Matt is the Co-Founder of Tower Hunt, an online network of commercial real estate dealmakers. He brings his 15 years of real estate experience to the show and sheds some insight into real estate deal-making.
Matt Marino Real Estate Background:
- Co-founder of Tower Hunt, an online network of commercial real estate dealmakers
- Has 15 years of real estate experience
- Located in Boston, Massachusetts
- Say hi to him at: www.towerhunt.com
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Best Ever Tweet:
“You should really take every line item from the top to the bottom of that cash flow, and look at it and ask yourself “What it means and why those numbers are moving around?”” – Matt Marino
TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Matt Marino. How are you doing, Matt?
Matt Marino: I’m doing well, thanks. How are you?
Joe Fairless: I am doing well, and looking forward to our conversation. Matt is the co-founder of Tower Hunt, which is an online network of commercial real estate dealmakers. We’ll get into the specifics in a bit. He has 15 years of real estate background and he’s located in Boston, Massachusetts. With that being said, Matt, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Matt Marino: Yes, sir. I wanna first thank you for having me on. I spent — from 2011 to 2017 I was at a capital markets firm called Eastdil Secured, that was located in Boston. They tend to function in gateway markets like Boston, New York, DC, San Francisco, Los Angeles. I started there as a very junior team member, and ended up kind of at the mid-level before I left to start Tower Hunt, and in the process I underwrote 11 billion dollars’ worth of closed transaction volume, and had the opportunity to work on a couple of cornerstone transactions in that market.
By the time I left, I was more focused on some internal projects. The firm was trying to build some proprietary technology to take advantage of a lot of the deal data that they aggregated. That allowed me to cut my teeth a little bit in technology and how software gets built, which is something I’ve always had a passion for.
I ended up leaving the company in 2017, and co-founded Tower Hunt, and we’re working on a network for commercial real estate dealmakers. The goal is to quantify somebody’s relevance in a way that you can’t do with a place like LinkedIn, because relevance in commercial real estate is power. It allows you to be independent, and not rely so much on the brokers in the market and some of the larger parties that tend to control all the information.
Joe Fairless: Keep talking about it please, and maybe I’ll ask some follow-up questions. I’d love to learn more about what exactly this is.
Matt Marino: Sure. I hope it’ll be kind of a back and forth, because I’d like to learn and incorporate the things you’ve done well… But I’ll keep coming back to the idea of relevance here, and I’ll define relevance as momentum in a market that somebody else cares about. Momentum – what does that mean? Momentum can be deal flow, momentum can be some kind of insight that you have… It could be experience or skills that you’ve built up doing something in the industry. In my case, I had a ton of industry experience doing very detailed underwriting at the institutional level, and then packaging up transactions, and eventually interfacing with my counterparts on the principal side.
Insight could be research that you’re doing into a specific pocket of the market, or it can be an isolated data point about something like a development project and what’s going on there that others in the market may not know about. So if you have that momentum, then in theory people who overlap with the market that you’re in should want to take your phone call, or should want to call you to get information. And it’s from that that you can aggregate data and corner opportunities that other people don’t get to. I think that’s something that you can speak to just as well as I can, with the work that you’ve done in growing your platform, and how you go about isolating deals that maybe other people can’t get to.
Joe Fairless: That’s interesting… What an idea, and what an undertaking! [laughs]
Matt Marino: Yeah, very difficult… Networks, and especially anything to do in an industry like real estate that’s very resistant to change – it’s a challenging undertaking. So I think first and foremost you’ve gotta be willing to fail, and be okay failing, and have that comfort that you can take your skills and go do something else if it doesn’t work… But this was something that I felt the industry really needed, and I would have regretted not taking a shot at it… So we’re gonna give it the best we can and then we’re gonna see what happens.
Joe Fairless: I see on your website there’s three prompts. One is “Where do you focus?” So these are questions that I imagine the new user who’s signing up for this platform would answer… So where do I focus? In your example you’ve got equity sale, data origination, equity recap, the market, the asset class and the price point, as well as the deals that you’ve done… And then how active are you, and it shows a map of where those deals are, with a certain location… So if you’ve done, say, Dallas-Fort Worth, if you’ve done some in Carrolton, if you’ve done some in Duncanville, wherever – then it’s gonna have those placed on there. And then who do you work with, so then it helps identify people who you have worked with on previous transactions or other deals, with the logic being “Well, now you’ve worked with them, so they might be good advisors/partners/colleagues to other people.” Is that basically the three steps that you would go through as a new user to fill out information, and then gain access to other information that other people fill out?
Matt Marino: Yeah, the core of the product initially, given that the network is very small, is to provide you with a way to build your resume in real estate… In the same way that you might go to LinkedIn to say where you went to school and a list of companies that you worked at. If you work in the industry, that stuff is a lot less relevant than being able to talk to somebody about the pockets that you’re in within a market; so that’s a geographic area, like you saw on the page. Typically, that’s one or more product types, typically it’s one or more strategies on the risk spectrum… Like Stabilized, Transitional, Distressed development fields. Some people have a limit on their deal size… So it’s being able to articulate that, and then kind of on a go-forward basis, as you operate in that market and do deals, it’s a way to very simply add the deals that you’ve done, and then what the system is doing is it’s automatically categorizing things against your markets.
The end result is that you have a profile that will quantify what you’ve done in an area, and that’s really kind of the conversation you typically are having, especially as a new investor or a new participant, broker/lender in a market – you get introduced to somebody and you immediately recite “Well, I’m from XYZ company. We’re trying to do development deals in the multifamily space between 2 and 10 million on the South Shore of Massachusetts.” And you recite that, and if you’re disciplined, you’ll follow up on that… But it’s all in voice, and email, and it gets lost, and there’s no way to search it, so fundamentally we wanna start by trying to provide just a really good resume that you can share with people as a leave-behind, that people can come and search by these extremely detailed criteria to find people… And then understand what have we actually done; you just say you wanna be in this market, or are you in this market?
Joe Fairless: What’s the benefit of someone who is not starting out to joining this network?
Matt Marino: If you’re an established operator or an established participant?
Joe Fairless: Yeah.
Matt Marino: It depends on where you are within an organization. If you’re somebody within an established organization and you have a track record, one use case for this could very easily be if you’re looking to make a change from one side of the business to the other, it allows you to quantify, again, what you’ve done, what your skillset and experience is. If you’re focused on driving deal flow on an established platform, there’s constantly competition, no matter how you segment the market.
The more successful you are and the larger the deals that you’re going for, the more you’re exposed to a better pool that typically includes equally sophisticated and capitalized people, so it’s a way to — I’ll use the example of being on the principal side, it’s a way to make the broker’s life a little bit easier, where when it’s time for them to go to their client and pitch why your pitch should be chosen over somebody else’s, they may have some anecdotes about you in the market, but there may also be just a really nice, clean way for them to show that person who you are and what you’ve done, and that when you say you’re gonna deliver on something, “Here’s the 90-day activity. Here’s 3-4 deals they’ve done in this market that show that they show up and get it done.”
Joe Fairless: What’s been the biggest challenge so far?
Matt Marino: Awareness is a challenge, and the so-called cold start issue of networks generally is a big challenge, where a lot of people at the beginning would visit the site, and in a previous design we had a search capability right on the front page, and if you go in, people gravitated immediately to this, and they would go in and they would search for a market or a specific segment of a market, and there’d be nobody there. And they’d churn and they wouldn’t come back.
So trying to understand the challenge that that represents, and trying to provide something with the product that is independent of the size of that network, which kind of brings me back to starting with the notion of a resume in real estate. Something that we’re working on currently to flesh this out a little bit further is the idea that this can be a place where you can capture market intel information about things like industry events, tenants in the market, live deals that are anonymously sourced and put into the Tower Hunt network and then are filtered very specifically against your interests, as a way to just kind of try to provide value that isn’t dependent upon having 100 or 500 other people in your market on this system. But there’s no doubt that’s a big challenge to overcome, so you have to be patient and just really work hard and show up every day, and at the beginning personally interact with every single user who wants to have a conversation with you and provide feedback.
The page that you’re looking at right now – we’re in the process of visually overhauling pretty much the entire product in response to feedback, just because I built it myself at the beginning to get immediate feedback and exposure, and what’s there is not as intuitive as it should be, so we’re kind of redoing that… And you learn that by talking to people and measuring what’s going on, in a similar way to how I imagine it works when you’re operating your property – you’d better have it instrumented, so that you can understand who’s showing up, why are spaces leasing or not, why are expenses moving around or not, and then make adjustments.
That’s one of the interesting parallels I’ve found so far moving to the software side – you have to be just as aware of what’s going on tactically as you do with real estate stuff.
Joe Fairless: Yeah, I could see its use case, for sure, and I do like the examples. Hopefully, the examples on the next iteration will still be alive and well, where you’ve got email after an intro call, after an email to a sales broker, leasing broker and operator… But the before and after – I think that you do a good job showing the benefit.
And for Best Ever listeners who do not have this in front of them, an example is a sales brokers before you saying “Hi, so-and-so. Following up to see if you have a chance to review information. It should be of interest, given your nearby holdings.” So this is you being a sales broker, I guess… But now you can simply have a link – “Here’s our track record” and explore the recent nearby deal activity.
I could just see this being a differentiator whenever you’re reaching out to owners about buying their property directly, and establishing that credibility… Because it’s a third-party source.
The question will come up “What verification process, if any, is there of this data?” Because someone could just be lying their face off. Is there any sort of checks and balances?
Matt Marino: Yes, the goal here is to ultimately make something that’s equivalent to the algorithm that Google runs to rank your search results. It’s a little bit of a black box, but they run your web page against everybody else’s on a number of different variables to figure out “How useful and relevant are you?” So when it comes to people in real estate, and this question about – okay, if you spam deals in there that aren’t deals you’ve actually done, I think one way to detect that and to reward the use of the network would be every deal that you put in, you have the opportunity to add participants to the deal. Those could be colleagues of yours within your firm, it can be counterparts on the other side of the deal, it could be the broker in the middle of the deal… And simply by inviting a couple of other, or even one other human being who was part of this deal, who doesn’t necessarily work with you – I think there’s a powerful social verification going on there. You won’t be forced to do it, but I think something that we’ll try and experiment with is providing height and visibility to things where you verified it against other parties within that transaction. It’s a great question though, because bad data is everywhere.
Joe Fairless: Yeah, just like LinkedIn, right? There’s no LinkedIn police that I’m aware of, verifying that what you’re saying is accurate… But colleagues are gonna know who worked with you, if that information is accurate or not. So the more people connected together, the more accurate the data would likely be.
Matt Marino: Yeah, and the notion too that markets tend to be – with exceptions like New York, but a lot of markets have known players, and once you’ve established yourself or spent a significant amount of time, you start to know who the names are, and you probably interacted with some of those people… So if I allege that I sold a deal to ABC Co. and somebody from that company is added to this deal, and you show up looking at my profile and you know that other person, there’s some immediate credibility that’s lent to that record, versus me just saying I did the deal.
Joe Fairless: Taking a step back, based on your experience, what’s your best real estate investing advice ever?
Matt Marino: I’d just say the devil is in the details. That’s the biggest thing I learned, coming from Eastdil Secured… And the way to make that concrete and applicable is think about the underwriting process that you go through. I was doing it from the brokerage perspective… But as a principal, if you’re underwriting a transaction, your end product is typically (among other things) a one-page cashflow that can be 5 or 10 years in length, and it’s kind of a property-level unleveraged, and then you’re typically running a leverage model on top of that, and you may even run it through a waterfall to understand your relationship between yourself and the other investors.
The biggest thing I learned going through that over and over and over again, with hundreds of millions of dollars’ worth of deal volume, is as you dig deeper into that single output, that cashflow, it can challenge your understanding of the market if you let it. And I mean that in a good way, which is to say that some people will take a template, pump a bunch of numbers into it, print it out, and they’ll look at the price at the bottom and they’ll say “Okay, I get this deal, no problem.”
What I would assert to you is you should really take every line item, from the top to the bottom of that cashflow, and look at it and ask yourself what it means and why the numbers are moving around within that line item. What you’ll find is you can take any line item on the cashflow, whether it’s the top-line revenue, whether it’s the operating expenses, or a single line item in there, or the cap ex coming from TIs and LCs, and you can dive down a rabbit hole with that in a good way, where it forces you — if it’s an office asset, for example, it may challenge you to go and make sure that you’ve walked the space and you’ve seen the vacancies. Or in the multifamily space you may need to look at the different vantage points of that building, the different sides to the building, and understand “Why are we driving revenue more so from one space than the other? Is that a reasonable assumption to be making?” If somebody blows out of that space and it’s vacant, why do we have it down for three months? Why shouldn’t it be six or nine? And so on.
On the operating expense side, why did the historicals show this big variance in 2018? …and dig into understanding why that was. Or trying to understand what you need to do to execute a business plan around the op ex that you think you’re gonna put out at this building; who do you need to know, how do you need to contract with those people, what are the kinds of things within this asset that can go wrong? It’s just to me a super-fascinating part of the business, where it’s the same process on every asset, as you need to run through that underwriting… And if you’re really a student of the business and you’re a deal junkie, then that’s the area where you can really learn, and from that learning comes – again, back to this topic of relevance, where you can speak with authority after you’ve underwritten 5, 10, 15 deals in a market… You can really understand what makes certain parts of the cashflow stand out in that market, and why. And then you can go talk to other people about it, and it’s from conversations like that that you tend to move your whole career forward.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Matt Marino: Yes, sir. We’ll see if I’m ready for it or not.
Joe Fairless: I know you are. First though, a quick word from our Best Ever partners.
Break: [00:20:23].20] to [00:20:58].17]
Joe Fairless: Best ever book you’ve recently read?
Matt Marino: I don’t know if it’s the best ever, but I’ve just finished Alone At Dawn, which is a book about a Medal of Honor recipient named John Chapman from the Air Force Combat Control, who was killed in combat in Afghanistan. Just a fascinating (for me) dive into a part of the military that I fully appreciate, and it’s really — within that branch of the military, it’s a deep, extremely specialized air force. The capabilities of those people and their willingness to do things that even the other elites, like Delta Force, Navy SEALs, SAS aren’t necessarily qualified to do… And it gave me an appreciation also for the humanitarian side of this particular part of the military, where their motto is “First there. Air Force Combat Control First there.”
That applies to military conflicts, but it also has applied to a number of humanitarian crises, like major earthquakes and things like that, where they can literally get onto the ground before anybody else. The highlight that stuck out to me was within 30 minutes they dropped on the ground into an airport in Haiti, after a massive earthquake, and within 30 minutes that airport was open and receiving aid deliveries from 50 countries around the world.
It made me cry like a baby on an airplane when I was reading the end of it, but just a powerful book… One that sticks out more within other things I’ve read in the last couple months.
Joe Fairless: It puts it in perspective.
Matt Marino: Yeah, we’re not curing cancer here, so… There’s other really powerful things going on.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Matt Marino: I’d say come visit towerhunt.com. It’s likely that the product that you see the day you show up, when this airs, is gonna be different than the one you and I, Joe, are looking at right now. If I’m doing my job, it’ll be different and better… But please come visit it. And then, like I said, at the top, a big part of my job at the beginning is connecting personally with people who are passionate about the industry and want to differentiate and create an avenue for them to grow. So reach out to me.
Joe Fairless: Matt, thank you so much for being on the show, talking about Tower Hunt, talking about the idea behind it. It makes a lot of sense to me. I hope you have a Best Ever day, and we’ll talk to you again soon.
Matt Marino: Thanks, Joe. I appreciate it.
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