’ve ever learned.

So Behringer really did hire a real estate expert when they brought you on board!

(Laughs) That’s exactly right. I came full cycle. Started on Main Street, went to Wall Street and now married the two together! I’d be remiss if I didn’t also include my father Dan; without a doubt, the most honest, highest integrity individual that I’ve ever met in my life. He’s gone now since 1992, but what a nice thing to be able to say about your father. He taught me the importance of honesty and integrity at every level and that no matter what the circumstance, it always wins. He’s clearly a mentor and hero of mine. Lastly, I would say that a man named Alan Schwalb, the Chairman, CEO and General Partner of the first company that I ran distribution for years ago, Star Partners, when we raised capital for Warner Bros, MGM/United Artists and other major studios. He is the guy who taught me the power of information, and that chess player mentality that we talked about. He was the most thoughtful and deliberate professional that I’ve ever seen. He would analyze every circumstance, how it would impact the investor, the financial advisor, the industry, what the potential fall-out or reverberation would be and base decisions on some pre-ordained level of success. He was the ultimate strategist.

In a business sense and in the context of the business you are running right now, what keeps you up at night?

Well Dan, what doesn’t keep me up at night would probably be easier to answer! I am paid to worry about the unforeseeable, see it and then protect against it. First I would have to say, in the space that I run now, Direct Investment Real Estate, mine is the first fist in the fire, it’s the first gear in the machine so to speak. So if my gear doesn’t spin, then not much does. If I don’t successfully capitalize a fund, then there are no assets to acquire and there are no assets to manage; so excellence of execution first and foremost is critical, and I worry about that. The regulatory environment is also a concern. There are some core structural components of non-traded REITs and Alternative Investments in general that are being challenged and redefined, and I believe that how you respond to these challenges will really separate the institutional sponsor from the weaker retail syndicators. Also, I worry about my team, everyday, as it relates to morale and the quality of life that they have. Wholesalers and National Account professionals sacrifice tremendously, and spend inordinate amounts of time away from their families and their homes. I don’t have 100 wholesalers like a lot of the larger shops. I can count them on a couple of hands, but I still service a huge selling group of 300 Broker-Dealers representing close to 70,000 reps. The people that I am responsible for are probably one of if not my largest worry.

If Behringer Harvard were to be an automobile, what brand and make would it be?

Well, can I morph two together? How about a Honda and Mercedes mix? On the Mercedes side, very high quality product, pedigree of management, global in nature, and considered best in class by those with a discerning radar of what really determines long term success. We pride ourselves on performance and service which I think Mercedes always has as well. Now for the Honda parallel because it’s my understanding that they hold their value over time more so than any other product in the business, and frankly, we specialize in public offerings with relatively low minimums. Mercedes might not be available to everyone like our product, so a “Hondedes.”

Terrific. And the fact of the matter is, Mercedes does have brand extensions to where they have Honda-priced type products.

That’s exactly right.

• END •

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