Creating Your CRE Strategy | S3E2

In this second episode of this special season of the A.CRE Audio Series, we’re talking about how to create a strategy for deal-making and deal doing, the theme of season 3. Strategy is an important part of deal-making: before you can go out and identify deals, you need to have a strategy, a reason to pursue those deals. The strategy really is the foundation of all real estate.

As part of this episode, Spencer Burton, co-creator of A.CRE and our resident strategy expert is going to share two experiences from his career and the strategies and firms he worked with. This episode is the first this season where we really get into the meat of the content for season three. It’s been a ton of fun. We’re glad we can share our experience with you, our viewers. We hope that we can provide value to you, wherever you may be in your commercial real estate career.

Creating Your CRE Strategy

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Episode Transcript

Anouncer (00:01):

Welcome to the Adventures in CRE audio series. Join Michael Belasco and Spencer Burton as they pull back the curtain on everything commercial real estate and introduce you to some of the top minds in the industry. If you want to take your skills to the next level and be part of a growing community of CRE professionals across the world, this is for you.

Sam Carlson (00:24):

Alright, welcome back. This is Episode Two of Season Three, true to form, this is going to be more of a conversation. Okay, unlike other season, we are starting out with the topic. We’re talking about strategies, as far as how to make deals, you need a strategy, you need a good strategy. So we’re going to go over how to put that together, how to think about that a couple of case studies. And so, let’s get started.

Michael Belasco (00:48):

Yeah. Let me add one thing. This is going to be more focused on Spencer’s world. And so, it’s going to be more Sam and I interjecting and asking questions and …

Sam Carlson (01:01):

We will interview Spencer on your behalf.

Michael Belasco (01:03):


Sam Carlson (01:03):

Yeah. So, Spencer, give us an overview. You’re the deal makers of the strategist. That’s your role. Give us an overview. And then, I guess, launch into our first case studies, however we want to do this.

Spencer Burton (01:15):

Yeah, let’s do that.

Sam Carlson (01:16):


Spencer Burton (01:20):

This is part of deal making. Before you can go out and identify deals, there needs to be a strategy, a reason to pursue those deals. And it really is the foundation of all real estate, a strategy that works, a why for that strategy. And so, we’re going to talk today … I’m going to share two experiences from my career, two strategies that I imagined and the firms then that I worked with when I was a minority partner, and we pursued to various degrees of success. And this is an area just, frankly, I really enjoy.

Spencer Burton (02:01):

I love imagining strategies, that the entrepreneurial nature in me likes to think these up. And I think over my career, I’ve thought up many strategies and most wasn’t able to pursue either because I didn’t have the capital behind me or there were other things that took our attention. So I guess maybe I’ll start with a story or …

Sam Carlson (02:22):

Yeah, let’s look.

Spencer Burton (02:22):

… how do you want to do this?

Sam Carlson (02:24):

Yeah, let’s start with a case study because I think what’s interesting about the case studies that you are going to mention, they’re off the beaten path. These are not typical case studies. And part of whether you’re an entrepreneur, whether you’re in commercial real estate, you’re looking at deals, how to strategically place yourself into some better opportunities, you need unique approaches. And so, the one that you’ve got written down … Well, you’ve got two, is that right?

Spencer Burton (02:53):


Sam Carlson (02:54):

Let’s just launch it. So give us an overview. Tell us the … Yeah, go ahead, Michael.

Michael Belasco (02:57):

Sorry, before we dive into that, and this is unprompted, but before we actually have the strategy, this is a conversation about strategy. I’m curious, Spencer, and Sam, you as well, are these idea machines. There’s this ideation process. There’s a process of coming up with these ideas. I don’t know if there’s a framework or a methodology or if it’s more off the cuff. How do the initial ideas for strategies to pursue comm? And that’s a question to both of you because, Sam, you have a lot, and it’s outside of real estate, but you have a lot of ideas that are great.

Spencer Burton (03:32):

Well, this is the entrepreneurial mind. Everywhere you go, you identify needs and opportunities. And a great example is Sam and I were on vacation in Peru. This is real estate related. But in fact, he and I, one of our hobbies, and for those who don’t know, Sam and I have known each other since we were kids. And really, what we enjoy doing is imagining business ideas and many business ideas or real estate strategies. And so, we were on vacation in Peru. In fact, I think we are near Chiclayo, Peru, at the beach. And this would have been early 2000.

Spencer Burton (04:17):

And we’re walking on the beach and our wives were talking about something interesting. And so, we looked up away from the water and here’s this five-story presumably condo building. And we started talking like, what does it take to do a condo strategy? Do you remember this?

Sam Carlson (04:37):

I remember all of this exactly, by the way. As you’re saying this, I remember everything. Keep going, I’m sorry.

Spencer Burton (04:42):

Yeah. And look, for those who understand condo development in Latin America, this isn’t rocket science, but we didn’t understand it at the time. And so, it was just fascinating to us. And we start to think, okay, what does it cost to build this building? Who buys these units? What’s the profit involved in this? What are the barriers to entry? Ultimately, what we’re asking is, what’s the demand for this product and what’s the supply? And how do you make it happen? And I think we went on for days thinking about it. In fact, we almost wanted to. We’re like, well, it can’t be that expensive to build.

Sam Carlson (05:18):

Our wives were so annoyed, by the way. They’re like, “You guys are doing this again?”

Spencer Burton (05:24):

Yeah, we really did. We spent a lot of that vacation just talking about that silly, really, condo development strategy in Peru. And so, to answer your question, Michael, where does it come from? Part of it is a formal process where you think through where there are demand, supply, and balances, but more of it is organic. You identify needs and opportunities. And from there, come at a strategy that can ultimately be good.

Michael Belasco (05:54):

You guys come from it with an … It’s like there’s an open mind, a lot of people go into business or they try to, and there’s a pre agenda, maybe there’s something they want to do. And they try to figure it out and they try to make it fit. When I hear you guys talk, it’s like there’s no holds barred in your imagination. It’s like anything is an open door, anything is an opportunity. I’ve noticed that about you guys. Where a lot of people I talked, it’s like, well, I’m passionate about this and I’m trying to make something work with a strategy that fits that. Where with you guys, and a lot of other people, it’s like, let’s just stay open without any preconceived ideas or thoughts and look and identify that opportunity. I’ve noticed that a lot with you guys.

Spencer Burton (06:35):

What’s interesting about ideas is ideas are our two-edged sword. I think when I was younger, we would have a lot of ideas. And when you’re younger, ideas are exciting. They’re fun. The problem with ideas is too many of them are good. There’s not a shortage of good ideas. But the problem is the actual execution, everything that comes out of that to create a result. That’s what actually matters. And I don’t … I’ll make up a stat a little bit, but I think it’s relatively.

Spencer Burton (07:08):

Because you’ve heard that like 9 out of 10 businesses go out of business within the first five years or something crazy. Well, the biggest reason, I think it’s 42% of that 90% go out of business because of what? No market need. No market need. This is what entrepreneurs and people who are developing strategies. The problem is, is they come up with a strategy, this idea, and they get married to it really quickly. If you have an entrepreneurial mind and again, you’d love to think about those things, those ideas, that’s fun.

Spencer Burton (07:45):

As soon as that happens, if you’re a real entrepreneur, if you’re a real strategist, you have to then take that moment, flesh it out and say, is this good to me? Is this good to me? And then you got to flip it and you got to go find it. Okay, what was it good for? Who is the actual end user, end client? If it’s software, who’s the user of that? If it’s a commercial real estate, who’s the takeout? Who’s going to take it out the end? So you have to start with that person at the end and then reverse back to your idea. And by the time you get back to what your idea was, it’s changed. And that’s how you really flesh out a strategy that’s worth pursuing. Because if you don’t do that, you end up creating something that you’re in love with.

Sam Carlson (08:28):

Well, what’s interesting about what you’re saying is essentially, deal makers and deal doers must be part of the strategy creation. Because if simply, the deal maker develops strategies, no one’s thinking critically. Not that …

Spencer Burton (08:44):

Well …

Sam Carlson (08:45):

… as deal makers can’t think critically, but you need a dealer, a doer to come in and say, what’s wrong with your idea? Which is really what Michael is saying is like, how can you come up with ideas? Because every idea, there’s something wrong with it. Well, the first step is let’s ignore for a minute what could go wrong. And let’s think about what could go right. But then at some point, you need someone to come in and say, is there actually a market for this? Is there a need for this? What are the pitfalls? How would execution actually look and is that execution realistic? Although that’s part of the strategy development, but the first step, the ideation, I think, is the term that Michael used. It’s very much a making process.

Spencer Burton (09:25):

So … No, go ahead.

Michael Belasco (09:28):

So you come from this ideation phase, we flesh that out, and then the next step is you had mentioned, Sam, is to start this exploratory process and maybe this is now, Spencer, where we dive into the strategies that you wanted to talk about. I don’t know.

Sam Carlson (09:45):

Well, I think what’s funny is that one of … The case say that we were going to share today, did you do this on purpose? Did you pick the Peru thing on purpose because …

Spencer Burton (09:53):


Sam Carlson (09:54):

… it dovetails into your …

Spencer Burton (09:55):

It does dovetail with is …

Sam Carlson (09:56):

I was just like, oh my god, okay, well, this is really … Michael, you came up with that question and is a great question, by the way, because it really … I mean, businesses are like … They thrive when they’ve got a really good comprehensive execution end user in mind. But nobody starts out that way. People always start with what they are in love with, what their idea is. They’re so egocentric. But what was funny was, you said that Peru. I’m like, so let’s take it from Peru. We’re excited, because now that’s a fun story that I can get involved in. We’re excited in Peru. Why didn’t we … Because we didn’t ultimately end up pursuing Peru. What happened then?

Spencer Burton (10:37):

Well …

Sam Carlson (10:38):

Did you forget?

Spencer Burton (10:39):

Part of it is life happened.

Sam Carlson (10:41):

Yeah, yeah, it’s true.

Spencer Burton (10:42):

We got home from vacation, life happened. Is something else I’m missing?

Sam Carlson (10:48):

Well, so I think it comes into that due diligence phase that Michael is talking about. So we came back, we started looking at Peru as a country. We said, listen, there is stock in the investment idea. But part of that are outside influences like the country. The country wasn’t a great place …

Spencer Burton (11:10):

Yeah, that’s a good point.

Sam Carlson (11:10):

… for that type of outside investment. And so, you said, and this was … We’d never been here. This was how long ago, 10 years ago, 12?

Spencer Burton (11:20):

17 years ago.

Sam Carlson (11:22):

So fast.

Spencer Burton (11:22):

You’re getting old.

Sam Carlson (11:23):

I am getting old. But I remember this moment too. Spencer is like, “Oh, why don’t we look at Panama?”

Spencer Burton (11:30):

Well, that’s several years later. So that’s …

Sam Carlson (11:34):

Round number two.

Spencer Burton (11:35):

… maybe round number two. So fast forward, several years, and at the time, we had a residential land development strategy, which actually I want to talk about in a minute as another interesting one. Neither of these strategies are truly institutional strategies, which we could have all sorts of conversations about those. And those are the second half of maybe the last 10 years of my career, very much been institutional strategies, and I’m happy to talk about those. But these are just interesting. They’re fun.

Spencer Burton (12:07):

There are a lot of lessons learned because we didn’t know what we didn’t know. So fast forward several years, we had the residential land development business happening, and not to ruin the second strategy I’m going to talk about, so let’s just say that it stopped working, and Spencer Burton finds himself in a position where he didn’t really have anything going on. And I needed something for the sake, with the benefit of my wife and kids.

Spencer Burton (12:41):

And so, I went to the head of the company that I was working at and I was a minority partner in, and said to this individual, we’re really … Let me step back, I didn’t have any prospects going on. And we’d had this experience in Peru. From that experience, I knew that there was some pent up demand for housing in America.

Sam Carlson (13:01):

The idea was a good idea.

Spencer Burton (13:02):

The idea was an interesting idea. And I also lived in Latin America. And so, I knew that there was this phenomenon of an emerging working class, not middle class, working class, a formalized class, a class of people that was growing at an incredible clip. And really, what this class of people was, is when I say formalized, meaning they went from a position where they were earning a living wage, but they couldn’t verify that income. Maybe they were selling good on the street or they were doing side projects and then we’re paid in cash.

Spencer Burton (13:40):

And they went from that to working at a more traditional job, maybe as a bank teller, maybe in a construction role where they were earning … First off, they were being paid to a bank account rather than in cash. And they were earning the equivalent of a W-2, or they’re earning income that was verified in a W-2. And what happens when you have verified income? You can borrow against it. That means you can borrow and you can buy a car and you can buy a house on credit.

Spencer Burton (14:08):

And so, I’ve seen this phenomenon happening. And we’ve had that experience in Peru, and I was now in this moment in my life where I needed something to happen. And so, I said, I wonder if there are countries in Latin America that are maybe a bit more investable than Peru was at the time where we could build housing for this emerging, formalizing class. And so, I began looking around Latin America. And Panama was a very interesting option. The expansion of the canal had just been approved.

Spencer Burton (14:43):

And so, there was this huge influx of public, private capital into the country, this investment. And it was generating all these new jobs. They projected a time 30,000 new jobs. And so, there was this interesting demand, supply, and balance that I believed existed. And then there was a due diligence process that followed that. Several trips to Panama, one of which Sam went with me on. In fact, our very first one, Sam went with me on. And literally, we arrived at the airport in Panama, Tocumen Airport. I don’t know if you remember this, we didn’t have a hotel booked. And we literally went out to the street. And that was how we did Latin America when we were younger.

Sam Carlson (15:29):

I don’t remember.

Spencer Burton (15:29):

Literally went out in the street, hailed a taxi and said, “Hey, where’s a good hotel?” And they took us to the … It’s out on the causeway. What was that hotel?

Sam Carlson (15:39):

It was on a causeway?

Spencer Burton (15:40):

Yeah, it was on the causeway. Anyway, this neither here nor there. We spent a week and we really affirmed that there was demand.

Sam Carlson (15:48):

Yeah, we were …

Spencer Burton (15:48):

There was real demand, and there was there was a lack of supply. There’s an opportunity there.

Sam Carlson (15:52):

Yeah, we were driving out to all of these projects, these subdivisions. When you think of a subdivision here in the United States, like I live in Boise, Idaho. I know what a subdivision looks like, a suburban subdivision. And this was not that, but it was actually really quite progressive. And they had a housing deficit at the time. So we were going down to verify some of the data like the housing deficit. Did we meet on that trip with the administration?

Spencer Burton (16:20):

Yeah. Someone from the housing ministry in Panama, and had been pulled at the time there’s a housing deficit of 150,000 units.

Sam Carlson (16:30):

That’s right.

Michael Belasco (16:30):


Sam Carlson (16:31):

Yeah, that’s right.

Spencer Burton (16:31):

In a country of three-and-a-half million people, that is an incredible housing deficit. On top of that, they use the US dollar in Panama. They have a loan program that’s very similar to say our FHA program. It’s for those who are just getting started in their life and getting a home, and anyway. The due diligence that we glean from that that first week was really valuable. And ultimately, we concluded, and this is the first piece of developing a strategy, you have to identify an opportunity where there is a demand, supply, and balance. And we found that there.

Sam Carlson (17:09):

Yeah. You guys have done that today. That one was pretty obvious. Now, I will say … So at that time, that was 2000 and what? 2009?

Spencer Burton (17:17):

That would have been 2006, 2007.

Sam Carlson (17:20):

I’m great on years. But that was interesting because when that actually came into effect, when we actually pulled the trigger on that, that was at a moment where the strategies, and you alluded to this, maybe if you want to jump into the other case study, the strategies that we had been pursuing in the United States had really gone by the wayside. Because, I mean, the 2008 crisis hit, liquidity, everything. I mean, you’re in a recession. And now when you’re in a recession opportunities and strategies now are harder to come by. And so, what do you do? Well, you identify an imbalance in supply and demand in a foreign country. And you persist that way, Michael?

Michael Belasco (18:10):

Yeah. So, okay, you guys are at the point now. You’ve identified a supply, demand, and balance. So what? Alright, okay, you’ve identified it. Who are you guys? Anybody could identify. In fact, the …

Michael Belasco (18:29):

… head of the country. What’s that?

Sam Carlson (18:30):

Well, you know.

Michael Belasco (18:30):

Well, think about, the head of the country, everybody knows there’s a supply, demand, and balance here. How then, from the maker side, do you say, well, we see this, and you know what, we’re actually the people that do it. We can translate. How do you get from identifying the need to then trying to make this a reality for you or your team or your company?

Spencer Burton (18:51):

Well, so that’s the next lesson. So the first lesson is, okay, identify demand, supply, and balance. The second is identify your competitive advantage with that strategy. Why you? And why not someone else? The simplest answer is, why me, why not me. If not me, then who? That sort of thing. But especially in more competitive strategies, institutional strategies, if you’re going to go out and buy … You’re going to go out and do a value add apartment strategy. You know what, it’s you and a million other people. So why you?

Spencer Burton (19:29):

If you’re going to develop apartment projects, why you and not the other million apartment developers? And I’m not suggesting that you always have to do a niche in which you are an expert in. Oftentimes, there are demand, supply, and balances in even the most common strategies, but there should be some reason, and this is a reason you pitch to investors, you pitch to lenders, you pitch to yourself to give yourself confidence when things are bad. There’s a reason for why you are the right fit.

Spencer Burton (19:57):

Now, if we think about this single family home, developing single family housing projects in Panama for this emerging formalizing class, why us? To be honest, we didn’t think that and that’s lesson learned.

Sam Carlson (20:15):

We were young.

Spencer Burton (20:16):

In fact, there was this moment during our due diligence. And at this point, we brought in our doers. We had a partner in the States, who he was an expert in entitlement expert. He came down and he was helping us identify, think about entitlement in a way that we weren’t thinking about. And we had this meeting with this gentleman who had done this very thing that we were thinking we wanted to do. And we’re sitting around, I remember this day, we’re sitting around a conference table about this size, and it was me and this entitlement partner, and this gentleman.

Spencer Burton (20:52):

And then there was a woman who was a real estate agent who was helping us in our due diligence process, and she spoke fluent English. We speak fluent Spanish, too, but she was someone who had lived in Canada and is a great partner. We love working with her. And so, we’re talking to a gentleman. And at one point in the conversation, he’s like, “Go home. Who are you to come to my country and develop these projects …

Sam Carlson (21:22):


Spencer Burton (21:22):

… that I struggle with every day to develop?” I mean, essentially, he said, “Go home. Go back to your country, you don’t know what you’re doing.” Now we’re entrepreneurs and in the face of that, we still proceeded and we were successful, ultimately, at this. We weren’t as successful we’d like, and I’ll talk about some of these. When I say competitive end, now we didn’t know how to develop housing projects in Panama. And as a result, it took us twice as long to do our projects there than we had anticipated. And we thought that a lot of that is because we were new.

Spencer Burton (21:57):

At the same time, because we were outside the box, we didn’t think like that gentleman at the table, we brought things to the market to actually change the market. There were certain things that we did in our projects that prior to us never happened. And I’d like to think, in part, because of us, became just the norm in the industry. And that’s because we came in, we thought outside the box. And so, actually, our competitive advantage, because people were asking that like, why you? It’s because we bring a perspective that’s different. And we think that different perspective will add value to the market, and therefore give us a competitive advantage.

Sam Carlson (22:34):

Yeah. And I was just going to say, I mean, you go back to everybody who says you can’t do something, just because they think they can’t do it, they want to tell you that you can’t do it. There’s enough people out there that will tell you that your ideas are bad and things like that. Well, I talked about that concept of you have an idea, go to the audience, you find out if it’s a good idea. If you go through that initial process and you do your own due diligence, have enough faith in yourself to be able to push people like that aside. Because some people will hear that and be like, oh, well, what does he know that we don’t know?

Michael Belasco (23:08):

Scare you right out.

Sam Carlson (23:09):

And that’s ridiculous, that’s ridiculous. There’s just people what want to tell you that they can’t do stuff because they can’t. There’s plenty of people who are not able to do things. And it’s mostly not because it’s not possible, because it’s not conceivable for them. They don’t have … I was just chatting recently with a friend. And I was saying, sometimes being entrepreneur is like you got to be able to take a step into the dark. And the scariest part is lifting your foot. Because it’s like, once it’s up, I’m committed and I’m going.

Sam Carlson (23:44):

And at some point in time, you have this idea, you bite on to it and you’re like, hey, this is good enough to run with. As soon as you are really committed to it, then all of the things that you need to make it work will start to fall into place. I will say that a competitive advantage, the reason that that is so important is because if you rush into a space and the idea is so good, that there’s so many people doing it. Okay, well, you got number one right, you got a good idea. Because everybody else has the same idea.

Sam Carlson (24:16):

But finding a competitive advantage, put you instead of in red bloody waters, put you a nice clean blue water. And that’s where you want to be. You want to be at a place where people go, wow, I mean, this is similar, but that’s kind of … I can only get what I want from those people. And so, I think a lot of times, and by the way, when you’re talking about competitive advantages, you think, well, how do you come up with that? That’s the same process of coming up with ideas.

Sam Carlson (24:48):

You talk to who’s going to be the end user, who’s going to be the end client, and you say, what are the things that you hate most about X, Y, Z. And let them tell you, and then you figure it out. And then all of that, that’s a feedback loop. So you go in, you get information, you say, well, what can we do to potentially fix that problem? Can we? Well, yeah, what about this? And the cool thing about … I mean, we’re here, the three of us, and we have all these really fun and cool ideas like, where’s Adventures in CRE going? Oh, we’re going to do a cruise. We’re doing a cruise, really?

Sam Carlson (25:19):

Yeah, well see a cruise, that’s going to be amazing. But these are the kind of things that as you develop a strategy, bring it to life, and ultimately what lead to the success. So what were you going to say, Michael? It seemed …

Michael Belasco (25:34):

I don’t …

Sam Carlson (25:34):

I think you had something and then I just can’t talk.

Michael Belasco (25:37):

It’s all good.

Sam Carlson (25:39):

… which is kind of my way. Okay, so we got one, the idea, two, the unique advantage.

Michael Belasco (25:42):

Yeah, sorry.

Spencer Burton (25:44):

No, go ahead, Michael.

Michael Belasco (25:45):

So you talked about lifting your foot, finally lifting your foot, you talked about this guy telling you guys to go home. And then you had mentioned this brief hesitation about, well, and I wish you would have done things a lot differently or something to that effect.

Spencer Burton (26:01):

There’s always that, right?

Michael Belasco (26:02):

There’s always a story where it’s like, I can’t believe how stupid I was when I look back. So how do you, and maybe that’s not the right word, per se, but there’s always this stepping … You’re stepping into the dark, this moment in time where you just have to take a leap. But I guess the piece before doing that is getting as smart as possible. It’s not taking a leap of faith because you’re passionate about something, it’s taking a leap of faith because all the data you’ve collected, everything you can understand about how this goes from beginning to end, or as you said, from end to beginning, is in place.

Michael Belasco (26:37):

So it’s not simply like, you know what, I hate my job. I’m out here, I’m going for this thing, and I’m just doing it. There is a clear delineation between that which a lot of people do. They just say, hey, I’m going to go and I’m going to do this because I don’t like my job or whatever it is. There’s a process in place by what you do step into the dark, but hopefully with a strong powered flashlight, and maybe a map.

Sam Carlson (27:00):

Stronger than a flashlight, yeah.

Michael Belasco (27:00):

Maybe a map. That’s like, okay. I think this is the right way.

Spencer Burton (27:03):

Yeah. So first off, this process. When we think of entrepreneurs, we generally think of people that are in business for themselves. What’s great about real estate is that almost all of us are entrepreneurs, whether we’re working at the largest development shop in the world or we’re working on our own. This process happens across that spectrum. And so, if you’re listening to this and you’re working at major real estate, private equity firm, and you intend to say that your entire life, there’s still value in this concept.

Spencer Burton (27:42):

At some point, you’re going to develop an idea or you’re going to pursue a deal. And you’ve got to step into the dark a little bit, you got to take a little bit of a chance that that strategy or that deal may or may not happen. And it’s scary, and it’s hard. And there’s only so much margin for error, let’s be honest. You can only have so many deals or strategies go wrong in your career that it really holds you back. That’s my first comment. Now, the second to Michael’s point about get excited about an idea, but then you need to do some research about it.

Spencer Burton (28:21):

I think what matters most is that you’re going in eyes wide open. You never will know everything that you need to know, even the most thorough of due diligence, whether it’s a new strategy or a deal. You’ll never know everything. And so, you have a process, you secure your process, you do your due diligence the way it should be, you understand as much as you possibly can understand. Hopefully, you have some experience in that space, and therefore you’re bringing with you that experience. And in the case of this single family housing project, we did our due diligence.

Spencer Burton (28:55):

We set months of due diligence. And the reason why I laughed though is we knew it was going to be difficult. We went in eyes wide open, and that’s why we’re able to ultimately get it done, but it was hard. And would I do it over again? Sure, absolutely.

Sam Carlson (29:18):

Yeah, that’s when you know the most.

Spencer Burton (29:20):

That’s when you know the most. That’s for sure. But it’s one of those where you have to be willing to accept that things won’t always go right. It’s not going to be perfect, but hopefully you have identified a supply, demand, and balance. Hopefully you have that competitive advantage to bring this strategy to a successful conclusion.

Sam Carlson (29:46):

As you were talking about the folks that might be listening to this and we’ve got people that are in corporate America that are happy to be that, I would say that entrepreneurial thinking is the foundation of success, not just for entrepreneurs, but people in corporate America. What does that mean? An entrepreneurial mind. It means that you see problems as games. Problems when solved, create a new outcome. And the outcome, that process is an exchange. And that means value is created.

Sam Carlson (30:25):

If you can create more value than the next person, what does that mean for your career? It means everything. I mean, there’s reasons. There’s different levels within a corporation. Where do you want to be? Maybe you do want to be just mid-tier and that’s where you want to be and that’s totally fine. But what if you want to ascend to the highest ranks of corporation? How do you do it? Well, fundamentally, it’s going to come down to how you think. Are you a … Following orders is good. If you follow the directive of management, things along those lines, it’s great.

Sam Carlson (31:01):

But man, between … I mean, we have people that work for us at a CRE. I’ve hired people in the past. I love it when they bring solutions. And the value, their stock goes up in my mind immediately. And when that becomes like a habit and that’s like part of their DNA that … They’re there not to outshine me, but to provide more value. It’s like, who’s going to jump to the forefront of my mind when it’s time for a raise or time for whatever it is, or it’s time for you bring me a strategy? Well, what do I think about that strategy before you open your mouth?

Sam Carlson (31:41):

What do I think about you? That’s like your idea. You might have an amazing idea. But because of your position in your company, what you’ve done, it might just go into the trash can because you’ve sat back passively for this long, and maybe you’ve just been too timid to come up with it. But I’m telling you, the entrepreneurial mindset, whether you’re an entrepreneur or not, has so much merit in corporate America. Those are the people who ascend, ascend the ranks. You have an entrepreneurial mindset, Michael, you do too.

Sam Carlson (32:14):

Obviously, we have this website that started out as this fun way to share and teach and do all that kind of stuff. But now we find ourselves with an audience of folks that were sitting here giving them content today. And we’re doing it not because we expect anything, but because we see their needs and we’re trying to provide value. And that’s the only driver that we have. Okay, so is that a strategy? Are we doing a strategy right now? I mean, maybe we are. We don’t think of it in those terms.

Spencer Burton (32:45):

No. We definitely don’t think of it in those terms. And real estate strategies are a bit different because there is a … A downside of real estate is just … It takes a lot of capital to do a deal. And this is actually my third point, as it comes to idea creation. Sorry to get away from the point, but I think it will come back to it. So you identified demand, supply, and balance, you identify what your core competency is, then you have to ask yourself, can I secure the capital to pursue and execute the strategy?

Spencer Burton (33:20):

Or put it another way, is there a demand in the capital markets for this strategy? And when I look at … So this first concept, the strategy housing in Panama that we talked about, there wasn’t a lot of demand. And part of that was because of we were foreigners doing a strategy in a country that we didn’t know that well. And so, there wasn’t a lot of demand for us at executing the strategy. But just generally speaking, there’s less demand from capital for emerging markets than there is for established markets. And so, that was a challenge for us, was the entire time.

Spencer Burton (34:02):

I think I’ve mentioned this before, as I look back and say, if I were to do this over again, I would put more focus on securing capital when we need it. Into the subsequent episodes, I hope we talked about cash management, and treasury in that role.

Michael Belasco (34:20):

We’re going to get into that one.

Spencer Burton (34:20):

Because I have some horror stories in that. I mean, ultimately, we got through them. So the third piece of the strategy is, can I secure capital to make this happen? Let me share another strategy if I could.

Michael Belasco (34:33):

Please, yeah.

Spencer Burton (34:34):

While we’re in this storytelling mode. So the very first strategy that I came up with, I was at the time a land broker. So I was bird dogging, for lack of a better term, land opportunities for residential land development clients. And those clients, I would identify land opportunities for them. They would then purchase that land, take the land through an entitlement process, such that at the end, that land could be subdivided into a certain number of lots.

Spencer Burton (35:09):

And then that client would go through the process of actually constructing lots, so laying the roads, laying the underground, sewer, water, electrical, and so forth, putting in the common areas, the entranceway, make it beautiful, these ready to build lots. And then they would sell the lots to one or more builders. And that was the strategy that my clients had. And I was quite successful at it. And it was very fulfilling, but I, from the get go, had aspirations of moving to the principal side of the business.

Spencer Burton (35:45):

I think many of our listeners who are in more of a fiduciary role have that ambition, not everyone. And it’s, by the way, quite lucrative to be on the fiduciary side or the brokerage side as it relates to deal-making. But I had this ambition to get to the principal side. And so, I had one of my clients had a great relationship with, I’d identified several deals for them, known them for a while. And so, I went to them and actually, it came about because there was a land deal that I’d identified, a bird dog. In fact, I had this strategy where I’d send letters out, handwritten letters.

Spencer Burton (36:24):

And then I learned … And this is back when technology wasn’t so great, I’d write one handwritten letter with a sharpie. And then I’d photocopy it dating myself of it, but I photocopy, and it actually looks still like it was handwritten. And so, every day, I’d send out letters to land owners, to farmers, mainly. And I would spot parts of the markets that I was in. I’d send letters, and I’d go to the title company. I’d get addresses and I’d send letters to owners, anyway. So I’d sent letters to this one area and this particular owner called me, and he was interested.

Spencer Burton (37:07):

And so, I’m not exactly sure the progression of the strategy. But ultimately, I took it to this particular client and I pitched this idea, and I wanted to be a partner in this particular deal. And this ultimately led to me leaving the broker side all together and moving to the principal side, but this was the idea of pitch. I said, okay, it’s so hard to find bare land right now, very, very difficult. And if you look at the process of land development like you do, great, great, great majority of the capital that you expend in this process is in the actual construction piece.

Spencer Burton (37:48):

We call it horizontal development, in the horizontal development part. But if you look at the value add, most of the value actually is added from the moment that you tie up the land until you have the approvals in place to then do that building. And I said, there is excess capital pursuing land development strategies, and you have all these builders that want to buy lots. How about with this particular deal, we just simply get it entitled?

Spencer Burton (38:15):

Meaning we get it approved to build, and then we sell it to one of the many of these other clients that I have one of the many other developers that would love to build the lots and sell them to builders. And so, ultimately, by the way, that particular property didn’t work out. It was a slippery seller, and he wasn’t sure if he wanted to resell. And that’s actually always a problem with farmers. But that strategy led to then a role with this firm, and my job was really to go out and find these deals. And I did.

Spencer Burton (38:49):

So I found and I can get into the story, our first deal, we call it Peachtree, and Sam is aware of Peachtree at the time. But it was a peach orchard and it was a peach orchard though that was unproductive. It was in rocky soil. And the owner had said, “Well, I just can’t make money on this peach orchard.” And so, he put it on the market, but he put it on the market as ag land rather than residential development land. And so, it was off of everyone’s radar. And I noticed and I thought, well, we could get that entitled.

Spencer Burton (39:26):

And this partner in the firm, the same one, by the way, that sat around the table, I went to him, I said, “What do you think about this? Do you think we can get it approved?” He’s like, “Yeah, we could get it approved. We have to get this conditional use permit, but I think we can get the conditional use permit. We just have to prove that it’s an unproductive agricultural land.” And so, my point being though that from this, a strategy developed, strategy is called paper lots. You sell paper lots, you buy unentitled land. You tie up, I’m sorry, unentitled land.

Spencer Burton (39:56):

You get the entitlements in place. You make the contract subject to approval of entitlements. And in the meantime, you go out, you secure a buyer who is willing to buy the land once it’s entitled, and you go through the entitlement process. You might spend a couple $100,000. And that money is really at risk. Because if you don’t get approval, you’re out the couple $100,000. But you don’t actually close in the land. And then …

Sam Carlson (40:24):

You sandwich it, yeah.

Spencer Burton (40:25):

You sandwich it and add approval, you assign the contract over to the developer who wants it. And we were quite successful at that for a while. Now, the reason I bring this one up in the context of capital pursuing a strategy, is there was outside capital for a moment in time. It was very much, and I was young at the time and didn’t understand the capital markets to the extent that I do today. And that strategy worked very, very, very well for a short time period.

Sam Carlson (40:52):

Until it didn’t.

Spencer Burton (40:53):

Until it didn’t, yeah. Until essentially liquidity dried up 2008 or that time period came along. I think, it was 2007 when it really stopped working. So we went, I think, a good 18 months, 24 months where that strategy was quite successful. I’m very, very lucrative where you take a $300,000 investment, and you make $3 million off of it in an 18-month period, very lucrative. The challenge was, all of a sudden, liquidity dried up. And when I say liquidity, meaning there was demand for that product, and therefore there was capital to buy it.

Spencer Burton (41:27):

And all of a sudden, that capital went away, and there was no one there for that wanted to buy it. And we had three or four deals that were in the process, that all of a sudden, we realized, there’s no one to buy this at the end, whether we get it approved or not, and the strategy stuff.

Sam Carlson (41:43):

I wonder if, and maybe you have this, should we add a step four to this process, which would be identifying potential outside threats? Because one of the things … You don’t want to have … When 2008, for example, the market in the marketplace, the actual economics shifted rapidly, that’s a black swan event. That’s not normal. But let’s talk just … I mean, how do you look at threats when looking …

Spencer Burton (42:16):

Well, I think …

Sam Carlson (42:16):

… at a strategy?

Spencer Burton (42:17):

I think what you’re saying … So, by the way, these three points, demand, supply, and balance, competitive advantage and …

Sam Carlson (42:24):


Spencer Burton (42:25):

… the ability to secure some capital for your strategy. Those, to me, are the keys to a successful strategy. What you’re talking about very much is the doer side. It’s what could go wrong? That happens during due diligence, that comes from experience. Michael, your thoughts? You, in your role, have done due diligence on strategies. How do you identify the pitfalls of these strategies?

Michael Belasco (42:55):

Yeah, I guess it depends on a lot.

Sam Carlson (42:58):

It does depend on a lot.

Michael Belasco (42:59):

I mean, it’s a very open-ended question. I think there’s …

Spencer Burton (43:02):

It sounds like a lot …

Michael Belasco (43:03):

Yeah, go ahead. I was going to say it’s a lot. To me, I actually categorize this as part of the maker process as well where you’re identifying strategy and you’re looking … If you’re talking about a strategy at this point in the process and you’re not refined and you’re not executing, to me, it’s a macro. I mean, you’ve identified like, when you look at your strategy, you go from macro to micro. You talk about capital markets. What are the threats to capital markets? What are the threats to liquidity? Even at that point, when you’re talking about 2008, 2009, there were very few people that could have predicted that. So black swan events are always something that’s …

Sam Carlson (43:44):

That’s true.

Michael Belasco (43:44):

… incredibly hard to predict.

Sam Carlson (43:47):

So …

Michael Belasco (43:47):

But threats, competition, who out there could do it better than you if there’s not … Adequately analyzing the supply, demand, like that and miscalculating that is a big risk. There’s a ton of risks. It’s very ambiguous to me at this point when …

Sam Carlson (44:03):

It does seem it might. I think in the context of this scenario, I’m thinking maybe more macro. Because you talk about capital markets. I’m assuming that means that you have a clear line of communication with the institution or whoever is providing the funding. And in that case, they like the strategy and they buy into the future of that strategy, understanding the macroeconomics involved and potential future. Black Swan events are probably a little bit of a wrench to throw in the conversation.

Sam Carlson (44:45):

But the conversation with the capital partners is that where a lot of … I mean, in a sense, you are mitigating their risk by bringing two together a new strategy, in a sense. Because they want the least amount of risk as possible. That’s their goal, is to put their capital at risk. So when you talk to your capital partners, is that where we’re coming up with some of these unique advantages and hedging our bets a little bit, I guess you could say.

Spencer Burton (45:15):

So when we say capital markets, what we’re saying is imagine a flea market, for lack of a better ad. No, that’s the wrong term. Imagine a marketplace …

Sam Carlson (45:25):

An exchange.

Spencer Burton (45:26):

… an exchange, and a certain number of buyers will arrive and a certain number of sellers will arrive at the market. And if there are, in the case of capital, fewer providers of capital than there are those who need capital, you’re going to have a challenge in raising capital. And so, in the context of, say, the paper lots, I mean, it’s slightly different because we’re really talking about now a cell and that’s a whole different thing. But I think when we talk about capital markets, it’s like, how much equity is there out there that you could turn to for your strategy? How much debt is there? And is there ample equity and debt to satisfy the needs of your strategy?

Sam Carlson (46:13):

And if there’s not?

Spencer Burton (46:15):

The strategy won’t be successful.

Sam Carlson (46:16):

Okay. I think that’s what I was going towards, is trying to look at that particular strategy. And in that case, there was ample equity for that strategy at the time.

Spencer Burton (46:27):

Yeah, until there wasn’t. But maybe the point is, what happens in a downside scenario? It might not be a black swan event, there might be some issue that comes up that’s more micro or uniquely suited to … Like maybe there’s a key man or somebody in the process that everybody depended on that something happens too. What happens in those scenarios? How do you manage? Again, those are, I guess, I would call that a black swan event in any way.

Spencer Burton (46:54):

But what happens in the dark times is the question to be and probably a lesson learned for hearing both of your stories in your early careers is something to always be cognizant of, so that when those times come, you’re well prepared to navigate through that. And sometimes it’s impossible. When you’re talking about risk reward, there’s capital that’s not always looking for security. There’s capital that’s looking for return. And maybe they’re diversified and they are looking for security elsewhere. But risk-reward is always a metric to be thinking through.

Sam Carlson (47:27):

So I think that when you come up with a strategy, there’s this initial strategy phase. And you come up with the idea, you flesh it out, you start working at it. But I think a real strategy evolves and it evolves over time because you don’t know what you don’t know, you know what I mean? And it doesn’t necessarily … Sometimes that means that your strategy will improve, will be better. And sometimes it means that it will be more conservative, it won’t be quite … Doesn’t necessarily mean it will be bad.

Sam Carlson (48:04):

But it does mean that I think this successful … For a strategy to be successful, is you have to be adaptable and continually. I think it’s Gary Vaynerchuk that says, you have to be in the clouds and in the dirt, clouds and the dirt. And coming up with a strategy and going down to Panama, that’s a very like clouds, there’s the idea, dirt, going and talking to the director of the ministry of housing, and going out and looking at property, talking to people in the area, identifying whatever it is, and just really fleshing it out. But it’s not a strategy if you haven’t taken it to both places. It always starts up in the clouds in your mind as an idea, but then you got to get down in the dirt and see if it actually has merit.

Michael Belasco (48:56):

I keep going back to this end-user concept because I think it’s a really good one. And you look back at those who are successful and they’re able to pivot when things are changing. You go back to the concept of like Netflix, and you think that like the Netflix. They had like three or four business models when they started their DVDs. It was the same medium though, it was entertainment, it was movies, it was TV, it was all these things. They’ve adapted, they’ve taken their core platform, which I would identify as really just entertainment content.

Michael Belasco (49:27):

And we’re able to pivot in an ever-changing environment. So that’s probably a takeaway here where real estate, even when you’re thinking about a strategy that you have, you’re building competencies and other areas and head in the clouds, you’re going gung-ho on one piece. You should be probably thinking about what other opportunities that are compatible to which you can navigate to for increasing opportunities, security, however you want to think about it.

Spencer Burton (49:54):

Well, I think what we’re really saying is, so we’ve identified three points that we’ve is key to a successful strategy. You can’t be complacent and ignore those three points perpetually. So you have to come back every six months year and say, does this strategy still work in its current form as relates to these three points? And if it doesn’t, how do we pivot? How do we adjust so that this can continue? And it may be small things, maybe big things, maybe abandoning the strategy altogether. And that annual or semiannual planning is key to the long-term viability of a strategy.

Sam Carlson (50:34):

I want to share something just as maybe concluding this particular podcast. This is a lot of fun, actually, because this involves whether you’re … Any business person. And I think when you’re an entrepreneur or when you’re creating a strategy that you’re spearheading, that can be a lonely feat. And at the end of the day, everything rests on your shoulders success or failure. And of course, you want it to be a success because then you claim the glory.

Sam Carlson (51:05):

But the reality is, is to achieve success, I have found that other people, the people that you talk with, that’s how you really get it. And so, I think one of it is knowing who to ask and then positioning yourself in these relationships and these networks to where, A, you can get information, B, you can get connections, and C, you can get insight. Because it’s fun to learn on your own. But sometimes, it’s better to learn from somebody else. I mean, you’re listening to this podcast, maybe you’re coming up with a strategy right now and you’ve heard one thing we’re like, hmm, maybe I need to go back and actually talk to the end-user of what I’m creating.

Sam Carlson (51:54):

Is this an idea that I love? Because I can’t buy all of the investment. I mean, I can’t be a consumer. I won’t make any money. And so, I would just say, imparting as a summary for me, and I’ll get you guys’ take here in just a second, is reach out to other people, grow your network. I mean, a plug for our cruise, that’s the whole point of our cruise, is that we want to connect people with other people, real estate, getting deals done, creating the right strategies, creating strategies that maybe start out as like a B plus student turned into an A plus student, could come because you have the right brain that connects with yours. And so, I think going it alone and being the smartest guy in the room is the worst idea possible.

Michael Belasco (52:46):

Hard thing to learn for a lot of entrepreneurs.

Sam Carlson (52:48):

It is. At the beginning of career, you always want to be the smartest guy in the room. And the second, you’re like, hey, well, I’m the smartest guy in the room, you need to change rooms, you need to figure it out. You need to get into a place to where you can glean information from other people, you can help them too. But I just think the power of your network, the power of the people, the relationships, your ability to communicate are going to make your ideas evolve into something you embrace. So I’ll turn it over to you guys to give your summaries on this.

Spencer Burton (53:15):

Yeah. Look, my summary is … This is my favorite part of real estate, ideation. It’s just fun. And it’s so incredibly fulfilling when you help develop an idea. And I say help like it’s not all on you, just to your point, Sam. Ultimately, there’s a team that puts these ideas together, and then execute the ideas and so incredibly fulfilling. It’s fun to put the ideas together and then incredibly fulfilling to see the ideas come to fruition and provide value to others. So that’s my parting.

Michael Belasco (53:50):

Yeah, we’re going to end on this because we did this concept of team. There’s a lot of things to say here, but it’s hard when you’re starting out to figure out, and we’ve just talked about this morning. I’m actually glad we came to this piece. It is incredibly important to develop good relationships and have a team with you, or at least a couple people that are strategizing collectively because you will always learn more, you’ll always be able to bounce things back. And there’s always a new perspective. So we didn’t talk about that in the concept. I think we’ve hit the framework. I want to add that that network in team is incredibly important.

Sam Carlson (54:31):

I got to say, I love the framework that we’re doing now where it’s more dialogue. Certainly, I personally have learned more about the strategy side of things. I think anybody who’s listening to this has learned the same. But it’s, for me, just the marrying up the situations and the nuances of events with information makes them sink in a little bit better. So for me, I love this. This is the first like real episode where we get into the meat and potatoes of content for season three. So I think this has been a ton of fun. So to you, the viewer or the listener, thanks for watching or listening. And so, we’ll see you on the next episode.

Announcer (55:14):

Thanks for tuning into this episode of the Adventures in CRE audio series. For show notes and additional resources, head over to www.adventuresincre.com/audioseries. Would you like to learn real estate financial modeling in a matter of weeks and do it with zero guesswork? If so, the A CRE accelerator is for you. The accelerator is a step-by-step case-based program designed to teach you exactly what you need to know and in the order you need to know it, so you can gain both the knowledge and experience to take your career to the next level. To see if the accelerator is right for you, go to www.adventuresincre.com/accelerator.