Transcript
Aaron:
Welcome everybody. Today, we are joined on our podcast by a legend, a legend in commercial retail real estate, a legend in Texas: Herb Weitzman. He’s the executive chairman of Weitzman, which he started in 1990. It’s a full-service commercial real estate brokerage firm, major owner, [and] property manager with about 44 million square feet handling the retail leasing through their brokerage and also about 22 million square feet on the property management side on the retail. His awards and accolades are too lengthy to list, but I will mention—just in passing—Herb won the 2018 Dallas Business Hall of Fame award.
So, welcome Herb. Your story is amazing and our listeners, I’m sure, are very excited to hear it. I really appreciate you being on with us today. Thank you for taking the time.
Herb:
My pleasure.
Aaron:
Well, maybe you can start off. You’ve had a long and storied career in commercial real estate and the success you have today was clearly built on many, many years of hard work. Maybe you could talk about the early years and how you broke into real estate and what was the trajectory from the beginning?
Herb:
Believe it or not, it happened when I was four or five years old because my mother and dad had a little inner-city store in Dallas on the east side of downtown. One day when I was about five, my dad said “[do] you want to come walk around with me and help me collect rent?” I said, “what are you talking about?” And he said, “Well, I bought a few little rental houses behind the store, and I go collect the rent on a weekly basis.” And I said, “Well, why do you do that?” He said, “well, it’s because this will be passive income and I’ll pay these off and it’ll help the family, you know, have a few more things that we need.”
I said, “Okay.” So that was the first time, and I went many times with my dad when I was growing up. And that was a great education for me and a great upbringing. So, we moved when I was six to East Dallas. Then when I was 11, I moved to University Park. And I graduated there and went on down to the University of Texas at Austin. I came out of school with a business degree and a major in finance.
Aaron:
You got your first job in commercial real estate after that?
Herb:
I got my first job in real estate my junior year at college. I was going to work that summer with a company in Dallas called Henry Miller Company. I thought I had a job when I got through with my junior year. They said, “check with us, we might have a job for you.” But when I called the president of the company, he was out of town. The son was at Air Force training and Henry Miller, Sr, who founded the company, he was out of town as well at some convention. And so, I just was so dejected because I had my heart just set on working for them over the summer. And so, I decided, well, I’m gonna go take a few real estate classes at SMU to start beefing up on real estate. So, I went and registered. The next day, I’m coming back [from class]. I have on a pair of shorts and cut-off t-shirt, and I’m going through this little shopping center near my house. I go in just to make an appointment at a little real estate office that I saw that was on the plaza. I walk in and there was this lady who looked like she was about 80 years old, and she comes up and says, “Can I help you?” And I said, “Yes, I’d like to meet Mr. Porter.” This was the Ralph Porter company. Little did I know he was very close friends with Henry Miller, Sr. And so, I said, “I’d like to make an appointment.” She says, “Well, hold on just a minute and I’ll check. I’ll be right back.” So, she comes back and says, “Well, Mr. Porter’s here. He’ll see you right now. And I said, “Well, I’m not dressed.” I’m in shorts and a cut-off. But I figured, okay. I go back and I see Mr. Porter and tell him “I did get a job with the Miller Company, and I was going to work for them this summer but they’re all out of town. And I don’t think I have a job.” And I said, “I’d like to work after I finish my class at 11 o’clock. I’ll do anything. I just want to be exposed to real estate.” He says, “Well, I’ll tell you what we’ll do. We’ll hire you for $75 a month and you come on in after your classes are over. I’ll help you get your real estate license.” So, the next day I told him “You have a deal.”
And the next day I started, and I’d come in after class and then I started looking immediately through the listings just to get familiar with what was listed. And there was only one commercial property. And I said, “boy, I know that property. I can’t believe you’ve got that for sale.” I got all the information I could on it. So two or three days later, it was the weekend and I had a date and, you know, I pick her up and her father’s there. And [he] asks [me] what am I going to be doing for the summer. And I said, “Well, I’m working in real estate and I’m going to school in the morning.” He said, “Well, you have any commercial properties?” I said, “You know what? There’s a great property on Greenville Avenue.” And this was about three miles from where his car lot was.
And he said, “Will you get me information on it? I’d like to see it.” Well, sure enough, long story short, he bought the property. It was my first sale. And you know, I didn’t even have a license. Mr. Porter helped me close it. And then another friend was coming back to town from the Army and my sister knows the family. And she said, “Well, you might want to call them and see if the couple is moving back and they could use a new house.” Well, I did that and sure enough, I did some research and, and now I’m in about the fourth week and they’re in town and they find the house that they liked. They put it under contract, and now I’ve got two closings, you know, and I’ve only been working for four weeks.
And at that time, Mr. Miller calls me. He actually was on a trip to Europe, and he called me and he says, “Oh, Herb, I’m so sorry. You know we didn’t leave a message for you, but we have this job for you.” I said, “You won’t even believe what’s happened, but I already got a job with Mr. Porter.” And I said, “I’ve got two deals already.” So that was it. But his closing comment was, “When you get out of college this next year,” he said, “we have a job for you.”
Aaron:
That’s great.
Herb:
So I said, “Oh my God! I got my job for when I graduate.” So, I joined the Miller Company after that and I set up the farm and ranch division. I ended up working for the first two or three years in the farming rights sales. And I started to learn all about the land around Dallas County.
So it was a winding road. My clientele, who I was trying to sell land to, they’d say “Herb, find me an industrial building. I need to move a plant” or “find me an investment property, I need passive income.” And so I started getting into all that. And by the time, you know, by now I’d been in business five or six years and I really have learned all the counties around Dallas County. And, you know, we’ve just participated in all that growth, because, at that time, I think Dallas’ population was about 700,000. Now we’re eight and a half million.
And that’s how I ended up in the development business because I would put deals together, I’d find locations, and the tenant or a buyer wouldn’t take it. I knew because of my research that this is a very good location, and I could do something with it. And so I would always take care of the customer. And then outside of the property there, I would start off putting friends and family in deals and build them out. And we moved into the grocery business with A&P, who used to be here and Safeway, who used to be here and, you know, all the time I was doing development. I was growing the business for the Henry Miller Company, and then Henry became my partner for about the first 12 years.
Aaron:
That’s amazing. What were the types of crises you faced and how have you navigated them?
Herb:
Well, what we learned was liquidity. And from that standpoint, I hadn’t taken too many positions in raw land. Most of my deals were income property. I was able to, always able to generate my capital through the brokerage business, so for the last 20-25 years, I was substantially over a million dollars every year in my pocket, you know, in the brokerage business. And every penny of it was going into real estate deals.
Aaron:
That’s great. And talk about some of the mental agility or tenacity you need to be successful. You’ve been at this real estate game for many years. Some people come and go, some people stay around. And you’ve been through so many cycles now and have seen so much good, bad, and everything in between. How do you keep your mental edge so strong all the time during all of these cycles? It’s such an unpredictable game, even where we are now. How do you maintain your focus through all the ups and downs?
Herb:
What we have here in Texas is something other states don’t have. It’s kind of a wildcatter state. It comes from the oil industry. And what happened after the ’73 to ’75 cycle, we had another cycle in ’79 where we had tight money in the banking system and a rapid rise of interest rates. So loans that I had at the bank went up to 24%, and I made it through that. Okay? A lot of the projects were financed and already stabilized. But that was over in ’81. [In]’81 was when the savings and loans were deregulated and everybody who w[as] on the sidelines and never could borrow money did, because now the loans to lend money were not just residential but commercial. And that’s what took us into a ramped-up period that really hit a crescendo.
That’s when the savings and loans started to go broke, the whole industry went broke, and the bank went broke. And that was the roughest period for any developer, including the biggest and the smallest and anybody who had borrowed money. We learned so much during that period.
What we learned from each one was a little different. After we came out of this in 1990, we ended up knowing what we had to do to create more stability. I mean we needed more stable income. And then we also realized that we thought we were levered properly, and we weren’t. And so we knew that in the future, we’re gonna have to be lower-levered. And then the biggest thing, is that we thought we had plenty of liquidity. And we went through the liquid assets [to] remove excess just to pay the mortgage and to keep our name good until the bank said stop paying. And they said, “We don’t want your 77 loans. Keep operating the property.”
Aaron:
And fast forward to today. I’d love to hear how you’re organized. I mean, obviously the work you put in and knowing how to scale a large brokerage operation and the development and the syndication. But how are you organized today, and how did that evolve to where it is today over the past 20 something years?
Herb:
We grew the company for the first 10 years. You know, I’ve always been brokering. And I really had wonderful clients. [I] brought Target here and did 70 deals with Target and had relationships with all the main grocers. And so going out with them and buying sites for the future. It was kind of amazing, you know. They’d say, “Well, how’d that happen? You know, you were broke and now you built this company.” And I said, “Well, yeah, it’s just relationships.”
Aaron:
That’s well said, “relationships,” and you’ve got one’s going back decades at this point. What are you telling the next generation these days who are coming up through the ranks? Every generation is different with their own challenges they’re facing; all sorts of pressures. How are you talking to your mentees—I’m sure which number in the thousands these days. But when they sit down with you and they’re asking you for advice, how are you helping them shape their career? I’d love to hear how you’re having those conversations with people.
Herb:
Well, we’re a growth company. So we’re always recruiting. What I’m interested in the first time is what they want. And what I try to get to is those that have the passion, you know, a burning fire to do something. But they don’t understand real estate. And in fact, they understand that less today than I think when I was there because you just had tough times. Your parents were poor, you had to work, you knew you had to work. You know, I was in my parents’ store and looking at them, watching my mom on her knees, putting shoes on kids. I don’t think that happens with kids today. You know, they grow up with a phone in their hand and most of the information’s right there and they don’t have to dig things out, you know; sell newspapers, or go bag groceries at a grocery store. You know its kind of beneath them today.
We have a hard time picking the winners, but we create superstars here. And we move them up either at brokerage or we move them over to development or they move to our syndication group or whatever. But it’s the most difficult thing I think we have to deal with and to grow a company, particularly with the personnel problems that exist today.
But what happens is you’ve got to pick leaders and that’s the number one issue because most companies can’t get very big. But in the brokerage business, if someone, gets their strategy together, they can go and learn, make money in brokerage and make a lot of money in brokerage, and then put that money to work in their stock and trade. We have programs in the company where we incentivize the broker to take care of the customer first, and then do that extra work and bring the deal in. And we’ll put you into a deal for carried interest.
Aaron:
Sure. If you look back at your career, and obviously hindsight’s 20/20, and maybe it’s too big of a question, but any specific regrets, anything you wish you would’ve done differently if you sort of played it back or reverse? I mean, you’ve been through so much, you’ve built so much, anything you would have tried to go back and tweak if you did it again?
Herb:
Oh, that’s an easy one. That’s a softball. You know, I would have gone and made all the big mistakes earlier! I would’ve made them all early. But you know what? This is a business that you learn from trial and error, and you learn from your mistakes. What you have to be careful about with the cycles is, you know, we’re playing a long-term game in real estate ownership with short-term cycles. You never know when they’re going to hit. Who would have ever seen in our lifetime that we would see the world pandemic hit? It was so foreign to us, what we’ve been through the last few years and how retail particularly was shut down [and] the stores were closed. So, what you have to do is go back to the three things I’ve said. Have stabilized income to get through the tough times, don’t get over leveraged, and build up your liquidity. And I think those are very difficult things to happen because, in school a failing grade is under 70. And we go do developments, we figure, okay, we got 15% risk here. You know, we’re gonna work hard, we’re gonna make it through.
Aaron:
And last question for you. I mean, we talked a little bit before we got on the podcast about your book that you put out Born to Build, which really talks about your 50+ years of being deeply immersed in Dallas commercial real estate.
Herb:
What I did is seven series webinars through the pandemic here with the University of Texas, and all the students in the real estate school too. I would talk to them, and we’d go chapter by chapter and they would ask questions and “How did this happen? How did that happen? How’d you get through this?” They really are just starting now in their careers and have no idea about how to build the capital base. It covers a lot of things, but it’s not from the book side or the tech side, this is what the deans tell me. They want these students to come out better than they’re coming out.
We, in our training, have the people running around different departments. And we have them drive with the managers and go out with the developer for a negotiation meeting. We want them to follow a transaction and see the negotiation until it closes. It’s stuff you don’t learn in the book; it’s on the job. And that’s where we find they come out very weak and we put them through a bootcamp training and a buddy system training with everyone who’s an experienced player, and before long we have a whole different class that knows a lot.
Aaron:
I’ll definitely have your mantra of “don’t over-leverage, build liquidity, and search for stabilized income” running through my head for weeks now. And I want to thank you again for making time. You’ve really had an amazing career. I’m sure our listeners will really appreciate learning from it. And just want to thank you for the time. Anything else you wanted to add?
Herb:
Well, we’re doing construction of 16 centers right now, and we have about another 15 that’s planned, but we do them in stages. Now, one key thing, we don’t want a big loan to the bank with the way retail is today. So, if you like the site, you better love it because you need to deal with cash, whether you do it, or you’re bringing in partners so that you’re able to build it in stages because it’s gonna be very difficult to build it all at one time.
Aaron:
Well said, Herb. Thank you again for making the time. It’s been an amazing conversation and we look forward to Weitzman continuing to be very successful. And thank you again for making the time. To be continued….
Herb:
My pleasure. Good doing business with you guys. Thanks.