On this episode of The Dealmakers’ Edge, Jamie Hodari sits down with managing partner Aaron Strauss to discuss starting a flexspace industry leader, his mental edge for negotiations, and the pioneering way Industrious looks at the future of work.
Highlights include:
- How a dirty conference room table & IKEA led to innovation.
- The key questions for an early-stage entrepreneur to ask.
- The future of Flex workspace.
- Jamie’s top recommendations for keeping a mental edge.
ABOUT THE GUEST
Jamie Hodari is the co-founder and CEO of Industrious – one of the leading professional coworking & office flexspace companies in the world. As of September 2022, Industrious has over 150 locations across more than 65 cities, from London to Singapore to New York City and everywhere in between.
Jamie is a graduate of Columbia University, Harvard University, and Yale Law School. His career began as a reporter for The Times of India before a brief stint in private practice at Sullivan & Cromwell. In 2011, he co-founded his first startup—Kepler Kigali—which focused on affordable education programs. Soon after, he co-founded Industrious with longtime friend Justin Stewart and managed both companies simultaneously for a short period.
Industrious has been recognized by Forbes as one of America’s 500 fastest growing companies and special recognition in the “Best Startup Employers” category. A privately-held company, Industrious has secured strategic partnerships with major industry players that include CBRE, Wells Fargo, and Equinox.
The Dealmakers’ Edge with A.Y. Strauss highlights the stories, successes, and struggles behind major commercial real estate investors. Each episode offers a behind-the-scenes look at commercial real estate leaders and their unique edge.
Transcript
Aaron:
Well, today I want to welcome Jamie Hodari, who is the founder [] and CEO of Industrious. His story is amazing, and we’re really happy he’s here. Industrious is one of the leading professional co-working and office space companies in the world. Industrious currently has over 150 locations across more than 65 cities—from London to Singapore to New York City and everywhere in between. And Jamie, we’re pumped you’re here. I met you over a decade ago, I think, when you were just starting out and you’ve done amazing things. So, we want to get out your story for our listeners. It’s super exciting. Maybe you can start off with your biographical sketch.
Jamie:
And thank you for having me. I grew up in Bloomfield Hills, Michigan. It’s a suburb of Detroit. And actually, to connect it to Industrious, my co-founder many years later turned out to be my next-door neighbor from growing up. My father is from Argentina, so we spent a little time there growing up. Then I moved to New York for college and was a reporter for The Times of India in India after college.
And then the career kind of took off from there. And I did a bunch of different things, which I’m happy to elaborate on them if you want. But I did a bunch of different things before launching Industrious.
Aaron:
Amazing. And I think you hit the holy trinity of the Ivies as well–your educational background; Columbia and Harvard and Yale. And you did a stint in Big Law: Sullivan Cromwell–not too shabby–I think, for about a year or so, right?
Jamie:
That is true. Yes. My … parents were excited about the Harvard/Columbia/Yale thing. I enjoyed them, too. I was probably pretty excited about getting into the job market. I loved them, but probably if my kids were, you know, college age, I would say that’s a bit too much. I find with a lot of our employees, the people who spend a lot of their twenties in grad school, I don’t think got a ton out of it vis-à-vis people who were in the job market at 23 or 24.
Aaron:
I fully agree there’s definitely a value in amazing schools and there’s also a lot of value in just getting out in the world and doing things right away. But I guess we could fast forward right to Industrious when you really started to really hone in on one major company and really build it out and blow it out successfully. Maybe start us off to those early years. I mean, it was about 2013. How was that to just start from scratch? How did the idea come to you? How do you kick off the company?
Jamie:
So I had been, as you said, a corporate lawyer at Sullivan Cromwell. I worked at a hedge fund. And then at the time we launched Industrious, I was running essentially an education organization called Kepler that we kind of invented; or created a new form of university where it’s a flipped classroom university. You watch your lectures at night at home, and you go in and you take your classes during the day with a facilitator. And this was at the time when there were starting to be like great availability of free online lectures. And it proved to be pretty successful.
There’s a bunch of campuses now. It’s in East Africa, and I really love that. I believe in education. I liked working in education. And I really believe that in most of the world, if you can deliver a $1,000 college degree that has great educational career outcomes [and] that doesn’t look exactly the way Yale or Harvard does, that that’s probably going to be a better fit for a lot of people and enable more people to go to university.
And it did take a lot to pull me away from that, but I missed the for-profit world. And it just so happened that I had a very important meeting with our largest funder, IKEA, the furniture company, in New York. And our New York offices were in a shared workplace because the vast majority of our staff worked in East Africa. And I went to prepare for the meeting with the president of the IKEA Foundation, and the conference room table is sticky and there’s light bulbs out. And it just was not a professional environment. So I moved at the last second. I moved the meeting to a Le Pain Quotidien, the coffee shop. And that night I just felt like “I cannot believe I’m paying for an office. And for the most important meeting or one of the most important meetings of my career, I’m holding it in a coffee shop because I’m embarrassed of the situation there. There must be 50,000 companies that want to take advantage of the sharing economy dynamics of a shared workplace, but want something they can feel proud of, want something that feels professional, that feels elegant.” And my best friend from growing up, Justin, had had a very similar experience, and was feeling very similarly. So we said, screw it, let’s do it. Let’s come up with a little business plan and let’s do it as a side project. And we’ll both keep our day jobs and we’ll both keep going with that. But we can have this nice little shared workplace complex that matches what we as customers would want. And it’ll be fun. It’ll be entrepreneurial. We’ll make a little money on the side.
It cost $1.15 million to launch. So that was a lot of money to have to raise, but not an impossible amount. It was really the amount where you could go to doctors and lawyers and friends from college who had become investment bankers and get $25,000 or $50,000 checks and cobble them all together and launch the first unit. For better or worse, it was a smash success. It exceeded every underwriting point we imagined, every customer response point we imagined. And then it put me in just in a tough position because we said, “Holy crap, this thing has legs and it feels like there’s no reason to think this is unique to this individual location where we did it. We could probably do 500 of these.” And so we … started growing it nationally. And then about a year in of running both Kepler and Industrious side by side, that became unmanageable. And I moved to running Industrious full time.
Aaron:
It’s amazing. Being able to do that for a full year, side by side alone. Running one company is impossible, I can’t imagine two.
Jamie:
No kids yet. Unmarried. There were some things sort of playing in my favor.
Aaron:
All right, fair enough. It was probably a no-sleep period, though, for sure.
Jamie:
Yeah.
Aaron:
Very exciting. And I’m sure sometimes some of these you pine for that, you know, those early days of some of the most exciting as well. Now the business is much more mature. And those early years of growing, opening locations, hiring staff, hiring people to scale out the company. Talk about maybe those first few years after the first few locations were there. You had a proven business model, next level of capital coming in, bigger investors coming, and maybe making the jump. There are probably people here on the podcast listening who are running small businesses and want to try to take the leap. You’re in a very rare community of people who have taken the leap from, “hey, this is a great small business, now how do I actually make sure it grows sustainably and very successfully at a broad-based level?” Maybe some of those earlier challenges you face to hit some more scale? It would be fun to hear about.
Jamie:
Well, let me start with fundraising. Because to your point, I think for a lot of listeners, what I find over time is—especially if they’re running a small business—that feels like the biggest obstacle between the business of today and the business of their dreams or the scale they believe the business should be at. And it’s really hard. And people find it very stressful and there is no easy answer for how to do it. First, I will say at a personal level, I was a telemarketer in high school and I got very used to people not just saying “no,” but saying like, “I will come to your house and kill your family if you enter.” And I think that was very helpful. I really look back and say just that comfort with you put something out there and if someone says “no,” they say “no.”
It helped me romantically in my twenties, kind of having the comfort [of] going up to someone at a bar or something. And it also helped particularly in work. And I do think for fundraising you have to be comfortable with rejection, [and] not have an emotional attachment to it. And I think some people who run small businesses and kind of get stuck. The idea of going and meeting with 50 investors and having 49 of them say no can feel really daunting. I had other challenges, but for me. I didn’t have that emotional block on that.
So, the first unit we raised, as I said, $1.15 million, and that was for the individual unit and that was true for our next seven locations. So to elaborate for listeners on what that means and why it’s relevant to a lot of growing businesses is we said “there isn’t a business yet.” And so one of the hard things when people go to raise money for a growing business is they go and say, “Okay, my business is worth $9 million and you’re going to put in $2 million to own some percent of that business.” And then you’re sitting there having to justify like, “why is it nine? Why is it not seven? Why is it worth anything?” And I think raising money at the parent-level for an idea on a piece of paper is really complicated. And usually if people do say yes, they extract very painful terms. And we’ve now raised $500 million for the business and a decade later, we would probably still be unwinding some of those early VC terms if that’s the route we had taken.
Instead, we raised money for each individual unit on a cash flow basis, so it looked more like a real estate deal. You guys are going to put in the money, we’re going to put in the sweat and we will build this unit. And then 70% of all the profits will go to you and 30% will go to us. Or I can’t remember exactly, but it might have been like 100% of the profits will go to you until you’ve made a certain hurdle and then we’ll turn into 30% of it or something like that. That worked really well. And then eventually when we were big enough, we ran and raised money. I can’t remember the exact amount, but like $70 or $80 million valuation because we had a bunch of locations and we were up and running and we were doing well. And then we basically had a mechanism where all of those people invested in the individual units, both got the cash flow of those units, and then at that moment were rolled up into the parent company. That might be too wonky, but I do think I just have talked to enough entrepreneurs that that fundamental question of “what am I actually bringing in capital for and how does the money flow?” is oftentimes the biggest obstacle. And I’m so happy in hindsight that’s the way we did it with our business.
Aaron:
That’s miraculous. Maybe now we can transition to fundraising at the macro level. You’ve raised a lot of money from institutional partners at this point. Maybe you could talk to us about your relationship with CBRE and how that developed and how that came about.
Jamie:
So yeah, fast forward to today or I guess this would be fall of 2020. At that point, I think we were in 52 cities; really I think the highest quality, highest performing flex provider in the market. I’m biased, but I think that’s pretty backed up by the data. And CBRE, the largest real estate services firm in the world, and they sit on a lot of data and they have contact with most of the Fortune 500 companies. And in the depths of COVID, they saw the percentage of their clients that said “flex is going to be a major part of my workplace portfolio”, or I can’t remember exactly how the question was phrased, but they saw that number go up from something like 35 or 40%. So already a relatively large number to something like 85%. And it set off a bunch of alarms within the company—“alarm” sounds pejorative–it set off a bunch of, like, “ooh, ok, how do we stay ahead of this?” And I think within a few weeks, I got a phone call asking if I’d like to have dinner with Bob Sulentic, their CEO. We met and it moved very quickly from there.
Aaron:
And I’m curious also. They had a co-working division. Did they roll that into you? Is that what I read?
Jamie:
They had a company called Hana. They rolled it into Industrious as part of the deal and invested at the time a little; I think $240-$250 million into industrious. And they own about 40% of the business. So they don’t control the company, and there’s various guards in place so that the company remains independent, which I think is helpful and important. And also they’re a very formidable voice in the room and a very powerful partner of ours. And it’s been really healthy for the business. I know people can have mixed feelings about strategic investors. I will say we have a bunch of strategic investors, most notably CBRE. I’ve had a very good experience overall and, in particular, with CBRE. I think it’s been transformative for the business.
Aaron:
Absolutely. I can’t think of a more natural, symbiotic strategic partner than the largest real estate global provider in the world. And you’re already international and having that capital behind you. I know you’re even buying some companies, too. Is that a big goal of yours to acquire other businesses and roll them into you? Or is it just if something very strategic shows up and really fits in, then you’ll look at it opportunistically?
Jamie:
Having been an M&A lawyer, even somewhat briefly, I would hesitate to ever say it’s a goal to buy companies. A lot of M&A ends up going awry, and I think you really gotta’ build a business that can grow organically and stand on its own two feet. That having been said, we acquired four or five companies in the history of Industrious; six, I think. And it’s probably a mix of opportunistic and saying if there are moments where the strategy of the company comes up against a specific obstacle and you know that the right acquisition could help get that obstacle out of the way and truly move forward the company’s strategy…and you could make that acquisition at reasonable economic terms or the acquisition itself on its quality would be accretive, then I think those are the moments where you go and do it.
And so, for example, we just bought a company in Europe called Welkin & Meraki and a company in Asia called The Gray Room. And those are the examples where we knew we wanted to grow in those geographies. We knew being an American business trying to parachute people in from Dallas to Paris and dictate how things are going to go would be very problematic and a well-worn path that a lot of American companies have suffered greatly from trying to take.
And so we knew we wanted to buy a business with a great leadership team that was small enough that it wouldn’t sort of overwhelm our underlying business model, which is management agreements, which for the most part, you can’t really buy other management agreement providers because we’re really the only one that does it. But that would be big enough that we could trust those teams to run our growth in those geographies. That’s what we found in these companies. And then you’re looking at a deal that you’re saying “we’re going to make money off this deal and it’s going to launch the strategy of the business forward.” And then those flip from being like “ugh” to, you know, to really exciting propositions.
Aaron:
Maybe talk about your business model because there’s been a lot of co-working companies; some big, some small, some in between. Your model was always a little bit different. Maybe you can describe it and share how that’s really fueled some success beyond some of your competitors.
Jamie:
Our model on the customer-facing side of the business is relatively similar to the rest of our industry. We allow people to buy their workplace as a product on a subscription basis, and they can do it in co-working if they’re a team of 20 and below and they can do it in their own independent suite if they’re a larger team. We also manage the common amenities of many buildings and so that is not that distinct. That having been said, there’s been one knock on our industry for the last 20 years that you just can’t get around, which is “ok, this is happening…”
Companies more and more are going to be buying their employees’ workplace experience as a product. There’s going to be more and more demand for flex. But it feels like a very risky business because flex providers go and sign arm’s length leases with landlords where they owe a fixed amount in rent every month. And if a unit’s doing well, they’re good to go. And if a unit does poorly, it all goes to shit. You’re having a hard conversation with the landlord, companies go out of business, etc. That mismatch of term where you’re signing a ten-year term lease with a landlord and a short-term agreement with your customer is a very risky dynamic. I happen to agree with that point. I love our industry.
I think we are 2% of commercial real estate now and I would not be surprised if, in a decade, 35-40% of commercial real estate runs through something that looks like what we do: a productized as a service version of a workplace. And yet I think for so long, many providers were trying to explain away the biggest problem with our industry instead of trying to solve it.
And so, in 2017, we said, “Enough. We are going to go do management agreements with landlords where we take a fee for running the unit and the fee gets bigger if the unit does well, and it gets smaller if the unit doesn’t do well and we share in the ups and downs of the landlord rather than signing this arm’s length deal.” And there are going to be a lot of landlords that say, “No way,” and they’re going to be some landlords and say, “I would love to be on the same side of the table as you.” Just like with hotels where the management contract model is basically the entirety of the hotel industry, this does feel like a less risky, more natural way, to arrange this. And that’s basically all we do now.
And it really helped in the pandemic and it’s helping with our growth. And I would finish by saying it is part of why the actual quality of what we’re able to deliver is a lot higher, because we sit on the same side of the table as Blackstone or Vornado and say, “What should we be doing at this building? What product should it be? How should it integrate into the elevator, access, etc.” And that you can’t do if you’re in an adversarial position to the landlord on the 27th floor of the building.
Aaron:
You’re absolutely right. And that was extremely well articulated. And the partnership model over time; aligning those interests properly to make sure that the ultimate customer gets that right experience. The landlord is enthused that the customer is kept happy, that your company can operate and do what it’s doing properly. That’s the way I think you’ve really grown beautifully and you’ll continue to grow. Maybe talk to me a little bit about this line blurring, right? So you have those management agreements in place. I’m reading you’re doing more sometimes. Even pushing the envelope with some of these work club concepts. Maybe somebody’s not ready to do a full-on management, but maybe there’s sort of these quasi-relationships which are different than some of the different business models. Or is that something I’m making up here?
Jamie:
Pretty much anything we do with the landlord is a partnership agreement. The products that we create at the building level do differ sometimes. So we have, for example, with Nuveen, we are managing the building’s common amenities at a few of their buildings and then allowing people to basically buy a subscription to get to use that space as their workspace a couple of days a week or things like that. And yeah, I think one of the big observations I would make is in the last couple of years where all of a sudden people can work from anywhere, that means anywhere can be a workplace. And so we are doing deals with residential developers, with hotels, with activating different parts of buildings to turn those into workplace complexes. And that’s been an amazing development for us, in part, because not everyone wants to work in the heart of a central business district in a 40-story office tower. Some people want to work above a Crate & Barrel in the cute little downtown of their New Jersey suburb and places like that.
And so that ability to create miniature workplaces or subscription-based workplaces or twice-a-week workplace in a broader variety of settings has in turn allowed us to be in a broader variety of submarkets. And that’s a real advantage right now. A lot of people that used to be commuting 40 minutes now want to commute 10 minutes. And so they need you to be in Short Hills, New Jersey. They need you to be in Greenwich, Connecticut. They need you to be in Crown Heights, Brooklyn, not just in Midtown.
Aaron:
And I think CBRE put out a 2022 occupier survey that I read; 59% of US occupiers’ employers say flex space will be a significant part—more than 10%–of their portfolio within two years. So the pandemic I’m sure accelerated that. I know you’ve took over some locations, some other companies, other competitors that may not have performed. The market, the exponential growth in the industry generally has been strong, but it seems like you’ve carved out a really, really nice niche of that partnership model; best interests of everybody doing the best possible build-out for the customer. I believe I was reading that you flirted with the public markets—and obviously it’s a weird time in the public markets. Is that still something on your mind to access public markets or at this point, being a private company in the long-term would be in the best interests?
Jamie:
So to your point, it’s a moment of a lot of growth in our sector more broadly and for Industrious. And I think some listeners that are not close to this industry are surprised to hear that because obviously office in general seems like it might be challenged. But most months right now, we are selling three times our pre-COVID average. Our revenue went up 130% year over year, and it’s continuing to grow at a very fast clip unabated. So that is exciting and that does seem on the surface like that would set you up well for the public markets, and I think it probably will.
And also, to your point, the public markets are in a choppy place, and I think it’s really important for a late-stage growth business to not make their transition to the public markets based on capital constraints, based on whenever they’re four months away from running out of money. And so it’s very important for us to say we have a healthy business, we’re growing quickly. We have enough cash in the bank when it feels like the market moment is right. Let’s do it. And I think it is important right now.
Part of the reason I think we eventually do want to be, or maybe even need to be, a public company is that most sectors like this over time concentrate into three big global platforms; logistics, manufacturing, outsourcing, data storage, anything that’s a big B2B kind of global service outsourcing business like this. And right now, there are two global platforms, IWG and WeWork, both of which are public, and the third seat at the table is empty. And we are far and away in the best position to take that third seat at the table and are probably very close to being able to credibly say we have. And I think the markets would react very well to a third global flex provider built on a much more risk-mitigated, much more capital efficient business model than WeWork and IWG.
Aaron:
Well said, and I dare say without a lot of baggage either. Speaking of notoriety, you did make a very small appearance in that Apple TV series, which I’m sure you get a lot of comments. Did it feel weird to see yourself portrayed by an actor?
Jamie:
Yes. So there was a character called “Jamie Hodari” in WeCrashed. That’s my name. It wasn’t “Hany Jodari.” It wasn’t some, like, character that was glancing. It just was me. It was my name. They hired a guy who looked like me. They never reached out and said, “Hey, we’re making this TV show. What do you what do you think?” The actor never reached out. So it was in certain ways a little bit of a surprise. We had a former employee who was an actor and he’s like, “Hey, I’m at an audition right now, and I just looked at the chart on the wall for other roles this company is running auditions for, and there was a character in some show called ‘Jamie Hodari.’” And that’s how I found out about it. And then the show actually came out, and what I would say is my family and friends loved it because they played me like the biggest nerd in the history of the world. I wore like a magician’s vest in every scene and was just playing the kind of like nerdy straight man to Adam Neumann, who was the WeWork CEO, kind of flamboyant, very erratic, capricious CEO. But for Industrious, it was awesome because it made it very clear we’re a company that cares, that is conservative, that cares about risk, that cares about delivering for its customer. So everyone was happy. My siblings got to make fun of me because I was played like a total loser. And our investors and I think customers and company were happy because the company was represented as a thoughtful, I think, future-focused but sustainability-focused business in the way that we are.
Aaron:
Certainly great publicity and it must have been an interesting real life experience with all the interactions. Tell me about, I mean, this podcast is called The Dealmakers Edge. So you’re a young guy doing big things. You’ve got a lot of responsibility. How do you manage the day-to-day consequences and the pressure of being a CEO of a very successful business? How do you sort of quiet the mind and get through stressful periods? What’s been your edge that you’ve developed over these years of growth? It’s not easy for people who are looking to scale. I’d love to hear how you’ve managed sort of the mental side of the business.
Jamie:
If I had to say how I manage the mental side of the business, I would say two things:
One is not going to be that useful to listeners because it’s unique to me, or not unique to me. But I am pretty “type B”. I’m pretty messy. I’m pretty laid back. I sleep in on weekends. My wife is as well. And so, there are a lot of entrepreneurs who are just wired for anxiety before you start even getting into the anxiety inducing elements of trying to build a business. That’s less my normal orientation, and that has been helpful. It has been said that even if you tend to be not anxious by nature, building a company is fraught and complicated and is a nerve-wracking endeavor. And I think the thing that has been the most helpful for me is I really do approach everything from the point of view of being on the same side of the table as whoever I’m interacting with, rather than thinking of it as zero sum or on the opposite side of the table. So with the executive team at Industrious, in managing them, I really feel like, “Hey, I’m your champion, I’m your partner in crime, I’m in your corner, and my job is to help make you amazing at what you do. And if I’m giving you tough feedback, it comes from a place of love and support and desire to help you be the best you can be, rather than adversarial or telling, you know, kind of sitting across the table in a position of telling you what your good or bad at in some more fixed way.” And same thing goes in negotiations, which is part of what powered Industrious’s ability to be the one company in our sector that shifted to partnership agreements instead of more adversarial leases. And I find not only has that been healthy for the business, but I think it’s been healthy mentally too. Some of what I think can get entrepreneurs wound up and in a tizzy is they can think of the world as being out to get them. They can think of any interaction as there’s a winner and a loser. And if I’m not winning, that means I’m losing. And that is stress-inducing. That’s part of what creates this competitive dynamic. That’s part of what creates this “oh, my employees are mad at me, and this guy sucks, and I got to fire him. But then this is going to happen. And my partner can.” And I think if you start from an orientation of being even with the companies you do business with, not just with your own team, we’re in this together and let’s create value together. I find that can quiet the mind a bit and make the whole process a more enjoyable, supportive, fun process rather than one that feels like you’re constantly at war.
Aaron:
I love that. I fundamentally agree with that 100%. And the fact that the whole company’s business model is aligned that way through and through makes it all easier. I’m sure. Anything that you sort of wish I would have asked you that we can get the story out more than you would have liked to share?
Jamie:
I think for the listeners that are in the real estate world, it is really important to understand that what Flex is has changed in the last five years. And many people I talked to still picture it being a floor of co-working ,a WeWork somewhere in the stack of the building that’s kind of unrelated to the broader life of the building. And what I would say is the ideal version of what we do is that the second and third floor of an office building are converted into a shared amenity base for the building, and that includes common spaces and meeting rooms that all of the tenants, including the long-term tenants of the building, can use as well as productized workplace that people can buy independently, or that the long-term tenants of the building can grow into or use when they need it. And the value of that is that means if the flex is 5% of the building, then instead of it just making a bit more money than a long-term leasing floor, it makes a bit more money than a long term leasing four and it helps the performance of the other 95% of the building. And the data is mounting that that’s how it actually is turning out to work when you do it right.
Green Street just put out a report in England that in the London market, if you look at buildings that have changed hands, there is a 10% premium in building valuation associated with buildings that had a flex component in the building. And so the most important takeaway for landlords or people in commercial real estate is to move from thinking of it as, “Hey, can this fill some holes in my building if I’m having trouble leasing” to “This is the amenity to rule them all that will enable my building to compete in the next ten years.” This is better than a roof deck. This is better than a secret room or a gym. This is something that solves a fundamental business problem. And so what I suspect for all listeners is if you look five years from now, most office buildings will have something at the base of the building that looks and feels a lot like an Industrious. Hopefully a lot of them are run by Industrious, but even if they’re not, that’s what people should expect. It will become the de facto most common amenity for office buildings that helps the long-term tendency of the building and allows people to sort of customers to use it directly.
Second thing. I would say this is completely separate. You asked a question about your mental state and how do you run a business and how do you keep yourself focused and things like that. And the podcast is called Dealmakers’ Edge. And so one observation on dealmaking that’s tied to the point I made previously about seeing yourself as being on the same side of the table. I don’t think that makes me a weak negotiator. I don’t think that makes me a bad negotiator. I think very few companies that have negotiated with Industrious or directly with me would say I’m a softie. But I do think what I find is it’s unbelievably important to understand what your counterparty is trying to accomplish; what are the things that actually matter to them? And I think what I find problematic in a lot of the literature around dealmaking, a lot of the books people read on negotiation is they basically say find what that person’s needs are fine with a so that you can twist the knife and then negotiate something to $0.01 above whatever their BATNA would be. And I don’t actually think that’s what it’s about. It’s figure out what matters to them so you can give them what matters to them. If a landlord is really concerned with elevating the performance of their building, negotiate a deal that allows that to happen. If a landlord is really concerned with return on capital, find a way to deliver that.
And I think that’s what I would say in so many podcasts and books about negotiation is [that] they talk about having an IQ, they talk about understanding your counterparty as a way to figure out what the fleshy spots are and where the weak points are and where their leverage is. And I find the most effective part is you want to understand them so you can figure out to give them what they want, and then good things come and then they’ll concede on the points that matter to you. But that for most dealmakers, I think that should be the prime negotiating frame.
Aaron:
I think that’s an excellent point. And win-win really means something. It’s not just a catchphrase. So I think you nailed it. The company is designed to win-win when you think about negotiations, [and] designed to win when you’ve really created a wonderful business. Jamie, I know you’re going to build it up many, many more levels. I’m really happy I took the time today and I guess we’ll cut it here. But I just really want to thank you again. It’s been an awesome experience talking to you today.
Jamie:
Thank you. I like the podcast. I love the name of the podcast. I am a dealmaker. I love dealmakers and I feel like everyone needs an edge.
Aaron:
And your story was terrific and hopefully we get an update maybe this time next year.
Jamie:
Deal.
Aaron:
To be continued…
The Dealmakers’ Edge with A.Y. Strauss highlights the stories, successes, and struggles behind major commercial real estate investors. Each episode offers a behind-the-scenes look at commercial real estate leaders and their unique edge.
Hosted by Aaron Y. Strauss, Managing Partner at A.Y. Strauss
Aaron Y. Strauss is one of the leading legal advisors in the commercial real estate industry, providing insight and guidance for billions worth of transactions during his career. As our firm’s founder and managing partner, he has positioned A.Y. Strauss as one of the region’s most respected law firms for commercial real estate owners, lenders and sponsors, serving the needs of our clients with the utmost in care, integrity and transparency.