CHARLOTTE – Mecklenburg Times staffers talk to John Culbertson early and often because he has proven to be a great source on commercial real estate, a guy who knows the lay of the land, has his finger on the pulse – all the clichés come true.
On the Level could have talked to the 48-year-old owner of Cardinal Partners all day and not exhaust his knowledge about a wide range of topics. But we had a focus: his newly self-published book, a slender, 102-pager titled “Go for Broker.”
On its well-written, amusing and informative pages, Culbertson proves himself to be not only an expert on commercial real estate, but a kind of real estate Jedi knight. It’s a philosophical tome, a psychological profile of an industry, a critique of business as usual, sprinkled throughout with anecdotes, both professional and personal.
His mother is a retired psychologist who is writing a memoir, and his father is a life insurance salesman and estate planner; people, he says, who worked hard to make other people’s lives better and deaths better. (His father, Robert Culbertson, was also a moderate on the Charlotte-Mecklenburg Board of Education during the desegregation era. One of his sisters is N.C. Rep. Ruth Samuelson, one of the state’s highest profile politicians.)
As a kid, Culbertson writes in his introduction, he “had a knack for changing schools yearly, frustrating teachers and educational administrators alike as I blazed a trail of infamy through the public and private schools of Mecklenburg County.”
Worried about him, his mother made him take a whole battery of aptitude tests popular at the time, and he wound up with a long list of would-be careers, starting with bus driver, then litigator, photographer, broadcaster, marketing executive, florist, banker, lead singer for the Ramones, and finally real estate developer.
That struck a chord, and after some years as a ski bum, he settled down, married, started a family that now numbers three sons, and launched a career in commercial real estate, a 2000-2005 stint at industry giant Trammel Crow.
He and some friends at Crow decided to split off and form their own company, but Culbertson is the lone partner Cardinal Partners has. The other two people on his lean staff are managers who are paid a salary; he is the only broker.
He had only 45 minutes, but Culbertson succinctly broke down the founding principles of his book, which is a guide for hiring a broker that could easily be titled “Zen and the Art of Commercial Real Estate.”
He popped a few inscrutable koans on us as we tried hard to keep up.
An author, too, eh? And it’s really readable. Great title. What does it mean? “Go for Broker” is really just a play on words. It should probably be “A Better Way to Broker,” the title of the first chapter. It’s there in the subtitle, too: “An executive’s guide to hiring a broker for today’s complex real estate deals.” It’s a guide for hiring. I started to write the book using examples of deals I had done, what went well and what I would have done all over again as a representative of both landlords and tenants. I went to Harvard (University) for seminars on negotiation.
Negotiation of real estate deals, or just negotiation? Just negotiation, of all kinds. And I went three times. Some of my colleagues said I was turning into a junky. And I became a convert, and a guru. Negotiations, relationships, that’s what real estate boils down to. I started thinking about what it means to be a fiduciary, to be an agent. Then I started studying the concepts behind Freakonomics. And I came to the conclusion that the standard compensation for real estate brokers makes no sense.
That’s really the premise of the whole book. Tell us how brokerages are broken. If your editor were to come to me – what’s her name?
Sharon Roberts. If Sharon came to me and said, “I’m ready to sell our great little building and I want to move into leased office space,” I would name a price that would sell as soon as possible and encourage her to take the first offer; it’s to my advantage to do that because there is so little work involved. Let’s say we name a price of $1 million, and the first offer comes in at $950,000. If she waits and gets $1 million a year later, at 4 percent, that’s, what, $2,000 more for me, but that takes too much work for me when I could have gotten $38,000 with no work at all. When I go to find her office space. . .
You have no incentive to find her the best deal to meet her needs because you get a percentage of the lease, so the bigger the lease. . . Exactly. You’ve got it. It’s incentivized for me to not find her the best deal on either end. But I have a fiduciary (responsibility) to her to be her advocate. There’s no (financial) interest in me pointing these things out to her. There’s a problem, and the solution is that brokers should put their fees at risk.
Meaning? Set up goals for clients. At the end of the deal, if I don’t hit goals, there’s a mechanism for them to claw back the fee.
That doesn’t sound like the way most brokerages do it. That’s the way we do it, but there’re not that many that do it that way. The biggest (commercial real estate firms) do offer it to their best clients. When I was at Trammel Crow and we were handling a lot of the Bank of America’s many properties, there were reviews at the end of the year. If Crow did what it was supposed to do, part of the fee was retained, and if not, it was refunded. I would love for other brokerages to do that for all their clients – it’s a great way to do business.
So that’s what you meant when you wrote the line about not being afraid to leave some money on the table. What’s the incentive to do that? I have some great friends who are brokers, and I tell them that it seems to me that their jobs would be a lot more rewarding if they had some skin in the game.
Skin in the game? You know how fired-up Jerry McGuire – I hate to use this reference because that movie means so many different things to so many people – he would get when he had to work hard and get the best for his client even if it meant he not get paid. That just feels more holistic – I don’t know if that’s the word I’m looking for – more meaningful. Right now there’s a misalignment of interest. Instead of slamming deals, you do the right thing, and still get paid pretty well.
Slamming deals? Just doing deal after deal after deal. You don’t remember the people you showed the property to. It’s just about volume.
You’re talking about getting something intangible from your work. When you’re with your kids at a football game and a client comes up and tells your kids that you saved his butt – that’s worth something. It’s just a better way to do business for everybody.