Speaker 0 00:00 <inaudible>.
Speaker 1 00:10 Hi, I'm John Cohen and welcome to icons. Let me see. Area real estate, a one on one interview show highlighting the backgrounds and career trajectory of leading luminaries in the Washington DC area real estate market. The purpose of the show is to highlight their backgrounds and their experiences and some interesting stories about their current business as well as their past and uh, to cite some things that you might take away both from educational standpoint as well as lessons learned in the industry and some amusing and sometimes interesting background stories. So I'm hoping that you will enjoy the show. My guest today is Steve Lustgarten, uplink real estate, Steve, a chief executive officer and oversees management of the Blake real estate operations in Washington DC. Steve has been with Blake for 47 years, coming from his undergraduate degree at George Washington University. Steve has a multifaceted background doing practically every type of real estate discipline you can do for office buildings, including vertical integration of the company into various services provided for their many tenants in their portfolio in DC as well as third party management work. Steve is a very well credentialed and I've known him for 25 of those 47 years. He and I have done several transactions together and I've enjoyed working with them over the years. So without further ado, here is Steve Lustgarten. Thank you for joining me today. Wanted to talk a little bit about your family background and what you've accomplished over your career. So let me just start right out and tell me where were you born and
Speaker 2 01:57 they raised, I was born in, uh, New York City. My early childhood. I was in the Bronx. I lived there and until my father passed away when I was seven, my mother remarried and we moved from the Bronx to Yonkers, New York. And I lived there until I was 17, originally, obviously, uh, in the Bronx. I went to public school there and uh, the path that I had, there was one where I thought I would move forward and go to the Bronx High School of Science. And when I was a young man, even at the age of seven, which surprised my wife this morning when I told her I was going to meet with you, that I thought I wanted to be an electrical engineer. What was your relationship like with your, uh, your stepfather and your mother? With my mother, she was a tough lady. She was 32 years old with two young children as a, as a single mom had to go to work.
Speaker 2 02:57 So we used to go to my grandmother's who lived a block away to eat and after school and uh, she had a tough and very loyal to her two sons. My stepfather was probably not the kind of father that everybody envisioned that they would love to have. So going away to college was terrific. When my father passed away, he left my brother and I each $10,000, which is how we were able to each go to college. Without that, I'm not quite sure what we would've done. So George Washington University was the ideal choice for me. So you wanted to come to Washington? I did want to get to Washington. I couldn't decide between the <inaudible> schools and GW, but some of my applications and help decide that it was a great school. I'd say for the first two years I had a terrific time, probably to terrific and my grades reflected it.
Speaker 2 03:58 I did not have a great interest in what the rears for this was. I started college in 1967 and I would say the rigor of my world that they put you through the first two years of college where you don't have a choice of what you're taking really did not interest me and my grades reflected that. And then the next two years, maybe even a little bit more than the next two years when I got into the business part of it, I did extremely well and found that very interesting. Is that what your degree was in my degree was in finance with uh, an accounting. And so were the social things going on at that time, have any input influence on your life at that moment? I would say I would, yeah. I would say I was extremely liberal to say the least and one through the riot here in all the marches and everything else that everybody did back in the 60s I think it was a nice experience going through that.
Speaker 2 05:00 I ran out of money and the bank refused to lend me any more money by 1971 so actually that's how I ended up at Blake. So I ended up taking a job at Blake real estate during the day, which was very close to GW and I switched the night school in the end as your senior year in college. My post senior year ended up graduating instead of June of 71 I graduated in December of 71. And uh, I would work here during the day when I do for Blake. At the time I was, I started here as a leasing agent. Then I would go to school at night. The original intent, I hadn't met personal eventually I married by then and it was, you know, take this job temporarily. She would be graduating in May, June of 72. And then we would decide where we wanted to live. And I could decide what I wanted to do for 11 and I guess I still haven't <inaudible>
Speaker 3 06:00 decided where I want to live in what I wanted to do for a living because
Speaker 2 06:04 still at like the real estate department here in the company was very different in those days. The real estate group, the leasing group was I think three or four people and then property management group staff in house was three or four people. And the main focus here was construction. Shortly after I arrived here, lake got its first nine figure contract, which was Walter Reed Hospital and that's when Blake was first taking off. And matter of fact they had a joint venture, the completion bond in those days, cause it didn't have the assets, they even put up the completion bond. Really the main focus for many years in the beginning when I was here was construction. And some of the focus that they put me on was leasing a building that we were building for a tower construction in those days. So I guess my learning curve was don't screw up our buildings go, at least our construction's building at 1828 l street.
Speaker 2 07:08 So you're doing third party leasing. Even at that time I did some with ours, but the one building that had a large vacancy was 1828 l street. We were building it and that was sort of a good experience because I got to see a building that was being constructed. I got to see the pieces and started understanding a little bit about construction and bearing in mind that I then have an architecture background. I didn't have a construction background and I then had an engineering background. So as I was leasing things, I would get to work earlier and earlier in the day so that I could then see how the pieces went together to construct what it was that I was leasing. So did you dig in on your own kind of big information out? I mean, yeah, curious. I wasn't told to do that, but I would get to the building at six o'clock in the morning at five 30 in the morning and I would meet with the job superintendent and I would start asking, what's this piece?
Speaker 2 08:07 What's this piece? I guess a story that I've told often when I've given some speeches around town, one of the first times that I showed space in the building, a very seasoned leasing agent came along and he brought some people in who wanted to see five or 10,000 square feet and he asked me whether or not the space that I was showing him had a wet stack in it and not knowing what a wet stack was. I said, well, let me ask you something that the last building that you look at have a wet stack. And he said, yes. And I said, well then we must have a wet stack also.
Speaker 3 08:37 And then I went running back and ask somebody, what's the wet stack? When I went back to the office and I was very happy that I said that we, we had a wet stack.
Speaker 2 08:47 So oftentimes you have to step out a little bit on the line and sometimes pull back if you can. Yeah. So we did. Sonny Abramson in those days had a certain economic threshold that he was looking for.
Speaker 1 09:00 A Sony Abramson of course is the principal of tower companies.
Speaker 2 09:04 Yes. What I wanted to do, I was always competitive in sports, so my goal was always the bring in leases in those days at higher rent per square foot than what sunny was looking for. And I thought it would help Blake, who used to build all of towers buildings for them, get another job. And so at least the building for more than the asking price. That's great. And then I guess the next story to show what a brilliant genius I was. They gave me the old building that was a law at 1150 Connecticut Avenue before it was torn down to lease. And the first space that I leased, I figured I would show off and lease it for more per square foot than what Blake was asking. And I came back and I thought I did this absolutely terrific job and I got 50 cents or 75 cents more than the asking price.
Speaker 2 10:03 And I measured off the blueprints and was very proud when I came back here not knowing that that buildings blueprints were in quarter of an inch per foot rather than a pinch per foot on the blueprints. I didn't know that blueprints came in different sizes. So I actually gave the guy 50 cents on the dollar instead of 100 cents on the dollar and to teach me a lesson, Blake went ahead and signed that lease and the guy had a very good, you know we were doing short term leases cause we knew we were going to tear the building down. Okay. So Blake sign the lease to teach me a lesson that on how to use a scale on a blueprint. So
Speaker 1 10:47 let's go back to Blake for a moment now. So you were talking about your, your leasing prowess growing. So this is how you really learned the business. You starting it from the leasing side, you went and you explored all the different aspects of the business. So how did the, the knowledge base grow? Just your own digging. Did you have a mentor here that helped you with things where there's somebody that kind of held your hand a little more? Is there other people here that were
Speaker 2 11:15 very much so when I started at Blake I was wondering what their training program was and I went through a very extensive training program. It lasted 10 minutes. Somebody handed me a telephone and said dial zero to get an outside line, dial nine to get an outside line. Here's a sheet of the vacant space and let us know when, uh, when you find somebody, they did not have a formal training program. What I did do though is I pulled out a lot of their files that they had and I would read a lot of the correspondence and I'd a lot of the contracts to see how people coordinate other people into being interested. And that the original person who started Blake leasing was a guy named Justin hinders, who was sort of an old sage in the industry who was really a spectacular human being.
Speaker 2 12:12 It was a head of leasing in those days, who before I would put out a letter or anything like that who was very good at letter writing and I would show it to him and he knew some whys and wherefores of leasing, he would spend some time with me. How did you learn the language of leasing? Because there is a language, obviously it was one of the first things I learned in the industry was how to read a lease and what it meant. All the different term. There was a lawyer. So you really weren't supposed to use lawyers in those days at Blake. Are you supposed to draft your own contracts and do it? So I would go down to the 10th floor to a law firm in those days called the <inaudible> scan. Decky represented Blake and there was a lawyer there, Milton quint, who, um, would spend some time with me in those days and he would explain things to me and walk me through it.
Speaker 2 13:08 And he was very good at that. Mike Windsor who ran the leasing department, spent some time with me doing that. I knew some from reading books. I bought things like the real estate and cyclopedia sheriff of real estate of leasing. And so you are a finance major in college. So you understood the numbers of the business. And GW had one course in real estate, you know, introduction to real estate if you know what a cap rate was when you came in. I, I, well I, I could run numbers very well, you know, and I was always good with numbers, but then I would read, so what I would do, I would read a couple of paragraphs of Elise and then I would sometimes sit down with the guy who were in leasing in those days. And I would ask him to explain what does this mean? Or somebody on the other side wants to change this.
Speaker 2 14:02 Why do they want to change it if we don't change it, why is it to the landlord's benefit if we do change it, why do they want to change? Why is it bad for the tenant? And we would go paragraph by paragraph and if I could get his time, I would then make notes. And then I started a loose leaf book, which I kept the years of the meaning of each paragraph in the lease. And then as leases in those days, leases were five pages long, which really wasn't that bad. And then as I did each transaction and people made changes to it, I kept copies of those changes. So then for each paragraph in the lease I used, I kept sliding them into this leaf book so that I would understand changes that were acceptable and changes that weren't acceptable. Do you still have that book?
Speaker 2 14:55 I don't know. I don't know whether I gave it to Owen when he took over when we made him president and it's so archaic and now everything's in computers and things like that. But I did, I had a book of proposals that I probably kept for 30 years. Proposals that outside brokers gave to us that I could learn by and the smarter they brought, you know, some people dreaded smart brokers who would come in with these very complex proposals and I loved it because I would keep them and learn by them and I can name all the old timers that you know from Jim Hunter to Steve Altman and all the people that were in the business that in those days who really knew their traits. And I would keep those proposals and I would put them in a looseleaf book and now it, I was a absolutely aggressive canvasser.
Speaker 2 15:47 I would get in early in the morning and try and get paperwork out of the way and show space all day long and a lot. Sometimes I would canvas from six at night till eight 30 at night because I knew that lawyers would work late at night and if I saw that a number and that in 7,000 I would then dial 7,001 7,000 2003 and hoping to get somebody to answer that law firm cost. The hardest thing was always getting past the receptionist and then I would say I was at a party and I can't remember who I met from your law firm who runs real estate, who does your acquisitions, but they told me to follow up and call their, can you connect me with him? And I forget his name. You know who that is. And I was pretty successful at it. I'd probably some years, there's some of the highest volume in the city.
Speaker 2 16:38 So this was on the phone. What about door to door canvas siding your child? I would go to a building, I would copy down the entire directory. I would knock on doors and sweet talked the receptionist into telling me who did their real estate. And I would call the person and say, listen, if you're not moving and you don't want to move, perhaps you need more space. And then I would ask them, who's the person next door? Maybe I could talk to them and ask whether or not they would move to accommodate your expansion so that you don't have to move. And then others would be, if we were building a building on a block, I would call people saying, you know, I'm sure you don't. You must like this area. Why don't you just move to our building, which is being built right next door to yours.
Speaker 2 17:24 So you learn these scripts from assist your own creativity, or did you have a script that you know that people helped you? Or did you listen to other people's, I'm not a scripted kind of guy. Okay. Uh, it was all just spontaneous, just all us, there were certain key points that I would want to focus on. I thought scripted, they throw me out for being a salesman. So no, I didn't like scripted and I kept cross-reference looseleaf books with all the information that I could get out of that person that I spoke to when their lease expired, whether they were growing, whether they was shrinking, who I spoke to the day I spoke to them when they at least expired and then a year later I would call them up as if they were my best friend. Say we spoke a year ago, whether or not they said call me back in a year.
Speaker 2 18:12 You said to follow up a year from now, how are things going? Are you throwing, are you shrinking? You know, is a time to sit down and talk now. And it was a game I used to keep score on how many people would just hang up on me. How many people were nice enough to talk to me. And you know, I found that anything above a three or 4% batting average on cold calling was pretty good. And I would see if I could beat the batting average. Yeah, those looseleaf books absolutely grew and then eventually act was invented. So then you could do it on your computer. And so
Speaker 1 18:48 it's used black's guide. I mean, did you use some of the tools of the trade at the time, at least the written ones that we were able to have access to?
Speaker 2 18:56 Yeah, I remember in the Florence probably the day he started the business.
Speaker 1 19:00 Well, Costar, right?
Speaker 2 19:02 Uh, well he was black sky. You know, originally it was a printed publication. And then eventually,
Speaker 1 19:08 yeah, his mother worked where I worked at the Saul Company and I saw him, I heard him talk about at these, she wrote at Princeton about it. So it was interesting to hear about it.
Speaker 2 19:19 Yeah. Because remember there was, you know, when we first did it, there was no database. And my goal was always to sell myself in a relationship before really getting into selling the concept of space. I was on trade salary, like didn't pay commissions or anything like that. Oh, that's interesting. And so, you know, I started here at $7,000 a year. My secretary is making $8,000 a year. So I couldn't decide whether I ought to be a secretary or whether I ought to be a leasing agent.
Speaker 1 19:51 A bonus for for performance stone and based on leasing, I mean activity
Speaker 2 19:56 that really came later on. Now in the beginning, you know, said the next year maybe they gave me 8,000 or $8,500 and eventually it got to the point where some of the people that I put into our buildings said we've outgrown a Blake building and we'd like you to help us find space outside of the Blake building. I could recall, you know, probably the one that I helped out for 30 years was a law firm out of Texas spray swollen Patterson, which became very swan Giuliani and then Bracewell and Patterson I think again. And I actually sold their lease to another firm in the building to help subsidize the move and move them from one of our buildings at that 30,000 square feet in international square. And then I moved them into I think 70 or 80,000 square feet and another phase of international square. And then they called me up and said, we had an overzealous managing partner in Washington and we really only need 30,000 square feet.
Speaker 2 21:00 Can you dispose of this space that we just built? That was very grand where we've put millions of dollars of improvements into it. And they said, here's an exclusive, and then I guess it's not fair to name who they hired, but they had a national brokerage firm that they represented who said, we want that less thing or you're going to lose us as a client. And I said, you know, then rip up my exclusive, you know, I don't want you to lose a major client, give them a shot. And after x amount of months, they called me up and said, you know, this is a major expense to us. Forget about them as a client, you know, we have to dispose of this space. We want you to give it a shot. And uh, you know, we're going to cancel their exclusive. And I guess I was in the right place at the right time and probably in about 60 days I got them out of the lease. And whole on the improvements they put in and it was just an assignment or was sublease. This was a sublease. Got them completely out of couple of floors and international square, I think phase three and then move them as the anchor tenant over to I believe 2000 k street that run good was putting together when he left the car company. So
Speaker 1 22:15 you were third party work more or less came from existing tenants like primarily or was it <inaudible>?
Speaker 2 22:21 No, but that's, that's how it started. And remember on all of that I didn't get any commissions that all went to like, you know, the commissions didn't start until I took over and got promoted to run the leasing group. And then I went in and said, listen, now I don't have a conflict of interest in discussing this. You know, here's a structure that I'd like to start at like events.
Speaker 1 22:42 That conflict of interest is an interesting question. Talk about the structure of Blake and it was primarily a construction company and you had a real estate group basically to lease and manage your existing assets. So talk about how that occurred
Speaker 2 22:55 involved. And so when I started here, we were really an investment arm for a construction company. Lake. When I started here was the largest contractor in the Washington area. We were larger than what is now Clark. Uh, we were, uh, a union contractor. Matter of fact, if we were bidding a job a lot of times in those days, Clark what's called George Hyman, which is what they were in those days. Sometimes they wouldn't even admit against Blake Blake
Speaker 1 23:24 largest federal contractor at 1.2 general contractor.
Speaker 2 23:28 Well, we would be largest contractor, whether we're federal or otherwise. We built for the Abramson. So we built for Jerry Wallman and on private public, all the public buildings we did, we did, there's a book called above Washington where I read one. Our marketing materials was a, it was a phenomenal book. You know, I'm sure you've seen it where we then used it as a marketing piece. We marked it up with all the buildings that were in above Washington that Blake built, which I'm still in awe when I take a look at that, to see all the buildings that like built that are in this city,
Speaker 1 24:04 the entire southwest quadrant there with all those federal buildings. How many of those were built by Blake?
Speaker 2 24:09 I couldn't give you a number, but I can name some and it's truly staggering. The James Forestall building the underground museum. That's now the controversy whether or not to take the sacral name off the Hoover building. Uh, the, the FBI building and Hubert Humphrey building. Uh Huh.
Speaker 1 24:30 Transportation. That big monster was in a million square foot building. Was that built pipeline?
Speaker 2 24:35 I don't remember. You know, there's so many of them. It's almost hard to remember the Smithsonian. Well, Smithsonian was the sac amusing, which 96% of that building is underground. The largest slurry wall in the city. We actually joint venture that I remember with a French company to build that. I believe we did something like 28 projects or 32 projects for the metro system.
Speaker 1 25:01 So all the metro stations, basically older ones.
Speaker 2 25:03 Well, the maintenance yards, finish work and metro assistance. We didn't do tunneling or anything like that, Walter Reed, but there's the navel. Very, very large. We, and then when there was a changing of the guard here, when one of the brothers left who was running the company and the other two brothers took over, we took Blake national, our first project in San Diego was $140 million naval hospital. We then went to Boston. We went down in the tidewater area, mostly federal. I'm assigned to the region. We were probably one of the largest constructors of hospitals in the United States. We built the VA hospital across from the Superdome. That was one of the few things standing after the hurricane, uh, after Katrina. So we had an office then and yeah, Harland by then we were non union, so we didn't go into areas like when we were in San Diego, we never went north of Irvine.
Speaker 2 26:05 We did a lot of Kaiser facilities. We did a lot of school facilities and we never even went into a city unless we had at least $25 million worth of work before we even went there. At our peak, we had 3000 employees. When I came here, we could build 80% of our building with our own forces without even a subcontractor. So yes, Blake was very much focused on, to jump back when I came here, this was a construction company that had a small little real estate group that took care of the investments with a, where buildings were built out of the profits from the construction company. Although eventually I think it reverse where the fortunes were in real estate, where probably, you know, the real estate's worth over $1 billion today. When did the transition take place? Talk about the transition from like being a major general contractor into now more or less just to real estate company and vertically integrated though.
Speaker 2 27:07 Talk a little bit about that. It's hard to put dates, but things started changing really on a parallel path. So when the brother that was running the company left and the other two brothers took on more of an active role, five of us became partners with the vendor family. Obviously my focus was gentlemen, it's time we focus more in real estate that the person who took over running the construction group said, you know, I think we ought to expand then. So from his standpoint, although bear in mind that there wasn't Blake real estate, it was all Blake construction in those days. So I was, I held out as everybody did you know I was vice president of Blake construction. So if I can help bring in a construction project, I would bring in a construction project to Blake. So on a parallel path, Blake went national and the first place we went to out of this area was California.
Speaker 2 28:13 At the same time I said, we've been really may be sitting on our real estate. The prior brother was given tax advice that expanding the real estate would lead to significant illiquid assets in the estate and you shouldn't grow it anymore. And I said, I don't think so. You know, looking everybody else in town. Let's go. This is, what, about 1980 81 something like that. This would be around 1981 maybe. Yeah. So the first building that we did, it's really, I think we started in 1979 may be men a little early with, I had been reading that car, wanted to go in the east, and then he was going to build up metro center. So I said there's one corner that he really didn't touch. So we ended up building the southeast corner of 12th and j street where we built 1120 g street. I said, with what car's going to do, we'll, we'll benefit from the changing demographics of the area.
Speaker 2 29:20 And this was a Blake development. This was your, this was the ground up. We tore down the old the department store and literally that building rests on Metro Center, rests on the title, all well and good. But car didn't move forward with bare development. So we were the lone ranger down there. So that's the good news and the bad news. So we went down there and we had this brand new building that had terrific transportation. Uh, very, it took us probably close to a year just to get metro to agree to let us think that whole and have a building setting pretty much on top of their tunnel almost. The other thing that happened there in that time period was interest rates took off like a rocket ship. So we had a construction loan that we were paying 21% interest on, which was less than fun. That was the first building I was a partner in.
Speaker 2 30:14 So obviously had a double interest in it. I don't think there's a project that you do if you live to be 150 that you don't learn from. So obviously I learned that 21% interest was very expensive. We leased up the building successfully and I said, man, 21% a lot and ended up finding a life insurance company that agreed to do a takeout and 14% only. They also took 30 at 35% of the profits. What was it participating? It was a participating loan and that was something new that had just come out. But I said it's still better than spending another seven points and interest. And we went to the closing table at a title company that I forget who they were and nobody knew how to write title insurance for an unknown amount, which is how I met Stu Leben. So stew ended up, we moved over to Stew's title company and we figured it out and we closed then that way.
Speaker 2 31:22 That was sort of our beginning of saying, you know something, let's, let's keep going on this real estate stuff. It's good. What was Blake's portfolio at that time? Speed. Before that it was just the outnet core that we still won't touch my philosophy, which is why I guess the vendors never fired me, was to be conservative, not to over leverage. So we don't refinance to take money out of our buildings. We, we like to keep our leverage low. We'd like to spend cashflow and distribute cashflow, but not put debt on a building. Not to take our equity out of the building in the form of debt and distributed. So that allows us to go through all the cycles of real estate without having so we can compete. And in my mind, that puts us in a bedded better competitive position. So at the average building in this town is sold every three and a half to four and a half years. Each time those buildings are sold, the value is ratcheted up, their debt position is ratcheted up. We can then compete better against those buildings. You also have vertically, you're vertically integrated.
Speaker 1 32:40 Do any third parties to my knowledge on any buildings, pretty much. Right. When you say third party management or leasing or we do do third party. You do? Okay. Yes. But back then, I mean, you know, historically
Speaker 2 32:53 back in the early eighties while we did for Sonny Abramson.
Speaker 1 32:57 Okay, I'm talking about your buildings bringing in a contract. You managed all that. You were vertically <inaudible>.
Speaker 2 33:03 Totally. Yeah. Well we, yes, we were the contractor. We the leasing agent, the managing agent, right. And the developer
Speaker 1 33:12 party outside involvement. You did everything yourselves so you could control things and you're so as far as incentivism is an operating company, you had fees that you could charge the properties, et Cetera, or not charge or not charge I guess,
Speaker 2 33:28 or not charged to reduce our basis.
Speaker 1 33:31 Interesting. Interesting. So income, I mean income for the company though to pay your people and everything was from leasing fees.
Speaker 2 33:38 Yeah, so the operating company and then when we did that, we didn't form like real estate until I believe around 1997 before that like and Blake Construction Company owns all the stock and like real estate anyway. Cause when we closed down Blake construction, we made it into a holding company that has certain investments in some of our real estate projects and that owns all the stock of like real estate. So it all flows up anyway to the same spot. So Blake real estate does, it is a leasing company, it's a management company, it's a development company and it develops for Blake own properties and it does feed, well I'm talking third at the present time. It does third party development and it does third party construction management also. And that business has grown a fair amount, especially of less 10 years. So talk about your personal growth.
Speaker 1 34:42 You were in leasing. How did you learn about the management side of the business and your, and then how did you learn managing people? How did you get into that role and how did that evolve and was that some of your more challenging aspects managing people or was it, you know, just the challenge. What were your more challenge, the more challenging parts of your career?
Speaker 2 35:02 Well, learning property management, we had a pro, uh, had a property management that we had for many years here. And it was the same prototype that a lot of people had years ago from the 60s and Seventies. The x, the x Ami, the x colonel, whatever. So we had the x colonel from the air force, which was good for a period of time. And like everything else,
Speaker 1 35:27 the world changed. So why? Well I was at good. And why is it light in the rule change and how Ben effect that?
Speaker 2 35:33 It was good at its time because that's the type of mentality and disciplines that it took to manage properties. In those days it was organization, it was discipline, sort of like the military ran like a battleship basically. Yeah. That's the way you ran a building. The world started changing and moving more and more toward a concierge. So you had it really split this supply chains. So your staff still was following an organized pattern, but yet now you started looking toward the tenant much more so where before the tenant was the byproduct, he was there and as long as you ran your building, well they were happy, but they didn't have certain unique demands. Lights were on air conditioning was great. They were happy. What stimulated UCB demands, as you call them? Concierge companies started. All of a sudden it was concierge companies crept up. So give me an example.
Speaker 2 36:38 Somebody's capital <inaudible> for instance, was around and there was one lady who really ate up the business and I'm drawing a blank on her name. And so people were hiring these companies. He'd put the concierge in the lobby and you could leave your dry cleaning with them. You could say I want there to tickets. They did stuff like a concierge in a hotel. So now all of a sudden you're a little bit more tendon centric cause there's like the 1990s or now before that, I think you're, I think you're in the 80s already. Some people move slower than others toward it and I think Blake lagged in making that change because the principals of Blake had a lot of faith and this was, this was an old time employee who started before me. He started here in the 60s and they were loyal to them and I pick out what year I finally went into the family and said, I request, I'd like to move the entire real estate company out of Blake construction because people are getting confused when even our salesmen are calling up and saying, hi, I'm with Blake construction.
Speaker 2 37:51 I want to talk to you about real estate. And said, well we don't need Blake, we don't need a contractor. So they are getting confused. And I, and I said, you're known as this huge contractor you're also known for, for as a government doing a lot of government contracting and there's a different mentality when you're appealing to the private sector. I think it's time that we separate the two. And one of the brothers really went to bat for me, one of the two. The other one said, you know, there's no need to, and the other brother who was the one that I used to go to a lot, Stanley about real estate, who, who our treasurer. And he was the guy who really was the real estate guy. Howard was much more of a contractor. That was his background. And he says, is the vendor family we're talking about?
Speaker 2 38:48 Yeah. And Stanley said, let them go. And they said, well, you know, Steve's always sort of been under the contracting umbrella. How do we know that he can even afford the overhead? Was Stanley said, if he flops, he flops, you know, you know, we'll find out. So he had a lot of faith in you. He was a good guy. He was a cheerleader. AndW we had a very, very close and special relationship, so he would be a mentor then to you. And in some respects, a very unique mentor. If you ever sold a movie author that was standing up. So, you know, there were times Stanley used to come to work between two in the morning and six in the morning. I mean, he, he was a very unique guy. But you know, I, I truly, truly loved Stanley. It was a very interesting guy.
Speaker 2 39:38 He was almost a savant with numbers and I can meet with him real fast. And normally his response was, if you want to take the risk is only one thing I want to ask you, don't put me back in a cold water flat. Go for it. And he said, go. And the other person who really helped me out a lot was Bob Smith. So how did Bob help you? Bob And I knew each other. Uh, he had spoken years ago about me coming over there to do for him what I did for the band. There's just stop for a second. Bob Smith was Robert Smith, the Charles E. Smith Company. Yes. And we, we had chats over the years and Bob and Howard, actually Howard Bender, <inaudible> friends, they actually went to blueprint reading school together years ago. And I said, number one, I'm very happy at Blake. It's flattering the discussions that we're having, but I think it would affect your friendship and Merlin.
Speaker 2 40:36 Blink do construction for Smith. Smith did their own, they had a deco bombs during a blank on his first name, but they had a guy named Deckelbaum Howard, I think. No, no. Marvin Marvin Deco bomb ran the construction group who retired four times from Smith and they brought him back. It was really good. So Bob and I got to know each other a little bit. So there was a lunch between Howard, Bob and myself, and I explained what I was looking to do and Bob back and said, I think I understand that. And he backed the idea too, and I thank them for it. So we moved up to 1150 Connecticut. Was there any prospal maceration between Smith and, yeah, we understood as far as ownership or, yes. Okay. Yeah, we owned 1101 17th street together for instance. Okay. And the charity wise, there was a lot of cross pollenization between the two companies.
Speaker 2 41:37 Both companies were very charitable. Well the Jewish community primarily, right? Yes. Yeah. So when we moved up the street, it was, you know, the leasing people and property management and I met with Howard and I said, I think you have to change my title. And he said, why? And I said, I have the same title as the head of property management and I think I want to make a lot of changes on that front. And the fact that he's a colonel, he'll respect the chain of command if I have a higher title than he has is what do you have in mind? I said, you know, he's vice president things, time for executive vice president, senior base praise w whenever you want. I really don't care. But I need the ability <inaudible> to meet with him and you have authority, have authority and he'll respect the changes command and we have to move from just the guy who cares about mechanical systems and things like that.
Speaker 2 42:37 I care about service and there there are other things I want to implement that he's going to have to, he's going to have to make changes and after 30 35 years he's going to have a hard time with this and we're going to have some differences of opinion and there may be some meetings with you where these differences of opinion are going to be discussed and I said you may have a hard time with some of the things I'm going to do, which is the other reason why I want to move up because even my philosophy on personnel is different than yours. Why? Because real estate people are treated differently than construction people. The world is changing and as a contractor it's different. Your margin to different. I need creativity. I need other things that you're given a set of blueprints and it's here, build this.
Speaker 2 43:33 Just tell me how much, and you guys do a lot of bid work, more so than negotiated. If your number's low, you're hired. Now by then I had already started a construction company called CCSI construction. It didn't compete with like it did mostly interiors, interiors and I would meet with people and negotiate or they would do it because they shook hands with us and felt, you know, I would say I'm going to take care of you and that's why we got the job. Some we bid, but a lot of it was negotiated work and I said it's just a different mentality and a different type and if I have to, I'll leave money on the table to keep a client and a relationship going because I'm looking at the next job, the next job, the next job where if you're doing straight hard, especially public bidding, the government hadn't yet changed yet to source selection and other things that eventually evolved.
Speaker 2 44:37 If you're low bidder, you're going to get it again. The next time I'm going to meet with people and go through their blueprints and say, you hire me now, I'd like to go through your blueprints and minimize the change orders you're going to get. If you're a hard bid government contractor, there's change orders and more lucrative than not having them. So it's, and I'm more from the school of, I'd like to be part of your team as opposed to having a distance between us. So you look at things in the long run. I look at, once I pick up a client, I don't want to lose that client ever. I could think of a transaction I was involved in years ago with the American Bankers Association. You want stories for this podcast. So the American bankers association originally came into the band. The building is a subtenant of IBM 1970 and they're still there today.
Speaker 2 45:34 And You bring them in? I did not. They came in before you were there. I was there and again they came in as a sub tenant because IBM outgrew the bender building was moving to 1801 k street in those days. But then their lease came up and we re we put them along as a prime tenant once or twice and rebuilt their space. And the last time we did a renewal with them, 15 years ago, they were interviewing brokers. And to the dismay, even I think of our leasing group, I said, I want to be interviewed. They said, what do you mean you're the landlord? I want to be interviewed. And I met with their board or their committee and I said, I'd like to be interviewed and here's why I think you don't need a broker. Here's the length of our relationship and here's what we've always done.
Speaker 2 46:30 I don't think you need a broker. And some of the best brokers in town had shown up to this. You know, they looked at me, you know, when we were all waiting outside there, what the hell are you doing here? And I said, I think we passed this in our relationship. And they ended up saying, well, how are you now? Did you take them to other buildings? Not Interruptions. No, I didn't have to. I said, we want you to stay here and we're going to give you all the benefits of no broker. So make believe I'm your broker and I gave you 100% return to the fake where other brokers are probably offering you back half of whatever I said. What I'm after is having you here for another 15 years and we're going to take your space back to raw concrete and build you brand new.
Speaker 2 47:19 You're going to have whatever you could have if you moved, you're going to have the interiors. If you like the lobby, you like the elevators and the facade of the building. If that's acceptable to you. Whenever you were going to build in that brand new building for more money, you're going to have in this building, you know the level of service that we give. If you go to another building and you sign a 15 year lease, the test Stickley, you're going to have at least two to three owners of that building during the life of your lace here. You know exactly what you're going to get and that's my pitch to you. And they said, well, we love what we have here. They even have their own maid. You know they don't have part of their regular cleaning staff. They have their own made plus a regular cleaning staff here.
Speaker 2 48:05 And I said, you know the arrangement, you never make a second phone call. You call a regular people if you need it, if you don't get satisfaction, you've got my direct office number, my cell number and my home number. Then it's my problem, not your problem. And they service orientation, they said, fine, we're going to do it. It was fun and as I told them, there's never you sit on that side of the table. We sit on this side of the table, we're going to go through an expensive rebuilding this thing and nobody, if the architect makes a mistake, both sides are going to come up with the most cost effective solution and we're going to do this as a team. And if you're not happy with something once you see it, because he didn't understand that on paper or whatever else, fine tell us we're going to make it.
Speaker 2 49:02 It's going to go to you happy. And I think it worked out really well for both sides. We got to keep them, which is pretty incredible from 1970 and here we are in 2019 you know, we know we have them at least until 2022 and I don't think many people have 140,000 square foot 10 of that long. And I think part of that is really our philosophy on how we go about it. I forget the name of the award that our property management company just received, but it's something like one of the top 2% in the country on a lot of people in town don't know that on how we manage our tenants.
Speaker 1 49:45 So the philosophy is longterm as I said earlier. And so a tenant like that, if they're willing to do a 15 year lease, they want to stay. They are looking for stability, they want every day. Although his tenants have evolved over the last 10 15 years, people are looking now a little differently. They're not looking for a 15 year term. They're looking, they have a shorter term to have flexibility for change because the dynamics business today are changing. Now. An association like that has been around for probably over a hundred years. They're not in a high change mode as a, as an organization, so how do you address the more high change type tenant, the tenant? It's evolving
Speaker 2 50:28 and constantly changing and growing. I think I disagree with you in some regards. Okay. Right now I would not say this is anybody's favorite real estate market who's a developer. We have too much supply, not enough demand. The average firm over the last eight years has been attempting to do that. 15% shrink size of offices are going down. People losing offices, they're going to work stations. People who were in workstations are going to smaller workstations. People who who were in workstations might be going to tables say the least. That led to people moving to create that module, so to go through to stay. Some people are saying, I don't want to go through that. I'd rather just move into a new building. With that already put in place. Although we have been successful with some extremely large people in saying we can do without you leaving the building.
Speaker 2 51:31 We just did it with the Justice Department where there was even an article published when they were out in the marketplace where Blake was given, I believe at 3% chance of winning that procurement for 217,000 square feet where we completely leveled just this and did that and did a consolidation where we swung them through the building. But the way we did it, we took a chance and we did not renew with 60,000 square foot tenants lease. So I said, we have a vacant building or we're going to win this procurement. So we didn't renew khaki sleaze who was, you know, it was a very credit worthy tenant. And we said, we're going to, we're going to go for this consolidation and if we lose boy we gonna lose. Cause that means we lost just this. Plus we lost khaki. We did it with the Wall Street Journal when so Murdoch bought them and said nobody has an office except for one guy who by contract has an office.
Speaker 2 52:30 Not even the precedent. And again, we, they've been in our building for 25 years. We said, we'd like to keep you and we believe we can. We can work around this, we can phase it and do it and we continue to service you. Which we did and they said, we believe you. We, we, we've seen you guys in action, which is the beauty of having not only being an owner developer, but also having the construction on. We think that helps. We have fast the turn around. We can retain people by doing things that other people wouldn't try and sometimes we've taken risks that we're pretty far out there as a contractor saying, we can do this and make it happen where we leave the meeting and say, can we really do some of your competition? Who have now evolved
Speaker 1 53:26 a little bit to getting almost those hotels hotel lization or the hospitality orientation, which you talked about a little bit with the <inaudible> service, but some people have taken it another level where they're treating tenants almost as if they were hotel guests and the lobby is like, you walk in, you feel like you're at a five star hotel in the lobby and et Cetera, et cetera. That's kind of a thought process along with the coworking idea, which is another evolution of course. So is Blake addressing that in some form or fashion or is there a way that you're kind of,
Speaker 2 54:01 the answer is yeah, I think we moved a lot more toward service. So we have one building where, and I attributed it all to the person who's onsite there where she is truly the concierge from the four seasons. We've had people who have outgrown that building, who have left, gone to another building, called us up and said, can you call the owner of the building and take up the management? She lives and breeze the building and there isn't anything that any tenant would want that she can't do. This is all her and this is all her creativity and we totally leave her to do whatever she wants to do for those tenants. They do. We member. One reason why it's evolving is the tenants are paying for it through their escalators. Right. We do it in our other buildings. Everybody is at. We've actually brought in the Ritz call and a few times to teach our people or it's called philosophy.
Speaker 2 55:04 Interesting, which I learned a lot from and I believe that that's the reason why, especially when people are going for a close, if I'm around or especially at a lunch transaction, I'll go in and I think Owen Bellman, who's now president will go in. I've said, give me your cell number and giving me a home number. You tell them you have a problem. Don't ever make a second phone call. Make it to me. It's mine. If you have a problem, it's my problem that you're a problem. The real secret to running it like a hotel, part of it is speed. That's really what's going on in the world and so if you even look at we, we do our own cleaning, even to control that quality. If you go out in our buildings, you'll see that even the person running the maids is sitting there with an iPad so that a problem can be identified, not in a written report, but there'll be a picture of it that's going to be sent to the property manager who will see it the next day.
Speaker 2 56:12 If it's something that can't be taken care of by the cleaning staff. We have our own on call, what we call shop, so we have a staff of carpenters and laborers that we keep on a call to do where normally you'd have to call on a service or whatever else to fix a broken door to fix the broken whatever. We have full time people who just do that. That picture is out there the next day so that people can respond immediately. The concierge concept, we actually met with a concierge company the other day to talk about re bringing him back in when we had them in a building on Connecticut Avenue. We found they weren't being used. We brought him in and we said, bring you a log of use. And they said, your people aren't using us as much. We're now going to explore that again. I mean, the concierge service told us you're not getting your money's worth.
Speaker 2 57:10 Sometimes it's tentative education though, just to know that they're in. They know that. So, but when a tenant makes a request, we're now fully computerized. So not only can they see that the request has been accepted, they can follow that request all the way through and know exactly where it is. They'll know that it's been received, they gonna know when it's going to be completed, and if there's a delay, they're going to know about that too. So all of that, um, you know, we all have, well everybody uses different software, but there's software now where people don't even have to lift up the telephone to make a request anymore. That's all done through software. The level of service is dictated by even the type of tenant that's in the building and the demands, the quality of how much cap x we put in our buildings. We have some trophy buildings, 21st in case street for Mountain Case Street. And then we have some B plus buildings. What we like to do is have our B, B plus buildings better than the other people's. I think we spend a lot more on cap backs than other people do. Say the least. Even things that people don't see mechanically. And
Speaker 1 58:32 we should throw into also why that is and talk a little bit more about your financial situation as a company as well, because what allows for you to be able to do so maybe step back a moment and talk a little bit about how that evolved and the thought process behind the capitalization of Blake and you know, why you decided to go the route you did. You know, instead of doing what other people have done, like the public company route or another type of ownership structure. So back up to that, maybe back up a little bit.
Speaker 2 59:07 Okay. So, uh, I guess let, let, let's pick a crash during one of the crashes,
Speaker 1 59:16 90 let's say 1989 90.
Speaker 2 59:18 I vividly remember that. So when you go through a crisis time like that you sit back and say, okay, what do we want to do to go through this crisis? A lot of lakes financing was done through unsecured debt. We've made decisions over the years that rather than being a factory and cranking out product that we are longterm holders. We are building these buildings for multigenerational ownership. Most economic partners that people bring in have a time horizon when they want their exit, our exit, we do not have an exit strategy. Our exit is to hold our exit is to d leverage. So we went through the following that we bring in a partner to get out of where we're at. Cause obviously people did not like unsecured debt.
Speaker 1 00:24 Where did that thought process come from? Was that from the vendor family originally? I mean w what? Why did they not want to, you know, lever up and grow and just explode or expand the business dramatically.
Speaker 2 00:36 I think it was a combination of a few of us here with the bender family that instead of being a fatric because we did buy and sell a lot of buildings and I can go over a few of those things with you because they, there was some interesting stories that go with that. However, the core portfolio we felt should be checked in. The family should be delivered and as something that can be passed down to the generations and support the people off of cashflow and assure multigenerations of a comfortable lifestyle and be a legacy that's passed down where grandpa daddy and whatever can be remembered as assuring a nice lifestyle told these people. We then have other properties that we've been involved in other than the core where we have gone in and gone out to the properties and
Speaker 1 01:39 that was the mission is to to look at opportunity. Then
Speaker 2 01:43 we then went into opportunities and I can name some of them and if you're looking for stories, which you told me you were looking for, there's some very colorful stories with some of them where it wasn't that we are wed to this for life because we had other partners or the way the finances were structured, these were set up to make money. These were not set up to be buy and hold to life. So the core portfolio was set up. Some of those deals go back to Jack Bender, which would be founding of the company, the founder of the company and the bender building was built in 1958 59 the oldest building in the portfolio, so the first building that was ever built by Jack, we still on and some of the other Jack Buildings. We still own 1808th street, 1800 g street or the building we're in now.
Speaker 2 02:38 Actually, I was our, I was already at like, or like Jack had bought the old building that was here. It was a people's drugstore freestanding building and an old medical building or an apartment building that was converted to doctors and some people. Other deals that we did. We did a lot after Morty left. Morty was not, Marty was focused on the contracting and that's context. Morton Bender, who was the oldest son when he was the youngest, but he took over running when Jack left and then when Modi left and Stanley and Howard were in, and then we became five of us became partners. We then acted like other developers where the goal was to do the transaction, to make money and times had changed where it was difficult just to build hold forever because of the way that transactions were structured. I'll give you a few examples.
Speaker 2 03:39 I'm a junk reader. I read things that nobody else would read. So there was a building that was owned by the Dutch government, by Dutch investors over at four 25 I street. So I read two things that interested me in that building. Number one, that there was a treaty with the Dutch government where they were exempt from capital gains taxes through the September of whatever year was that we're talking about in the 80s and number two, the federal government had signed a contract with the immigration bureau to wire the entire country back to that building. All the immigration, anybody who went after that building was told that the immigration bureau was gonna move because of the sensitivity of the, of what was in there. They belong in a government owned building and they were going to leave their 300,000 square feet. I said, why would they sign this deal with the eds?
Speaker 2 04:42 I'm not a believer. So the vendors traditionally did not put up money. They did not. Everybody thought they gave me Zillions of dollars to the deals with. They gave me their financial statements, which is why we had so much on secured debt over the years. And Howard said, I'm not thrilled about this. If you really want to do it, go to it. But I really don't. You know, it's 400,000 square feet. They're leaving the building is everything. Everybody's reading. And I said, Eh, I want to do this. So I ended up putting a first deed of trust on that building. A second deed of trust on that building. It was this before they moved or that they were in there still, but had not signed the lease and extension. And then for equity. Then the second deed of trust needed a participant to go on with them, which was bank of Montreal. If I recall. I was a certainly eighties yeah. This was during the high interest rate time? No, this wasn't high interest rate time. This was during the savings and loan. Oh, it's crazy. Tell us, this was probably 1980680780 eight okay. And then for equity, I got a savings and loan to give me a third deed of trust where they took a 45% Kevin's. So basically I financed the building for $1 million more than I was buying it for totally non-recourse. It doesn't sound like a Blake deal to me.
Speaker 2 06:17 So all of our deals were a hundred percent finance and then d leverage. So we're low leverage people. But in day one they didn't put up any money on any deal. And then I met with the government and we started negotiating and they said, well, you know, we, we think we're going to move to Virginia or we're gonna build a building and all that. And ultimately it didn't go that way. And I said, you know, you don't even have time to do it. She signed a 10 year lease that gives you all the time in the world to figure this thing out. And I even went over with them. I said, we build a lot of government buildings here. Statistically it takes eight to 12 years to put together a government building. A 10 year lease is right in the middle. And while I'm talking to them, I decided that, and that neighborhood was horrible in those days, let me see whether I could sell it.
Speaker 2 07:12 And I made someone, a partner who introduced me to the savings and loan. I made someone else, a partner who put up the deposit of a quarter of a million dollars to just hold the building. So we had some partners in the deal who almost made introductions and then plus we have the SNL. And I remember the SNL at the last minute said in out, would you give me another point to do the deal? And I said, would you loan it to me? So he said, sure. I said, then I'll give you another point. That was a different era. So I remember flying out to Chicago and telling hype, man, I was introduced to man in those days. Continental Illinois was one of our big banks and they said, you know, we have someone who we think would pay you a lot of money if you could close that lease. I said, okay. So I met with and I PR, I met with Steve Perlmutter and a few other people out there and I bought the building I think for 28 million.
Speaker 2 08:16 And they said ultimately, uh, I think we agreed on a sale price. If you could sign this prototypical government lease, cause you don't have a deal right now with them. Is that what you're negotiating? It was a prototypical sale that you can deliver. This will pay a $62 million. So nine months later or six months later, whatever it was, we signed the lease with the government. That pretty much matched that. Eichmann said we'll close in 30 days and I think it costs us $1 million in t eyes to close that transaction. It's not like we were wed to that and I think that was the right thing to do because later on I think the building traded like 30 or $40 million years, you know, hype and then sold it and it kept going backwards. So you know, we weren't with to that. There was dirt that we bought with PMI with Anthony Kelly over at 13th in New York avenue for three and a half million dollars that we sold to day on. And in those days for 32 million though,
Speaker 1 09:22 was this activity driven by the financial markets at the time, the flexibility of capital to do those things, for instance, because at least as far as I know, you haven't done that type of activity over the last say 10 15 years at least. So explain what, what were the circumstances that drove that activity at the time,
Speaker 2 09:42 unsecured debt was readily available, readily available. So it was, it was a capital driven. Yeah. But we were involved as you know, in lots of things other than real estate also. Right. The answer is if a deal made sense and we could do it where we put down nothing but our financial statements and we believed in the transaction whether it was buying the c one oh one, the fiber optic company that we did pay telephone company beer distributorship. We went ahead and did it. And uh, it was done with no money down, but personal guarantees. It was done with personal guarantees on the unsecured debt, which is why when the crash came and everybody was calling the unsecured debt, it was a very uncomfortable time. And as you work your way up,
Speaker 1 10:36 way through that, tell me how you, I know you were challenged. We had challenges during that time. Tell me how that all got worked out.
Speaker 2 10:42 I had mental and physical challenges explained. You know, Blake was not used to not being a 400 pound gorilla. And again, our people were more contractors than real estate people. I W I was started a guy up the street. I lost 50 pounds in six months and didn't feel real. Well, I was flying around the country putting out fires and
Speaker 1 11:08 this was 1990 91 in a row,
Speaker 2 11:12 probably 89 yeah, 89 90
Speaker 1 11:14 and I would ask people, why are you calling this that the deal is good? And they said, well, we're calling their debt because if we call your debt, you're good for it. I can recall, I won't main banks, but there was one bank where we bought a shopping center that had an NOI of 8 million and we had the same amount of debt and now the NOI was up to $11 million and we'd already paid down some of the debt and now they're calling our debt. The good news is some of the banks really believed in us. So when those days, one of the banks was bank of America or whatever, one of their predecessor names where we said, we'll help you out. You know, if this bank's calling the debt, we'll help you pay it off. And not only that, but we think you want to do real estate deals because no one in town has credit.
Speaker 1 12:11 And we're a believer. So we went ahead and we did a couple of buildings and we were the only ones delivering product. We did pretty well during that period, you know, so we were putting out fires in the morning and starting deals in the afternoon. So taking the Warren Buffet for the last few, you know, buying when everyone's distressed, basically, nobody else could put up front door. Yeah. And it was more the banks idea than ours where they said, why wouldn't you do this? We're not telling you Steve, we're not lending other people money. So that worked out well. But you know, there were other deals that we went ahead 20 you know, 1120 g street that I mentioned to you. We thought that was going to be a core deal. But you know, when the roll cycle came along and we realized that we were putting up 100 cents and only getting a 65 cent benefit out of it, the answer was we're going to sell the building during the crash.
Speaker 1 13:09 When credit was tight, 1350 New York Avenue, the life company that had that loan wouldn't extend the loan and there was nobody out there to give it. We lost 10 to outgrew the building. We wanted to invest five or 6 million into the building, but we weren't going to do that unless we got a long term extension extension and the life company that had the deal would only give us six months. And I said, you know, is this an intelligence test who would put $6 million more into this for six months? Why do you want to foreclose on a fully renovate, you know, we wanted to put a new lobby in and all this, you know, we can't do this. So we ended up selling that building to the Inter American Development Bank and instead of losing the building to this lender who would extend the loan, we ended up making you know, a fair amount of money on that. So Steve's, let's shift now a little bit to your philosophy as a, as a person with the company and how you lead your people, what you tell your people when you hire them and how you would encourage people to grow within the firm. And, and also, uh, in the community as well. How you, uh,
Speaker 2 14:25 inspire people to do their best. I think some of that is done through the vetting. When we go through interviewing, we tell people that we are looking for excellence. We tell people that we are a service oriented company. And so if we see somebody is coming out of a firm where service, either the firm isn't known for service or that's not the type of organization that it is, where it's a skill set that maybe they didn't learn, we would probably stand clear that person. What does service mean to you? Steve? Client comes first. Among other things, listening skills, a lot of people can talk and they can even talk a good game. Sure I give good service, but if you go to that meeting and the only thing you do is talk and you don't listen, you can't give service. We talk about how to lesson and we even teach them that sometimes there are people at telling you isn't what they mean to really listen and try and interpret what what they really are getting at including sometimes people complain but that's really not what they mean.
Speaker 2 15:45 I'll give you an example. We built something wasn't the biggest thing in the world is less than a million dollars where we did brownstone for somebody, the little work on the outside, but on the inside we did a lot of work for this person and we got the blueprints and we gave the guy a price and he said, it's more than I can afford. And we said, well we could go back to the architect and do it and he goes, I can't afford to pay the architect to Redo this. Can you guys mark up these blueprints and bring it down to my budget. We said, okay, we'll give it a shot. We said, we can eliminate this, we can do this, we can do that. And he said, where he at now? And we said, well, with all of this out where this s that's within my budget and we did the job.
Speaker 2 16:34 And then he came in and he says, but you didn't do this and you didn't do that and you didn't do that. And we said, well, that was eliminated and now when you couldn't do it and you guys, well that's not my understanding of it. This was between you and me. This was a relative of an employee, a very close relative like a husband. And I said, listen, here's what was brought to the meeting when we brought it in. And I might add, we actually had some things left over from some other jobs where he actually got more than what was even marked up. And I thought we went above and beyond. I was offended and the project managers were all offended. They said, we really help this guy out, and now he's thinking, I've got <inaudible> out here. And he was nasty even at the table.
Speaker 2 17:19 And I said, uh, here's the piece of paper you signed. You know, everything with the little red xs on it is what was eliminated so we can bring it in on budget. That's not my understanding. So I said, listen, you seem really upset. I'm gonna make it real simple. Here's how much we spent on the job. Here's our cost. Pay Us whatever you want. If you want us to lose money, we'll lose money. If you want us to make 1% 2% you tell me any, pick the number where we lost money. And he said, is that acceptable? I said, it's not acceptable, but we're going to do it. If this is what you truly think is fair, that's fine, we'll do it. But I really, you know, obviously we don't want to work for you again. So here's a list of this subs. Call them for any warranty work.
Speaker 2 18:09 Just please, you know, don't call us again. And if this is what you really think is fair, you and I think differently, but these subs, if you call them, if you have a problem, we'll come. They'll take care of you and such as life. And I just, you know, I'm a little smarter than I was yesterday and I learned a little bit about you and you're probably not going to come to my house for dinner, but if that's what you think is fair, that's fine. We'll still eat steak. Don't worry about it. Let's talk about stories. The other way. Things that you thought, oh boy, I'm not sure. I'm just, it's going to work and then all of a sudden it just came out of nowhere. This is unbelievable. I think four 25 I street would probably be the best one. That was a big, that one worked out a lot better than we ever thought it would work out.
Speaker 2 19:01 Did people do things that surprised you in a positive? I mean it just, you know, we're just overwhelmed. I can't believe this is happening kind of thing. I'm on four 25 I street. I think the fact that we got the government to commit on that one, I think the financing that fell into place on that. For instance, three weeks before closing on that one, there was somebody that, we had a million people in the room because of all the layers of financing. It was one person at the end of the table wasn't talking. And I said, who are you? And he said, I'm the second deed of trust. I said, you're not saying much. And he said, well, I'm trying to decide whether or not to do the deal. I said, well, I thought I thought he committed. And he goes, no, I committed to consider doing the deal.
Speaker 2 19:49 I said, we're closing in three weeks. And he said, you know, I've decided I don't want to do the deal. And I said, terrific. When were you going to tell us? And he said, well, I knew everyone was getting together. I said, we're getting together to talk about closing, closing. So he, he walked and I actually showed up the closing short millions of dollars. I forgot, I think I forgot what the second trust was. But I think it was probably $8 million, eight or $10 million. And by the way, this was new. This was new year's Eve because of the Dutch treaty. We had a close, it's new year's Eve. No, later that and lawyer turned to me and he said, Steve, uh, you know, let's make up a number. Let's assume what was $8 million? He said, do you know you should $8 million? I said, yeah. And he said, what are we doing here? Cause we took out, we put one conference room as the first day to trust the other conference room was going to be the second and the participant and the third year to trust was somewhere else and cellar was somewhere else. I mean, we took up like six conference rooms and then at the end, Sandusky, decky or Findlay Combo, whatever it was in those days. And I said, uh, I'm gonna negotiate a second day to trust over the next hour. He said, with whom? I said, the salar. And he said, does he know it? He said, not yet.
Speaker 2 21:23 And he said, well, what are the terms? I said, 60 days, I sit in 60 days, I think, you know, I said, there's someone else who I think, who's heard about what happened, who said, you know, I think it's a good deal, but I can't, I can't put it together in this amount of time. And I got with the seller and initially he was not happy. And I said, you know, here's a letter from someone who I'm telling you they're there, they're going to put up this money, but it was impossible for them to pull it off and we've got to close tonight because of your problems on capital gains. And we were going and going and finally, and he said, well what about recommendation tax and all that? I said, listen, if I can't pull this off later on and we have to unwind this action, I'll pay you.
Speaker 2 22:12 You know, it's our problem. And things started getting, you know, now it's 10 o'clock at night and these guys have till midnight said, lawyer goes, what are you going to do? I said, give me the phone. So I called the airport and I said, I need a plane. And they said, where are you flying? I said, West. And they said, what do you mean you flying west? Where too? I said, I don't know, but we need to charter a plane and we have to start flying west so that it never gets to the midnight. So you get to cold closing team. We never had to like an hour and 15 minutes later we finished that. But the lawyer said, you know, and of course the people I called said we have to file a flight plan. I said, Hawaii. I said, California, Hawaii, I don't know.
Speaker 2 23:02 Was it two? I said, let's see how far we are, you know, and I, and I'll give you a place, you know, where do you want me to tell you? So yeah. And I remember and ever since then, we do leave town now no later than the 20th of December because my wife was not happy camper that night. But yeah, that, that one was unbelievable. I think we finished that deal around 10 30 quarter to 11 on midnight. Wow. I'm sorry on a New Year's Eve. But yeah, we cut that about as close as you could do it. But going back down, hiring somebody. So we need, we need somebody who, first thing is they understand the customer comes first. We want somebody who, if they make a mistake, doesn't lift up the carpet and put it onto there. We want them coming in and saying, I made a mistake. I need help. Get Out of this mistake. We like somebody who likes to work, you know, we'll pay you, but you gotta want to work you, you gotta like you have to enjoy working. And we want people who enjoy a team environment and all of that's very important.
Speaker 1 24:16 Sure. And you'll know that within probably 30 to 60 days after they're hired
Speaker 2 24:20 easily, we, there's a tremendous amount of cross selling that goes on here. And I might add the people that didn't get compensated at the time for the cross selling, our leasing people bring in tons of construction. Uh, they'll bring in property management. Our construction guys are talking to somebody when they building and saying, Oh, you didn't hire leasing person to do this thing. You know, we got the greatest leasing team in the world. Everybody really looks out for everybody else on this thing and they're very, very good about that. And they love doing it. Let me, yeah.
Speaker 1 24:55 <inaudible> two more issues that I can go to before I asked you a final question. One is a, you're, other than work and family, which I assume are, you're pretty high priorities, you have a, an interest in giving back. Tell me a little bit about that, Steve. What you do
Speaker 2 25:12 that actually goes to David's mother. When I was first made a vice president, Sandra Bender was around, this is Howard's wife. Yes. And she asked me out to lunch and said, tell me about your past. I said, you know, we grew up modestly, um, four of us when my father was alive, lived in a one bedroom apartment. My brother and I used to sleep in the kitchen so we never had to go far for a snack. And you know, then we moved to the suburbs when my mother remarried and you know, we talked it through the whole thing and uh, said you're doing pretty well now. And I said, yeah, you know, and very thankful for it. She said, that's exactly why we're having lunch. She said, there are people out there who can use help. I want to put you on the board of the heart association.
Speaker 2 26:08 And I, you know, I think it's very important that you learn about giving back and charity and things like that. You know, she said, I think you're, you're going to go far in the company where you at the time Steve, I was young, I was <inaudible>, I was the youngest vice president, I think ever. Like about 30 or so. Yeah, probably 30, 31. And she said, you know, I think it's a, it's a real important thing. And she, Sandra was always president of our foundation and she said, um, you know, I understand you have a pretty bright future here. And she said, oh, that's what I do for a living. Um, I give away money. And she was on the board also. And uh, well, so now aspiring to you, it was unbelievable. And this company adopts charities. There's a meeting going on in the next conference room with the heart association. I went and I just agreed to chair the heart walk. We guaranteed that they would get $100,000 no matter what, just from Blake, the foundation just committed to give a million and a half dollars to the heart association over 10 years, you know, they guaranteed that to them. This company basically adopted hard and since then obviously, um, I've been a pretty easy pinch.
Speaker 1 27:36 That's great. Let me ask you one final question and then, um, talk a little bit about how people can reach out to you and maybe find you, if, if you could put one statement on a billboard that a million people, millions of people would see, what would you set? What would that say?
Speaker 2 27:57 The answer is I would like to thank everybody in Washington for my success because success is not made by a person. It's made by the people that you went to face with. So the answer is, I would like to thank everybody in this town for, for, for my success, because that's really where it's come from. You don't make your success. Other people allow you to be successful.
Speaker 1 28:28 Thank you, Steve. Appreciate your time today. Appreciate it. And uh, to reach, to reach you. How can people reach out to you if they like to reach you?
Speaker 2 28:38 I think because of my travel habits, the easiest way would be through my assistant and she can get to me and I'd be happy to answer <inaudible> questions or talk to anybody who wants to talk. Rachel Hayward, our
[email protected] thank you Steve. Appreciate your time today. I pleasure.
"I don't want to lose a client ever!" Stephen F. Lustgarten
