Chris Powers:

We know that a lot of great things come from operating really well. You see more deals, you can execute on them better, you can hire better, you can run teams better. I mean, the implications of that goal are massive. And we think the industry, going back to deal junkies, and again, I'm using it not in a derogatory way, but I don't think a lot of people, especially at our stage are in it to operate. And in a world that we're heading into where money's going to be harder to find, interest rates are higher. You can't punt a project any longer, two months and get away with it. Money is not free anymore. There's a ticker. You have to be able to operate.

Nancy Lashine:

Hello and thanks for tuning into Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Park Madison is a capital solutions and advisory firm serving the global institutional real estate business. Capital is the lifeblood of the real estate industry. But the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What have been their biggest successes and lessons learned throughout their careers? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them. How they make critical decisions? Who has influenced them, and a lot more. On this episode, we have two guests from Fort Capital, Chris Powers, who founded the firm and Jason Baxter, who serves as Fort's president and CEO. Fort Capital emerged from a series of entrepreneurial moves by Chris who bought his first real estate deal at the age of 17 while he was a student at Texas Christian University.

Chris and Jason met working on land purchase deals and started working together to do all kinds of development deals, recognizing that investors were more likely to fund organizations that are focused and specialized, and also recognizing that development is well just hard and requires continual new fee income to keep the development organization running. They look for a strategy that would be more repeatable and generate more of an annuity income. In 2015, they saw an opportunity in Class B industrial and launched Fort as a specialist industrial manager. Since then, Fort Capital has invested over 2.1 billion across 23 million square feet making them one of the leading US managers of Class B industrial real estate. Fort Capital has grown while syndicating transactions on a deal by deal basis with over 900 individual investors. We discuss Ford Capital's evolution, their unique use of technology and data in the management of the business, and where they're planning to take it next.

Our conversation begins with Jason and Chris discussing the early days of their partnership and the types of deals they were doing together prior to founding Fort Capital. Chris, Jason, really great to be with you. Thanks so much for joining today and I'm excited for our conversation.

Chris Powers:

Thank you, Nancy. It's a pleasure to be with you.

Nancy Lashine:

So the two of you run Fort Capital. Tell us how'd you meet and how'd you start the business?

Chris Powers:

We met in 2014 and we were both at different companies at the time and I was putting together land deals and Jason was buying them from his company and we met that way and it really was not an explosion of we should be a partner immediately, but we kept working together. And then without belaboring it too much over a series of probably 18 months, we got to a point where Jason had left where he was working. He was actually consulting with another company, helping to build their land position in DFW. We continued doing land deals and through a series of conversations it was like, hey, let's start partnering on some deals. Why don't you come office? And we could start slowly, but by that point we had built a rapport and friendship and trust and that was the beginning. I don't know what I left out if there's anything you would add to that, Jason?

Jason Baxter:

No. That's a short and sweet story of it. We were working on different sides of the table and we found a lot of synergy and there were things that Chris was doing that I wish I could be doing. And I think there were things that I was doing or that I knew that Chris thought would be helpful if we just did it together. And I think we both saw the opportunity so we took advantage of it.

Chris Powers:

Yeah. I think of one fun little story in there is I was buying land unentitled and entitling it and then selling it to multifamily developers or infill town home developers. And Jason was working for a really successful home builder that was really great at urban infill. And I remember a moment on my end where we were selling a piece of land and maybe we thought there could be, I don't remember the number, it's insignificant, but maybe eight town homes on this piece of land. And Jason was gracious enough to sit down with us and say, yeah, you could probably get more like 20, and if you can get 20 on there, you can get double the price. And that's when the light bulb went off to me with Jason saying we wanted something of what he had and he probably wanted something of what he had. It was like, okay, we were better off together than we were on opposite sides. And again, it didn't happen overnight, but that was the beginning of, at least from my perspective of like, man, we need to start doing stuff together.

Nancy Lashine:

Oh gosh, it's such a great example of stories of when you're working with people and you think you're on opposite sides of the table and they turn out to turn around and say, "You could do this better." Or they just try to help you with something where you didn't ask and you realize that is the definition of a great partnership. Yeah, that makes a lot of sense. So I'm a little like I'm sitting here going, okay, you were in the land business, you were doing housing, Ford Capital does multi-tenant light industrial business. So did you just buy something that was accidentally zoned for industrial or how did that transition happen?

Chris Powers:

I think it happened in a few ways. So at that point, Jason and I had been working together for a couple of years. We knew we were going to keep working together and the projects were getting larger, but at the time we were a jack of all trades, master of none. We were doing land deals, townhome deals, student housing deals, buying multifamily, building office buildings, really just deal junkies to be honest with you. That wasn't like our goal, it was just what was happening if you look back so we said... I started meeting with investors to get larger checks for larger deals and they would all say the same thing, which was, "We think you're successful, you have a great track record, we believe in the project, but if we're going to write a larger check, we'd really feel comfortable that the group we give it to wakes up every day focused on that one thing.

So if you want a big check for a townhome deal, we'd rather just give it to the group that wakes up everyday dreaming about townhomes, not the group that thinks about it a couple of times a week. So that conversation happened a little bit. I think it's a combination of probably more me than Jason. But the temperament around development, development's just really hard. I think it's gotten harder with time. It takes longer to entitle projects. There's a lot more risk involved in development that you can't control. So for me anyway, I can say development was becoming not as attractive. And then we just started looking at, okay, well what would make sense to go all in on? And ironically, we hadn't done any industrial to that point. But without going too much into it, we had just really looked into industrial. Last mile industrial was becoming a thing back in 2016-ish.

So there was a bunch of macro reasons why we thought it was interesting. It was cheap. And for me, there was a Sam Zell recording where he just talked about why he doesn't develop and he only buys existing assets and really tries to buy things that you can't really rebuild anymore. And Class B industrial is you really can't rebuild it for the most part. So it was a confluence of we needed to focus. Development was hard and we believed in industrial. And Jason and I were talking about it on Monday. We went, I think it was like a retreat or it was a meeting and we went on a year in retreat and we basically just looked at each other and said, okay, we're going to change the company. From this day forward, every new deal that comes in is going to be Class B industrial acquisition. We'll finish all of our legacy development projects, which was going to take a few more years.

I think Jason will probably add on there were some issues at the operating company level that we had to get to doing something because development was going to run out eventually. But we made that decision in 2016 and we've stuck to it and for lots of reasons, one of the best decisions we ever made for the company.

Nancy Lashine:

Partnering together might've been the first really good decision.

Chris Powers:

I would agree with that.

Jason Baxter:

We like to think so.

Nancy Lashine:

When did you brand the company Fort Capital?

Jason Baxter:

Let me give the answer on this one, only because Chris has had the thought of what Fort Capital would be in terms of the brand, how he thought about it for a long time. So why we laugh is because in his mind, which is true, it's earlier. It's in probably 2013-ish is when I think he started to formulate the thought. Is that about correct Chris?

Chris Powers:

Yeah. And it was actually named Rumstick Capital for a year because my dad grew up on Rumstick Point. It's a peninsula in Rhode Island called Rumstick Point. My dad had just passed away so it was kind of owed to him. But the funny part of that story is most people were calling me going, "Did you just start a liquor distribution business or are you a liquor store?" The word rum. So I was like, oh shoot, we got to find a different name, but Jason can keep going.

Jason Baxter:

So then it was around the time that Chris and I were actually doing deals together. He was also formalizing some of the legal aspects of what he was already doing. And part of that was actually making that name shift and filing the documents and all that. So the legal name change happened in 2015.

Nancy Lashine:

So let me ask you for each of you individually, what was that consequential moment, the aha moment when you said, oh my gosh, we've got a real business here and we are in this business of multi-tenant light industrial. What was that aha moment for you, Jason?

Jason Baxter:

So yeah, I think Chris was starting to touch on it. My take on that initial decision to switch was it was a much more gradual realization of the future for me. Chris was getting very educated and bought in on the idea of Class B thesis and he had formulated a very good thesis around it, which we talked about heavily back in 2015 going into 2016. And I did a deep dive into understanding all of the things that he was learning and really formulating my thesis to match what he was already seeing. And the reason why mine is slightly different is because I was also building an operating company at the time internally for Chris and I on all the things we were already working on, which were heavily development focused. So we had tons of land acquisition deals that were in different stages of development and different buildings under construction to the tune of probably 70 or 80 million worth of land and buildings at the time. And this is back in 2016 and we were still a fairly small team.

But what happens in development is your revenue stream is based on fee business. And as those developments start to get closer to the end, those fees start to wind down. And if you don't have future developments teed up, well, it's hard to build a business model. So you either have to keep going with development and bring on new developments, or if you're going to pivot to something like Class B industrial as a thesis which is a cash flowing asset, what it allowed me to do is immediately take the thesis that I thought was so powerful that Chris had helped identify and then realize that that could be a forever reoccurring revenue generating machine that we could actually build a great company on top of, which was my background and what I was hoping to do. Chris and I were going to do anyway, which was build a great company. So I saw an immediate pathway to not only execute on a great investment thesis, but also build an organization around something that was sustainable.

Chris Powers:

And I have to just add, I think it's a key moment to just say, I think one thing that has led to our success or any success that we've had is exactly what Jason said. I haven't seen it as often. Nancy, you probably have because you get to meet teams like ours all the time. But the conscious decision of we're going to actually build a company, a lot of people get into this business and look, I don't mean this in a... They're deal junkies. It's more like we're just going to do deals. We're going to have a team together that just fumbles through these deals. And look, you can make money doing that, but you can't build an enterprise with enterprise value. And one thing I got to say that Jason really brought that I didn't see at the time. I was bought into the camp that your OPCO is this fledgling group of individuals that just tries to make deals happen and you collect just enough revenue to pay him.

And again, I think a lot of that came from where he had just been one of the top home builders in the country. He was like, no, we're going to build a company out of this. So I think it's a key moment to just say like, yeah, we found something to put money in, but we also found somebody to build a company around.

Nancy Lashine:

Yeah. Gosh, you guys have touched on so many critical factors that we see obviously so many groups that come through our door who want to raise institutional capital, but they don't get really early on, things that you got for example, development is really hard and institutional investors see that many of them just don't want to do development for that reason. There's just risks that are hard to quantify. Takes a long time, and it's not an annuity business. So on the flip side of it for you guys, yes, you constantly you need to build a mountain of development fee income and markets are cyclical, so that's really hard to do. And by definition when you see the boom and bust of all these development businesses over decades, that's part of the reason. So building an annuity business in private equity or any fee-based business is phenomenal.

And investors want to just hire because they can, someone who's best in the business. So they want a group that does just one thing and is really expert in one thing. You need to be both. And just for our listeners who don't know what Class B industrial is as compared to any other industrial out there, why don't you just define it the way you see it for us so everyone knows what we're talking about?

Chris Powers:

I think the first thing is just the vintage in which it was built. So a lot of these buildings were built, call it 70s to maybe early 2000s at the latest. They tend to be because of when they were built and the needs of society at the time, they were much smaller bay and the location of them, they're infill. Especially what we're buying, these are in the center of cities. When they were built, it was probably the outskirts of town. But now based on how society's developed, these are infill and it's warehouse, it's distribution, there is manufacturing, there's Class B cold storage that you could throw in there or almost like lab space. But for us, we really think about it as warehousing and distribution. So if you're seeing smaller base stuff get built, it's often either on. Especially in Texas, on the outskirts of town or in locations that you wouldn't consider as infill. But for us specifically, we're focused on the smaller tenant sizes, lower clear heights, again, older buildings, but still serve a major need in society. We believe that need's actually growing.

Nancy Lashine:

So in the seven or eight years since you've been in the business, has that usage and tendency changed?

Jason Baxter:

I wouldn't say that it's completely changed. I think our understanding of it has definitely changed and we've seen I think has been fairly consistent looking backwards, but it is for sure increased over time. The demand and the same things that were happening in 2016, '17, '18 just continue to grow at a scale. And what we've really gotten an understanding of using a lot of this stuff I'm sure we'll talk about with technology and data and things is, an understanding that the growth, like anything in real estate is based on population growth. And what Chris is alluding to with us, not these buildings not being replaceable or you can't build in these locations anymore. The needs for what those services or distribution or warehousing was back then has only gotten more. The need has only grown. So the demand continues to grow as these cities continue to grow. And since they're not building it, obviously that drives rent up.

When people say, well, what about e-commerce and all the things that are driving that, all the Amazon, all the million square footers, that has had a huge impact. Not necessarily on the tenant type or anything like that, but when those larger spaces continue to grow in a city and those cities continue to grow and things do move more towards e-commerce, what it allows the city to do is start to see those infill buildings in a different way. So they do start to be used by new types of tenants. That's not the major driver. But what the real effect is is that as more demand happens in those larger spaces, the rent obviously goes up in those larger spaces. And as the rent goes up in those larger spaces, so does the rent and Class B industrial. So when you combine just the nature of all industrial rents going up with the fact that this asset class is not replaceable and the tenant demand is growing, it puts the owner in a great place to be able to see a future where rents are going to continue to slowly climb.

And then the other factor that I would add into that is that we know fairly well the cost of the space compared to the amount that businesses typically can afford in this asset class. And much like the Class A industrial, it's still a relatively small portion of the total income of any business. So there's definitely room there for businesses to be able to afford more. In the Class B space, it just historically has not kept up with other asset classes, other real estate types such as office or multifamily. Class B light industrial has historically stayed extremely low from a rent basis. So we're just starting to see that hyper escalation over the past six or seven years.

Chris Powers:

And a lot of that hadn't been institutionalized.

Nancy Lashine:

So typically for industrial, it's bigger industrial, you'd see that rents are three to 5% of revenues. Is that typical for small bay as well?

Jason Baxter:

On a percentage it's slightly higher, but still relatively low for their business. And what we have found is it's actually more impactful because of the nature of the tenant where if you get into a giant warehouse and it's a national company, although the credit might be good, they're very powerful and they have a lot of flexibility in terms of vacating or exiting or paying penalties and things like that. Where if you're a smaller regional or local business that needs 5,000 square feet and it's your livelihood, it's how you support your family, what we have found is that those tenants are even more sticky and they're more reliable. And that percentage of rent isn't as impactful to them because it's a necessity. They have to have it. So they don't measure it the same way a large institution would in terms of the Class A and a P&L and how much the real estate costs their business. They look at it as just a part of the livelihood.

Nancy Lashine:

So who are the tenants? Can you give us a sense of the breakdown? What kinds of businesses are they all local? Are they all individually held? What's the tenancy look like?

Jason Baxter:

That's part of the reason why we like it, and Chris definitely jump in if I leave something out here, but the tenant mix is very wide as you can imagine. We have over 1,800 tenants in our portfolio and we have spaces from anywhere from 1,000 square feet to 50,000 square feet in a couple even larger than that. So we have a wide range. But if you have to ask what is the general makeup of it, it does run the gamut. But what we have realized is the most impactful sector is what we call service-based businesses. So they're not always local. They can be regional and they can be even state-wide businesses such as like a drywall company. A drywall company might have offices in Houston, San Antonio, Austin, Dallas and they're supporting all the growth of housing that is happening, all the population growth.

So they need the same functionality in each city. And we sometimes have the same tenant in multiple cities. But they're very heavily service-based businesses. So it can be anything that's supporting the housing industry, the growth of a city, to infrastructure even down at the property level such as air conditioning companies, landscapers, plumbers, electricians, pest companies. And what people I think underestimate a lot of times is the need for cities to have those services because we all rely on them, but we don't actually think about how many it takes to support a major city in Texas or Florida. That's not a hard math equation to do to figure out how many of those providers are out there and where could they possibly go. And that's the way we're able to look at it and see that the tenant base is pretty sticky. There's a lot of variety. So we look at that as de-risking the portfolio because there's a lot of options for tenants.

Chris Powers:

I think one interesting thing to think about in what he just said is to the extent, maybe there's another asset class I haven't found of it. But if you're in a Class B apartment and you make more money, you either buy a house or you move into a condo or a high-rise or a Class A apartment. But you leave the Class B apartment asset class. If you're in an office building, traditionally you maybe start your business in a Class B office, money's tight. You do really well. You move into the nice Class A building on Madison Avenue. Even in self-storage, you might have a crappy self-storage unit. You start buying nicer things. You move into an air-conditioned self-storage unit.

But in Class B industrial, if you do better financially, you do not move to Class A industrial. You would only move if a function of your business needed it. So what you find is tenants that do better actually grow within the asset class, they gobble up more space and they become better tenants. They don't leave it. The more money you make the incentive is to balance. And industrial because it's a function of your business, you really don't do that. And hopefully we never go through another pandemic again, but the pandemic-

Nancy Lashine:

I was just about to ask you, what was your experience during the pandemic with your tenants?

Chris Powers:

Every single one of them virtually at the time I think we had six or 700 tenants. Virtually everyone, I think the word was essential. The only tenants that we received letters saying we're not paying rent were from national credit tenants with big law firms and big legal teams. Every other tenant was like, how can, again, what Jason said, it's their livelihood. People talk about credit. It sounds really good until you have to get sideways with one of them. And depending on the size you are as a landlord or as a property owner, these people can eat you up quickly.

Nancy Lashine:

What percentage of your leases are recourse to the individual signers?

Jason Baxter:

Every lease has some recourse or penalty. Now these are oftentimes they're very small leases relatively for the portfolio. They always make up a small percentage. So the penalty or the recourse is not necessarily large, but we always have some commitment from the tenant. And the reason why you're able to do that is because these are not always what would be considered credit tenants. So they know that they need the space and they're willing to take the risk. So you still have to weigh the fact that what does recourse mean? What does it really mean if a tenant can they even cover it? But we do often get, if not most of the time some form of recourse and deposits and things like that.

Nancy Lashine:

Yeah. Because that's the only real counter to all the things that you've said about the growth of the tenancy and the stability is that they're smaller businesses and in a deeper recession, if they don't make it, they don't make it. And there isn't a lot you can do about it but you end up with vacancy. And we haven't had a deep recession it seems like in so long, X the pandemic, which doesn't feel like it took very long to come out of because of all the capital that was flooded the economy.

Let's talk about technology because you mentioned that a few minutes ago, and you have something called the Fort Operating System, which has a very cool ring to it. What are you using it for and why do you need your own operating system?

Jason Baxter:

Well, I would say just in a high level, what do we use it for is everything. And I'll give some examples on that. But we really do think of the Ford Operating System as the backbone of everything we do. It is the foundation, the infrastructure. So we don't really think about doing anything that isn't related to FOS. And that really, if you take it one step further what I'm talking about is the database that is behind all of the functionality that is FOS, an operating system. Like the day-to-day activities and actions. But behind it what we're really doing is collecting data. And we're collecting activity and actions and results and responses and things like that. So we're getting a very good continual building of a foundation of improvement. And that's how our company is set up is continually improving and continually thinking about progress.

So the FOS way we think about it is everything. We decided early on, so this is way back even when we were still developing, we were already... Chris has always been tech focused. I think this is one alignment that he and I had early on was just our, one willingness to adapt to technology, our excitement about it and our interest in it, and both having some vision aspect of who we are, meaning we're just always looking towards the future and seeing the possibilities and really deciding early on that we're going to have some technology early on. So things like Slack. We've been on Slack since before anybody knew what Slack was. And we've tried to be that mentality in our company or build that into our culture. So when we started thinking about after going through several iterations of different product types, operating softwares or different systems that you can use, but none of them do everything specific to your business.

And what we realized early on is that every business is unique and every business has its own needs and there's no turnkey solution. I don't think there's anybody in the world that would say, for my business, there's a full turnkey solution that does everything. And we knew that we weren't trying to build a turnkey solution that did every single thing in the world where we could do it better than say the best accounting software. But what we knew is we needed a turnkey system where we could do all of our work and collect all that data in one consistent way so that data from an outside source was combined with our source. So we thought about that in these buckets, the first being ownership of our own software and strategically deciding to develop that so that we could control the life cycle of our data. So that we were fully in control and that we could build it such that we could connect other things if we needed to. So that we could do data analysis and synthesize that data.

Nancy Lashine:

So how many software engineers are on your team?

Jason Baxter:

Three.

Chris Powers:

Three plus subs.

Nancy Lashine:

Okay. And you started building your own software back in?

Jason Baxter:

We always have subcontractors that help with different aspects of projects, but we have a technology team of six people internally. And we have an outsource team of probably another three to four at all times that are helping us build our systems and maintain them and really develop towards the future. We're always working on things that are going to be two, three years from now, today, while also using the system as it exists, and it's already extremely powerful for us. But the second aspect of that was really proprietary data and then having one single source of truth knowing that that would lead to our ability to utilize things like artificial intelligence in the future. And we had that idea or that thought back in 2018, 2019 when we first started to go down the path of spending the money to develop our own software, our own internal operating system that it was hopefully leading to us to be able to have our own data and analyze it in a way that no one else could see.

And we just assumed that we would scale because Chris and I obviously have a strong belief that we'll keep growing. That we would get to a point where our data was large enough that we could see the world through our own lens and have an advantage by being able to analyze our data better than others. And it's not a unique idea. There's lots of great companies out there that have been doing this a long time like BlackRock and Bridgewater and these groups that have used data like this for a long time. But people haven't applied it to small business and specific asset class to become an expert. So we thought that that would give us a huge advantage. And then we took it to another level and going back to your question of how do we use it is, instead of looking at it just through data in terms of deal sourcing or buying deals or executing deals or understanding deals better, which is how most people I think would think about data in terms of their business is how do we make more money?

We do that, and that is a huge component of it, but just as important to us is how it helps us improve, understand, learn and adapt to our people. And build a stronger team and communicate better and create accountability and incentives. So we use it as much if not more for the ability to build a great operating company as we do to go find ways to make more money because we believe that if you could use your own proprietary software, collect the data correctly and utilize it internally, especially where we are with AI at the moment, that there's a potential there to really empower your team to see your data in a way that no one else can and hyper escalate their ability to execute. And then the asset class or the thing you're working in or the data that you're getting from the real world is secondary to the team's ability to execute anything. It's not valuable to have one without the other. It's the way we look at it.

Nancy Lashine:

Yeah. That's an interesting perspective. I'm thinking about, you talk about a single source of truth. Can you give us an example of the life cycle of a data point and how that has influenced your decision-making, whether it's with respect to an existing asset, a new acquisition or hiring people or bonusing people? Just to be a little more specific.

Jason Baxter:

The life cycle data point, it starts with data collection, and that is how we do everything. That's the backbone of the company, the database. That database is set up in a very unique way, which is we have many systems built into the database which are the easy way to refer to them as ETLs. And that's just saying that's what happens with the data, exchange transform load. And that's a very common term in the technology world, which is an ETL. It's an easy way to tell data to go do something, send it somewhere, automatically as it comes into a system. So that is what we're doing in our system so that then we can do data synthesis, where we're telling that data, this is what we want to do with you. Well, you can't just say, we want to do this with you with this data point we have to first transform that data to be able to do different things in different locations or combine data from outside software with our data internal software.

So that process of data collection, data synthesis is very critical in setting it up so that you end up with clean data. So you have clean data points that you can actually do something with. I think a lot of times people think data is just this massive collection of information that just magically goes in a giant Excel form or something or a list. But actually conforming that data to do different things is very important. But once it's synthesized then we can use it for decision-making. So we can do things like what you said, we can use it to do deal execution. We can do it to do business needs such as goal setting, OKR setting, aligning business units to ensure that they align with our flywheel. Ensure that the things that the different departments are working on are actually having an impact on what we say we're going to go do. And that we can utilize the data collection from things that are happening in the wild world to influence and impact what people do the next day.

And we're not doing it to tell people what to do. What we're doing is we're using it to give people insight so that they don't waste time or spend time on something that isn't going to have an impact. So if you think about traditional goal setting method, somebody might come in and they say, this is what I need to work on every day, but do they really understand the impact of the business? If you have the data that shows how the things they're working on impact specifically their business, you can then set those goals to not just do that thing, but to actually increase its ability to have an impact. And that goes, I'll give you an example. We just had our mid-year growth reviews, which is every employee gets to sit down with their manager and they talk about, we have a very specific set of criteria that we review on growth reviews. And these growth reviews aren't for the manager, they're for the person to learn if they're actually growing.

Well we've now utilized the past history of scoring that the team member gave themselves, the notes that they gave themselves and the notes the manager gave, as well as who this person is. So we have a profile on this person, who they're, what their strengths and weaknesses are, and we have the things the company's trying to accomplish. You can layer those data points in and with the help of AI and machine learning help see what would at best this person could actually work on to improve not just in their job but in the growth of their growth path in the company. So when you're able to see all those data points and give an employee that ability, you're giving them a strength that it's just hard to replicate. They can really see how they can have an impact on a company.

Then if you take that and combine it with the fact that we're using the data points from the outside coming in, such as what's a good real estate investment? Is it the right decision? How are we going to execute on it? What's the steps needed to execute on it? Then these people can align what they are doing every day with the target that we're trying to hit, which then align. So we're able to utilize data points from both sides and make the team better while at the same time finding better opportunities. And an individual data point, although does matter, it's the combination of all the data points that really matter.

Nancy Lashine:

So Chris, I have to ask you, have you and Jason used data to improve your partnership?

Jason Baxter:

The answer is yes. He probably doesn't see it the same way I do, but this is the way that we've used it. So all the data analysis that I just explained, several years ago, Chris and I started doing annual, well, we've been doing them forever, but we started to have a more specific type of annual retreat that just he and I do. We actually do it twice a year. But the annual retreat is the more in-depth one. And oftentimes when you have partners, Chris and I sometimes are working on two different things. It's all the same thing but our focus is at any moment rightfully so they should be. So to get aligned on things like the numbers, the projections, the future performance, what's the right next move, all that. Sometimes you can spend lots of times talking about that, but if you use the data to clearly show you what's happened in the past? What does that mean? What's the potential for the future and what's going to happen?

So what I started to do several years ago is use that data to make really, really clean understanding of the future, which then help us get aligned on what's possible and then how to use it. And then really instead of setting pie in the sky goals of saying we want to go buy a billion dollars worth of real estate, we actually had the data to back it up. And then exactly what it was going to take to do it. And exactly how many properties, the size of properties, the size of the team, how much money it was going to cost, how much money could you make. All that stuff became at our fingertips to be able to say what's real and what's not. So we're able to now set goals out three to five years that really are impacted.

Chris Powers:

I think I fall in the bucket of, hey, Jason, we need to go over here. This is where we're headed and here's what it's going to look like and this is why it's important. Jason's superpower is one, understanding that, but then synthesizing that back to like, that's all great but we have a job to do today and tomorrow and for the next five years until we get there. So I can just speak from myself. That was a great answer he gave and I probably would've said something similar other than those meetings prior to all that were a little bit, and I think partners listening to this, they're dreaming sessions with loosely held goals that seem achievable, but they're not backed up by a lot. The last three or four years of meetings, it's like, here's the data, this is it. There is no question. Here's where we're headed. And oh, by the way, to do that goal, these are the things that would have to happen based on who we are, how many people we have, what our budgets are, how much cash we have.

So for us, we still get to dream, but you get to dream with a little bit more reality baked into it than just this blank canvas every year of like, well, what's next year going to look like? And that might sound silly to some people, but I know a lot of business owners, even with great businesses that still show up to the year-end retreat and they're just ready to dream a little bit.

Nancy Lashine:

Well, you have to dream a little bit.

Jason Baxter:

You have to.

Nancy Lashine:

That's just a great setup. So share with us, if you will, what's the near-term goal and the longer-term goal for the business?

Chris Powers:

We'll split it up, but the long-term goal, I'll work backwards. Our mission at Fort is to become the best real estate operator in the world.

Nancy Lashine:

That's all?

Chris Powers:

That is the goal.

Nancy Lashine:

That's all?

Chris Powers:

That's it. And that's a lofty goal. But we know that a lot of great things come from operating really well. You see more deals. You can execute on them better. You can hire better. You can run teams better. I mean, the implications of that goal are massive. We think the industry, going back to deal junkies, and again, I'm using it not in a derogatory way, but I don't think a lot of people, especially at our stage are in it to operate. And in a world that we're heading into where money's going to be harder to find, interest rates are higher. So you can't punt a project any longer, two months and get away with it. Money's not free anymore. There's a ticker. You have to be able to operate. So that's the long-term goal. The short-term goal right now, the biggest thing I think we're focused on, we've talked about technology and that's an ongoing focus.

But I think as we are looking to raise, we've syndicated capital. We didn't really touch on it today, but we've syndicated capital for as long as I can remember. I mean, that's all we've ever done. One check at a time and we're looking to raise a substantial amount of money to continue to execute on the strategy before us, which is Class B industrial. But we don't think Class B industrial is ultimately where it ends for us. We'll have lots of opportunities to add new asset classes or jump within industrial and add other strategies within industrial, which is probably first and foremost. But our near term goal is to raise a boatload of money.

Nancy Lashine:

So I know when I started Park Madison Partners 16, 17 years ago, I would always look around to say, okay, well to be the best at what we want to do, who do we have to be like and then surpass? Do you guys think that way? And would you like to share with us who are the great real estate operators today?

Chris Powers:

I started my career focused on where other people were and then judging our business against it. So yeah, the fun part is I think Blackstone is a fascinating business. I've always been fascinated by them for lots of reasons, and I would say there's lots of things we do at Fort that are similar to what they do. I think growing up and becoming more comfortable, I'm more comfortable with Fort just being ourselves and keeping tunnel vision on. Because we look at the industry and look, it's the largest industry in the world. There's lots of players. There's just a lot of things that our industry does. It's like we've been doing for 50, 60 years. If you take too much from our industry, you can just become another company. We just have never thought of ourselves that way. So the answer is, I really love Blackstone from a real estate perspective. They're very interesting to me, but I'm also very comfortable building it our own way.

Nancy Lashine:

Jason, what would you say?

Jason Baxter:

The second part of what he was saying is really where my core belief lies is that we've always done things by taking what we're inspired by and we know that works. But looking at it through a fresh lens and saying, what company do we want to come to work to every day? How do we really build a place that attracts really talented people, inspires them and does all those things? We really believe in that. And because we've done that, we've been able to sort of whether you say, stumble on it or do things completely different than the industry norm, and we do feel like that has given us an advantage. So I never want to give up on that. So when we say we want to be the best real estate operator in the world, the way that I measure that, the way that we measure that internally is that we always have areas to improve on and we're constantly getting better.

If we're not improving on those areas, then we are obviously not becoming the best real estate operator in the world. And if you just keep your head down and focus on that constant improvement and growth, of course we're going to set lofty goals to try to move up the chain in terms of deal size and raising capital and those things. Every step of the way, you'll find yourself getting closer and closer to being the best real estate operator in the world. I truly believe that because we're smaller, we're more nimble, we have the ability to do things that even Blackstone can't do. And we know this because we've talked to people that have asked us specific questions from places like Blackstone and BlackRock that says, how are you all doing this piece? And we're always amazed it's like, why would they be asking us? And it's not because they're not capable or they're not smart enough and they have the resources.

But when you become that massive, you're a giant cruise ship and you know how long it takes to turn a cruise ship around, you can't. You got to go 10 miles out and turn for two days and then start heading back. We can turn on a dime. So if we decide to do something different with our data today, turn it into an actionable item, build it into a process and roll it out to the team, we can do that tomorrow. And because we can iterate at the same pace the technology is evolving with AI and machine learning and the things, and be at the size we're at with the infrastructure, the technology, the systems and the team. That we can operate the biggest companies and be super nimble. So we believe that that gives us an advantage.

I'm not saying this like we're the only people out there doing that. I think there's a lot of companies and a lot of industry that are primed to take advantage of where we are in this moment of history. To be able to be just the right size and nimble enough with the resources and the knowledge and the young team that just gets all this to be able to really take advantage of it and the competition will completely change. I think everybody's in for a, I wouldn't say a rude awakening, but everybody's in for an awakening in terms of how hard the competition is going to get across many different aspects of society because of what people have access to.

Nancy Lashine:

Yeah. That's such an interesting thought. Wow. I would love to keep going and deep dive into that and geek out on a lot of the things that you're saying, but we are towards the end, so I'd love to just do a rapid fire series of questions and you guys can just jump ball, if that's okay.

Chris Powers:

Okay.

Nancy Lashine:

Greatest influence in your life, Chris?

Chris Powers:

My dad.

Jason Baxter:

I would say greatest influence in my life now is probably Chris.

Nancy Lashine:

Okay.

Jason Baxter:

Got one up in there.

Chris Powers:

My gosh, my heart's pitter-pattering.

Nancy Lashine:

Favorite place to visit?

Jason Baxter:

Newport Beach, California. I go there a lot.

Chris Powers:

Mine's a recent one, to be honest with you. Well, I would say it's two places. It's Indian Wells, California, but really Vail, Colorado. Family's kind of made a, that's become a staple for us. I love it out there.

Nancy Lashine:

Yeah, it's awesome. All awesome places. If you could have dinner with anyone tomorrow night, dead or alive, who would it be?

Jason Baxter:

That's a good question. The dead part's hard because I would've to think for a while because there's probably a ton. What comes to mind immediately for me is it's really two people, but that's probably where I'm at right now in my mental state in terms of everything I'm researching and learning. But it's Peter Diamandis who started XPRIZE and a lot of other great things, or Aval Radacon, who's just, I think a brilliant mind and a brilliant thinker.

Chris Powers:

I'm going to go with a probably answer maybe you've gotten before, but if you look at my office I'm littered with these books. I'd go to dinner with Warren and Charlie. And I think that's even just the interesting dynamics between our partnership. I obviously I admire the people Jason said. I know Jason thinks highly of the people. But it also gives a little peek as to where his strengths are and just how we view the world a little bit. We also, while we see the world a lot the same, we're also able to look at things differently and compare notes.

Nancy Lashine:

What keeps you up at night?

Chris Powers:

A one-year-old. No. I think what keeps me up at night is Fort Capital. More from a positive perspective but it's just what are we capable of doing? We get asked all the time, have you ever almost lost the business or what would you... That's just never even been something we think about.

Nancy Lashine:

Yeah. So it's dreaming. You're dreaming, not worrying.

Chris Powers:

I'm never worrying at night.

Jason Baxter:

Yeah, my concern or I wouldn't even say it keeps me up because it doesn't, but it's the possibilities. It's not the concern side. It's like we have so much to do and so many opportunities. How do we get to it all? And I think we just have so many plans and so many things in progress that I wanted here today, and I'm more stressed about how do we get there soon.

Nancy Lashine:

Well, that's a great way to end our podcast. You guys have been amazing. So much fun. Thank you so much for doing this. Look forward to continuing our conversation.

Chris Powers:

Thank you so much, Nancy.

Jason Baxter:

Thank you, Nancy. Appreciate it.

Chris Powers:

Super pleasure.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show in making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So if you're enjoying the show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.