Taking Care of Buildings

In this episode of the Mountain West Podcast, Chad chats with Jesse Smith, the President of Management Services at Newmark Mountain West. They talk all things property management: how Jesse got started in the industry, what it takes to be a property manager, highs and lows of the trade, and so much more.

Transcript

SPEAKER_00 0:00

And they're like, oh, is this is this the quarterly distribution? And we're like, I'm like, no, it's the monthly distribution.

SPEAKER_01 0:06

It turns out this property makes money every month.

SPEAKER_00 0:10

And so they were they were surprised. They were like, wow, that's like this property is actually performing how it should, how we modeled it, how we bought it, what we how we thought it would do. But because it had poor management and cheap management, it just wasn't good.

SPEAKER_01 0:27

Welcome to the podcast, everybody. Today we have a really cool guest and someone I've been trying to get onto the pod for a couple of months. He's been so busy, he hasn't had any time for us. But I give you Jesse Smith, president of Asset Management Services, or what normal people call property management. Welcome.

SPEAKER_00 0:50

Thank you so much. I'm happy to be here.

SPEAKER_01 0:52

Thanks for uh carving out just a little bit of time running between properties to uh hang out with us.

SPEAKER_00 0:57

Absolutely.

SPEAKER_01 0:58

So uh I got a bunch of questions for you. This is gonna be fun, but why don't we start with you giving us a little bit of background on how in the world you got to this place?

SPEAKER_00 1:08

Yeah, happy to. Um, a lot of people do end up in property management just by happenstance. Um I am uh probably rare in in the sense that I actually went to college for this. So um graduated with a degree in facility and property management from BYU.

SPEAKER_01 1:25

Wow.

SPEAKER_00 1:25

Okay, and then uh jumped right in working at NAI West Um in 2012. Uh took an assistant PM job there out of college.

SPEAKER_01 1:35

That was a crazy time at NAI West, because at that time, NAI West, if I remember, was like the number one largest brokerage, if not the number one, number two, whatever. Yeah.

SPEAKER_00 1:46

They were a huge brokerage at the time and property manager, huge brokerage, huge property management. It was a great place to launch my career because I met a ton of brokers, um, including you and all the Mountain West team that was kind of sister companies there. Yeah. Um that was this uh with Yvonne.

SPEAKER_01 2:04

Was she running?

SPEAKER_00 2:05

Yep. Okay, yep. Awesome. Yep. So that was a great place to start my career, kind of cut my teeth. Um, after about 18 months, I went to Heinz, um, the developer out of Houston. Yeah. Um, they owned several office buildings here in the market, um, and continued learning the PM business. Uh, managed the Kearns Building, Gateway, Office Towers, Cottonwood Corporate Center. Um, so had a really good experience there learning kind of the how an institutional owner runs their their PM.

SPEAKER_01 2:40

So, like back at BYU, how what what made you think of property management? Like people ask me sometimes, why how the heck did you get in commercial real estate? Almost like, why are you in commercial real estate? Yeah, for sure. No, but for me, it was like my whole family's been in commercial real estate for generations, and so it just was like a almost like a foregone conclusion. But I'm curious, what what was the impetus for that?

SPEAKER_00 3:04

Yeah, I think um I, you know, growing up, my dad was a school teacher. So I grew up um kind of in a really small town uh up in Washington and um with you know a great upbringing and family, but kind of wanted to do something a little more, I guess, entrepreneurial business. Um, and so as I looked at different career paths and majors um in my undergrad, I think facility and property management stuck out because I really liked the tangible nature of you know the business, right? Buildings, properties, you can see them, you can touch them, you can feel them, they're they're they exist. And and I also felt like every single building in the world needs to be managed by somebody. And so it felt like a secure kind of route to go down. Um, and so yeah, out of all the majors, I kind of landed on that one, took an intro class, and just kind of fell in love with it and and ran with it.

SPEAKER_01 4:05

It's interesting because if if if for the people that are listening who don't have a great grasp on commercial real estate, you look out at a shopping center or an office building or an industrial building or any anything commercial real estate, that asset is a five million dollar building, a hundred million dollar building. Every single one of those has a property manager assigned to it that manages it every single day. Yeah. Most people, a lot of people don't know that who aren't familiar with commercial real estate.

SPEAKER_00 4:36

Yeah. Somebody has to collect the rent, somebody has to pay the bills, the vendors that take care of the snow removal, the landscaping, the maintenance. Somebody's got to be there to take a call from a tenant if they've got a roof leak. So uh yeah, every single property, every single building, somebody's got to be taking care of it.

SPEAKER_01 4:54

What kind of personality type do you think either wants to be a property manager or is a property manager? Like what's that personality type? I can tell you what it is for a broker. It's like a crazy wild human being.

SPEAKER_00 5:09

Um, I think property management, um there's a few things that I think make a good property manager. Um I think being organized is one of them. Um because you've got a lot of different balls to kind of keep in the air at any given point. Um I think being willing to kind of get out from behind your desk is important um because you've got to be on site at your properties, you're interacting with clients, you're interacting with tenants, you're problem solving vendors. Yeah, you're taking a look at an issue at a property, trying to, yeah, problem solve is probably another one. Um, so I think and and I think you've got to be a people person, um, because you you do have to interact with people. I remember my first kind of assistant PM job, like picking up the phone and like calling a random person, and and how that was kind of weird for me, right? As a just kid coming out of college, but you get super used to it and and now it's like second nature, but um, so yeah, people person, organized, get out from behind the desk, problem solve.

SPEAKER_01 6:19

Yeah, and that's the other thing that I think a lot of people don't know is you're not behind your desk. I mean, you are at some point during the week, but you are out looking at properties, solving things on site every single day, moving around. Every day you wake up, it's a different day, different problems, different whatever.

SPEAKER_00 6:37

I love that about the industry and the career is every single day is different. There are some cyclical things that happen every month or every year, but every single day is something new.

SPEAKER_01 6:48

Huh. Okay. I interrupted your story. You were you were at you're at Heinz.

SPEAKER_00 6:51

Yeah. So um after after Heinz, um, I did a master's degree up at the U. And then kind of from there left and uh joined a kind of boutique property management company, um, and spent about eight years there building kind of from the ground up, um, and uh had all different product types, retail, office, industrial, um, and building a team as well, property managers, accounts, accountants. Um, and then left there uh a couple years ago.

SPEAKER_01 7:25

And we are gonna talk about the fact that you went to BYU and Utah, right?

SPEAKER_00 7:30

Sure.

SPEAKER_01 7:31

It just feels like the elephant in the room.

SPEAKER_00 7:34

I uh I I followed in my grandpa's footsteps. He did the same thing. He did a uh undergrad at the BYU, master's degree at the U. And then actually his one of the gifts that he gave me uh before he passed away was um these banana chairs, a cougar blue banana chair with a big Y on it, and then a bright red Utah chair with a U on it. So those are both in my basement. We hop in there when we, you know, run on Madden or you're torn, you're both. Yeah, I bleed blue for sure. So go cougars.

SPEAKER_01 8:06

So I think where you and I intersected is I we started Mountain West in uh 2009 as a brokerage, and um I always wanted to figure out how to do property management, but property management is really, at least from my perspective, very complicated, and I didn't have the expertise there, and so I always wanted to find a partner, someone who we thought was a great partner who we could partner with, who could build property management with us. Um, there's so much synergy between brokerage and property management, and vice versa. They're very synergistic, and obviously it's a great thing for brokers to have for clients because we want to service our clients, we want our clients to have the best of everything. And we bounced around trying to figure out property management for 10 plus years, maybe 13, 14 years, and I caught wind that you were making a transition and you were looking to, you know, do something different and build your next company. And I kind of lost my my, you know what. Like I was so excited. I think I called you directly, yeah. And you were like, who in the world is this guy? And I was like, we got to go to lunch. And you were like, What who is this weirdo? Anyway.

SPEAKER_00 9:35

No, it was, it was, yeah, it was it was you, it was Nick, and yeah, it was uh uh I remember that day, like it was yesterday, it feels like, to sit down and just talk through kind of you know the vision and what you guys wanted to build at Newmark Mountain West on the PM side and um to see if that aligned with kind of my future and where I was going. So I remember like it was yesterday, it was an awesome lunch, and it was kind of the start of a really cool thing.

SPEAKER_01 10:07

Yeah, I just felt like again, it it was a partner thing for us. We wanted to have the right partner who was a long-term partner who was incredible at property management, and we felt like we spend so much time helping our clients, and that means everything to us. And then one of the hardest things to do as a broker in sales is you turn this client over to another line of business. Yeah, and sometimes it doesn't work out, and that's a poor reflection on you as the broker, or you could say the same thing as a property management manager turning it over to a broker, right? Yeah, and so to have that partner who is so awesome and so great at property management. I mean, I was I was super pumped.

SPEAKER_00 10:54

So thank you.

SPEAKER_01 10:55

Took a minute to actually make the deal, but yeah, those are kind words.

SPEAKER_00 10:59

I really appreciate it. I I appreciate um both you and Nick just just yeah, having that faith, that competence, um, and and just for the opportunity, right, to to build this, because I think it's something that like you said, for you know, 10 plus years didn't really exist at at the company. And so to be able to launch that business line to start something from scratch again, which did feel a little crazy to start from scratch, um, again, but at the same time, I I enjoy that. I like the process, I like uh the challenge, I guess, of of building something from the ground up. And so to be able to do that with partners as great as you guys, with brokers like we have at Newmark Mountain West with the support staff, the resources, um, it was truly a no-brainer to to partner with you guys.

SPEAKER_01 11:59

Yeah, we were reviewing numbers this morning, just unrelated to this podcast you and I were, and uh a couple things stuck out to me. But one, in year one of operation, you received 55 referrals from the brokerage. Yeah. So like you could that the pent-up demand for a great property man manager in in-house was so big.

SPEAKER_00 12:20

Yeah.

SPEAKER_01 12:21

And I think last year you got another 45 or 50 referrals. So like talk a little bit about what it's like to be really a startup, but just have that like rocket ship growth that you've had. I mean, you've gone, I I can't remember the exact number, but it's it's a hundred percent growth or more than that, I'm sure I'm doing it a disservice, but it's a huge amount of growth that you're seeing.

SPEAKER_00 12:46

Yeah, we've added we've added basically two properties a month since inception, um, which was about two years ago. So yeah, up to 50 properties, um, which is truly insane, right? I I think you know, if I were to try to do it by myself without this partnership, without the brokerage kind of community behind me, um, it would have been half as fast, if not even slower, right? So, so to have that pipeline, it's essentially like I feel like I have, you know, 150 salespeople that that are out there in the market, they know what's going on, they know the transactions that are happening, they know the clients.

SPEAKER_01 13:27

And they have confidence in you as a property manager turning their clients over to you.

SPEAKER_00 13:31

Yeah, and I think, and I'm obviously grateful for that and appreciate their support and kind of respect that way. Um, and that has come over time, I think, with just knowing these guys for and gals for, you know, 10 plus years, but also just trying to create, you know, incentives and and motivate them to really think of me first when when uh an assignment comes up that that they could refer. So um it's been it's been incredible to kind of see those referrals come in and then be able to go out and try to close those deals and and then to yeah, deliver and and take care of the client and the properties.

SPEAKER_01 14:12

What's a I mean, obviously that incredible growth is great and everybody's excited about it. But what are some of the challenges as like a startup business owner, founder? Like what are challenges with that level of growth?

SPEAKER_00 14:27

Um I think uh one of the challenges is just when you're going that fast, having the right people in place to kind of support the growth. Um and luckily, thanks to kind of long-standing relationships, both my own and and of kind of the Newmark Mountain West community, we've got a team and staff that are able to support us in that in a way that is scalable and sustainable and doesn't necessarily kind of overburden us um right out the gates. Um and then I think just keeping the momentum going, right? Always, you know, always hungry, always kind of searching for the next deal, um, keeping the pipeline full. Um it's great to go out and land deals and you know, win deals, but then where's the next one coming from, right? It's kind of the same as the broker mindset of just you know staying hungry and like continuing to to to search and and keep your pipeline full so that you can have a constant stream of kind of new business coming in, but then on the back end be able to support those properties and actually deliver a product.

SPEAKER_01 15:39

Yeah, and you've got an incredible team behind you. Yeah, it's really I mean, obviously you're great, but the team behind you is is really big, which makes perfect sense. Like you gotta you gotta build out that team. If you have a weak team behind you, you can be the greatest salesman up front and have every cool attribute, but it it just crumbles when you start to scale like that, right? All the weaknesses start to come out.

SPEAKER_00 16:01

Yeah. And I'm not a great salesman either. I I just I just I just kind of say how it is, and if they like it, great. And if if they don't, I I don't I don't think I try to convince anyone.

SPEAKER_01 16:16

Do you think PM people are salespeople?

SPEAKER_00 16:19

No.

SPEAKER_01 16:21

Why is that?

SPEAKER_00 16:23

I mean, if they were salespeople, they'd probably be brokers.

SPEAKER_01 16:26

Well, they'd have to be crazy to be broker.

SPEAKER_00 16:30

Um I think it just it's a different personality type, right? I think it's I think it's it's it's a little more I I know for me personally, it's I like to kind of I'm a little more, I guess, I like to control things a little bit more. And I feel like on the broker side, you're open to so many variables, right? Deals falling apart outside of your control. Whereas with property management, I feel like I can kind of control the variables. It's a a lot of it's a risk management game, right? And protecting your properties, protecting your clients. And so making sure you have the systems in place, the vendors in place, the processes in place, you know, that kind of helps me sleep well at night, knowing that everything is kind of locked in, as opposed to wondering is this deal gonna blow up tomorrow? Type thing.

SPEAKER_01 17:24

What was a setback you can think of like in the last couple of years building this company where you were like, Man, I wish we could have done that better, or something you learned from that you like lost an account on or lost a pitch on or something like that.

SPEAKER_00 17:42

Yeah. Yeah, had a couple setbacks. Um last year definitely had a little bit of a rough patch, had a couple really big accounts come through as as you know, pitch opportunities, um, which was great. The fact that we were in front of these kind of big name clients and had opportunities to pitch on these big properties and portfolios. Um and kind of had two in a row that I lost, um, both of them. Um, and it's it's kind of hard to take, you know, it's hard to, it's hard to lose a big deal, right? Especially when you feel like, you know, this is the one that would, you know, really cement me or put me on the map or um kind of it's almost external validation, right? That I'm I'm good, that I'm that I'm doing a good job, that I'm that I'm succeeding. Um, and so to lose those, not get those was tough. Um but I think it also was a good test for just resiliency, grit, like being able to just kind of show up the next day, realize that hey, the world didn't end, like life goes on. Um and and I think a big part of that for me is like having supportive partners, right? That uh aren't beating me up over it and are just you know, kind of give me that confidence of like, hey, no, like it's okay, like we'll get the next one. And then also um just knowing that like yeah, there's another another property will come. And and that ended up kind of happening, like you lost a couple big ones, now you gotta have another big one come through and landed it.

SPEAKER_01 19:28

So I think that was an interesting period of time. I mean, in some ways, I think it humbled us because we were just blowing and going and picking up properties, and like it was a rocket ship, still is, but those couple of setbacks I think taught us all the things you just said. And then this year or the end of last year, we picked up a bunch of really huge ones. We're gonna pick up a couple more that we're gonna announce here, and so I think in a lot of ways it kind of humbled us and reset it, and it was like, okay, you know, that's a couple of things I I need to learn on pitches. We need to pick up some more velocity as far as clients. And anyway, I feel like it actually made us better.

SPEAKER_00 20:09

Yeah, yeah. I hope I hope so for sure. And and yeah, it's that's gonna happen again, right? Like there's wins, there's losses.

SPEAKER_01 20:18

No, we're not gonna lose again. We will never lose again.

SPEAKER_00 20:21

It's uh it's it's just part of life, but like being able to, you know, being able to bounce back right after, I think that's huge.

SPEAKER_01 20:29

Yeah. So how this is something that's kind of interesting to me. There are good property managers and there are bad or poor property managers. How does being a good manager or bad affect the viability, the success of a property, which we would define as NOI, net operating income, like how much money the property is making?

SPEAKER_00 20:54

Yeah.

SPEAKER_01 20:55

In your career, what do you see there as like a good property manager? What kind of value do they drive to an owner to an asset?

SPEAKER_00 21:02

Yeah. Um, I actually just had a conversation with one of our clients this morning about that. He previously had his property at a different shop, was being managed by someone. Um, and and they struggled. They uh I think you know, the number he threw out that they kind of figure they lost on NOI was a hundred grand. Um and they went with that manager because they were cheap. They were a lower kind of priced uh fee. And so they thought, hey, great, nice low fee. We'll save some money. And at the end of the day, ended up losing 100 grand on their investment because of that. They switched to us at a much higher fee, double the fee that they were paying their previous manager. But uh we started sending out their distributions um monthly, and they got their first. One and they're like, Oh, is this is this the quarterly distribution? And we're like, I'm like, no, it's the monthly distribution.

SPEAKER_01 22:06

It turns out this property makes money every month.

SPEAKER_00 22:10

And so they were they were surprised. They were like, wow, that's like this property is actually performing how it should, how we modeled it when we bought it, what we how we thought it would do. Um, but but because it had poor management and cheap management, it just wasn't doing that.

SPEAKER_01 22:27

So you think it feels like accounting is a huge part of property management, and accounting scares a lot of people, including me. And so it just feels like you're obviously super competent on that. Uh just speak to that a little bit about how difficult it is to set up accounting back of office and all of the measures that you have to go through as far as that's concerned.

SPEAKER_00 22:55

Yeah. Yeah. I think the accounting side of it is big. Um, I think for me personally, how I kind of view the accounting function is really two components. One is the software. Um, and I try to set up a completely paperless setup and a completely cloud-based setup using kind of software that is very, you know, industry, top of industry, basically. So um we use two programs, one is Yarty, one is Avid Exchange. Um, those are the softwares that we use for everything related to our accounting. Um, and that allows all of our tenants to pay rent electronically online or through a lockbox. It allows our our bills to be paid via e-check or via a debit card or credit card. Um, and so everything kind of removes the paperless aspect of it, um, which I think streamlines a lot of things and also just kind of provides some protections because you know, we're not necessarily cutting checks and kind of there, there's just there's some safety there for our clients. And then just working with the client on however they want their accounting set up, right? With their banking, if they want to do a bank account, if they want us to do a bank account. Um, and then the other as the other big aspect is our team, right? Our controller, our manager, accounting manager, um, AP, property accountants, right? Those those are that's everything.

SPEAKER_01 24:23

You still have people that want like a hard check. Like every single month I want an actual check mailed to me. For vendors, not like for a for a landlord, for an owner.

SPEAKER_00 24:36

Um, oh, for distributions? Yeah. Um not a ton. Seems less common. Most of our distributions are ACH.

SPEAKER_01 24:44

I had this guy early on in my career who owned a bunch of properties, and he would collect like the mail would come every day, and he would open mail and be like, oh, another $2,500 or $25, whatever it was. And he would put them in a like a bin in his office, and he would always tell people, when it gets to $25,000, then it's worth my time going to the bank to cash everything else. This is like so funny.

SPEAKER_00 25:13

Yeah. No, we try to avoid going to the bank if possible.

SPEAKER_01 25:18

So had no choice back then. You had to go to the bank.

SPEAKER_00 25:21

Yeah. Yeah. Right.

SPEAKER_01 25:22

So, what other technology do you see there in property management? Like, or where do you see AI intrusion or AI assistance in some of the things you're doing?

SPEAKER_00 25:33

Yeah. So a lot of the softwares are building in AI kind of capabilities. Um, big one is on the accounts payable side. So uh our invoices come in from all of our vendors, um, and the software uses AI to kind of read those invoices and pre-populate a lot of the um sections and uh the approval process for these payables. Um, we still have human eyes on everything. Everything's approved by by multiple humans, but um, AI helps there. Um, we also have a software for tracking insurance certificates for our tenants and our owners and our vendors. Um, and I know they have AI as well uh that helps to just kind of extract data from certificates, populate forms, keep kind of a lot of it's just the data entry side of it, I guess, um, right now.

SPEAKER_01 26:27

I think AI is not replacing you.

SPEAKER_00 26:30

Um, I don't think so. Hopefully not yet.

SPEAKER_01 26:34

I was getting a haircut the other day, and uh my barber was talking about this. He's been my barber for like 15 years, and I was like, dude, you have the greatest job ever. All these guys come in here talking about AI, this, AI that. He doesn't think one thing about it. Yeah, he just keeps on cutting there. Yeah, yeah. He never has to worry about it. Yeah, and I think in some ways, um, all the things you're mentioning about AI are obviously additive to what you're doing, but you as the property manager, that face-to-face and that problem solving uh every single day, I think is really hard, if not impossible, to replicate.

SPEAKER_00 27:12

Yeah. So AI can't go to properties, it can't look at you know, roof leaks or parking lot potholes or and and it can't interface with people.

SPEAKER_01 27:23

It can't, I mean, there are AI that can talk on the phone now, but can't wait to put the robot out for a property property visit.

SPEAKER_00 27:33

That'd be cool.

SPEAKER_01 27:34

Yeah, that would be amazing. Yeah. So do you have any examples of like uh properties that you've taken on or in the past that you've taken on that like huge success story or the opposite, like a huge disaster or funny story or anything like that?

SPEAKER_00 27:50

Um I mean the funny story that comes to mind, there's there's lots every day there's something different in property management, honestly. But um one funny story that comes to mind is we had an insurance inspection we were doing at a kind of a large shopping center, and um we were checking out a nail salon that was that was there, and we were like, hey, we need to they need to see every square inch of this space. Like we gotta go in the back. And uh so open up the back door, and there's a bed, there's a microwave, there's there's a bunch of food. People are living at the back of the space. So I think that I think it was just the owner right of the business, just kind of hustling like, hey, mortgage and rent. Yeah, just combine it all into one. And so um that one, that one was entertaining. Um there was another uh center we managed that had a a grocer in it that bailed, um, kind of went belly up. And they had, I mean, it was like a fish market. It was they had all kinds of crazy stuff in there.

SPEAKER_01 28:58

I love fish markets in Utah.

SPEAKER_00 28:59

And they were, they left, but everything was still there. So we go in to inspect it maybe a week, a week or so after they had bailed, and I mean, the place smelled disgusting.

SPEAKER_01 29:12

Like there was actual fish left in there. Everything, yeah, everything fish in there.

SPEAKER_00 29:16

They the freezer was like left open, was leaking everywhere. Like it was it was a nightmare.

SPEAKER_01 29:21

So um again, AI is probably not gonna replace that guy walking in and smelling that.

SPEAKER_00 29:28

Yeah. So so yeah, there's always something new in property management. Um, always something every day there's something new. There's another center we had where uh there was in the alley behind the the center, um a lady would put out like 20 plus dishes for um cats and fill them up with food and feed the cats while in the alley. Yeah, right. So um had a little cat sanctuary behind our property.

SPEAKER_01 30:00

So you're on this rocket ship of growth growing at whatever, infinite 200, 300% a year. Where do you see yourself? Where do you see this going in two years, three years, five years? Um obviously maintaining the same infinite growth.

SPEAKER_00 30:17

Always, always. No, I think I think we are gonna continue growing. I mean, where property management really picks up steam is when markets are hot, when when buildings are selling, transacting.

SPEAKER_01 30:32

Um, that's a lot of times when property management can pick up new assignments because that's when Yeah, because basically one guy is selling and because property management is really, really difficult to set up and integrate. And as an owner, once you have that property manager who's really like on the inside with you, they understand the property, they know everything about it, they do all your accounting. It's really painful to switch.

SPEAKER_00 30:57

Yeah.

SPEAKER_01 30:58

And it's almost you almost never switch unless you sell the property or something horrible happens with your property manager.

SPEAKER_00 31:06

Yeah, exactly. That's spot on. So, so for us, that's really when we can land new deals, is when the building's selling, we can come in, work with the new buyer, and pick up the assignment with them. So um, the market has been down for the last couple years, right? Um, not as many buildings changing hands, interest rates are high. It's you know, you know more about that than I do. But it's it's so in that environment, you know, it's harder to pick up new stuff.

SPEAKER_01 31:37

So you started property management basically at the lowest point for uh investment sales in like I don't know, five or six or seven years. Yeah, we have a great knack of starting companies at the absolute bottom of the trough, yeah, which is actually I actually love it. Yeah, like we started Mountain West, the company in 2009, right? At the absolute bottom of the trough.

SPEAKER_00 32:02

Yep.

SPEAKER_01 32:02

And everyone thought we were nuts, and and I and I think we might have been a little nuts.

SPEAKER_00 32:06

I that's I mean, my career started 2012, which was kind of yeah, on the upswing side of it, but yeah, still got to see a lot of kind of the the you know the GFC effects and kind of what was happening um to the real estate market.

SPEAKER_01 32:21

But if you're having this level of success right now, your feeling is once transactions return in a huge way, and they will in some measurable way, whether interest rates come down or whatever happens, you're just gonna see even more success.

SPEAKER_00 32:36

Yeah, I think it'll keep the yeah, the the pipeline will continue to flow and yeah, we'll get more referrals and more opportunities and hopefully land you know as many of those as we can.

SPEAKER_01 32:50

What do you you wake up in five years? Like what defines success for you.

SPEAKER_00 33:00

Um I think for me I think success number one is about being a good person. Um so I think if in five years I can say that I'm an honest person, um, if I can say that I'm a kind person, um, if I can say that the my family loves me and I love them, if I can say that my work, my partners and my colleagues at work enjoy working with me and respect me and feel like I respect them. Um and my clients feel like I take care of them and they get what they pay for and more by working with me. Um I think I will feel successful.

SPEAKER_01 34:10

Okay, that was actually a really good answer. I was thinking you were gonna say make a bunch of money. So that was much better than what I was expecting. So last couple of things. For people that are listening out there that have a property, it's being managed by someone else, they're wondering, you know, should I switch or should I not? What would you say to that person? Why would they why should they choose you and what we're doing here over their current property manager or someone else that they might be considering?

SPEAKER_00 34:40

Yeah. Um, I think if they choose us, I mean you're going to get someone I think that feels more like a partner than necessarily just a you know, you're a client of somebody. Um I think the clients that I work with feel like I'm invested in them, I'm invested in their properties, um that our team truly cares about their success. And so I think um if you want a partnership, if you want someone who truly cares and takes a fiduciary interest in your property, um I think that's a that could be a reason to to have a conversation with me to look at switching. Um I love that.

SPEAKER_01 35:37

Yeah, that makes perfect sense. I mean, if you want a partner, then you're the guy.

unknown 35:42

Yeah.

SPEAKER_01 35:42

That's really the best way to say that. A relationship. I would have actually said that in referring someone to you. So that's awesome. Well, uh, as we wrap this thing up, we always like to do market trends.

SPEAKER_00 35:54

Okay.

SPEAKER_01 35:55

And so for this one, I thought something really interesting that's happening or has been happening. Triple nets in this market, in surrounding markets, have been inflating at an astronomical rate the last call it 10 years, but for sure the last five years.

SPEAKER_00 36:12

Yeah.

SPEAKER_01 36:13

I mean, when when you started in 2012, what was a typical triple net? And triple nets basically mean taxes, insurance, and commonary maintenance. So pretty much all of the expenses that go into a property, and you usually define that by a per square foot number. So if a random shopping center has $500,000 of all of those expenses, you back it out into the square footage of the shopping center. Expenses divided by square footage equals in 2012, it used to be Yeah, probably.

SPEAKER_00 36:49

I mean, honestly, three to four bucks a foot.

SPEAKER_01 36:52

Yeah, three bucks, like back in the day. Yeah. You said three bucks, like, yeah, okay. You said four bucks. They were like, wait a second. Yeah. What's going on here?

SPEAKER_00 36:59

Yeah. Yeah. Three to four. I mean, that was pretty common. Um, and yeah, definitely since then, I mean, it's been, you know, close to 15 years, but you know, we have centers as high as like 10 to 11 bucks a foot now. Yeah. Um, and yeah, I think there's as far as trends go, I mean, I think we can all agree everything costs more now in 2025, 2026 than it did in 2012. Um, so there's pressures, inflationary pressures. I mean, I remember a time, um, I think it was kind of right after COVID when we got hit with a bunch of letters from vendors saying, hey, we're adding this charge, we're increasing our services by this percentage. Um, because costs were just skyrocketing. Salaries were going up for you know employees, and then just costs of goods. I mean, I remember a time when gas, you know, and diesel prices were high, that gave all the trash haulers and the landscapers, you know, opportunity to increase um their you thought like 2020 was just parabolic. That's where it seems like things kind of really took off um on the cost cost wise. And and then, you know, so all of your services, you know, you're paying more for, and then yeah, property taxes have gone up for the most part. There's you know some properties here and there that have kind of escaped the assessor's eye.

SPEAKER_01 38:29

But most of them less and less these days, yeah. Yeah, it's very rare. Property taxes are basically going to be 50% to 75% of your triple net overall expenses.

SPEAKER_00 38:40

Yeah.

SPEAKER_01 38:41

And almost across the board, no matter what city municipality you're in, you're seeing skyrocketing property taxes. Salt Lake City, obviously, a great example. I mean, I don't know what the average increase is, but just on a number of properties that we manage or own or whatever work on. You're seeing since COVID, things go from $350 to $7 to $8. Just in that short window of time, expenses are doubling, tripling. And a lot of that is property tax.

SPEAKER_00 39:11

Yep. Um, and then I mean, don't forget insurance too, right? Oh, yeah, insurance. Property insurance has gone up uh immensely. I mean, just with all of the kind of natural disasters that have happened, the wildfires um and different things that have affected kind of different parts of the US, property insurance has gone through the roof, too.

SPEAKER_01 39:30

That's such a good point. I I mean, property insurance was almost like an afterthought 10, 15 years ago. It's like, oh, yeah, yeah, oh yeah, you gotta get property insurance. It's like 10 cents of the five dollars a square foot. Yeah. It was an inconsequential amount.

SPEAKER_00 39:44

Yeah.

SPEAKER_01 39:45

But now it's increasing, sixty cents, seventy cents.

SPEAKER_00 39:48

Yeah.

SPEAKER_01 39:49

That's interesting. I didn't even think about that. How, where does that go? Do you just see it continuing to rise, or do you think there's at some point there has to be a pushback because you're passing a lot of those costs on to the actual tenant. Yeah. So when we're saying triple nets and ten dollars a square foot, it's not the landlord paying that in most cases.

SPEAKER_00 40:09

Yeah.

SPEAKER_01 40:10

It's the tenant paying that.

SPEAKER_00 40:11

Yeah.

SPEAKER_01 40:11

And at some point, the tenant says, Yeah, I can't pay $15 a square foot and give you $30 a square foot in rent. So something's got to give, and it ain't property taxes aren't going down.

SPEAKER_00 40:23

Yeah.

SPEAKER_01 40:24

And I can't go to the city and say, hey, I'm just going to pay half.

SPEAKER_00 40:27

So like where do you see that?

SPEAKER_01 40:29

Where do you see that breaking?

SPEAKER_00 40:30

Yeah, I mean, I think at a certain point, I think, you know, if you look at like markets like Denver, you know, Denver, I think, is kind of maybe 20 years ahead of Salt Lake in a way. And I'm not super familiar with the market, but I know that it's not uncommon over there for triple nets to be $12 a foot, $15 a foot, um, even maybe even closing in on $20 a foot. So um I think it's it's just that resetting of expectations for the marketplace that hey, it's it's not 2012 anymore. Like this is the new reality. Um, these are the new costs, and tenants kind of have to adjust for that. Uh landlords have to adjust for that. I mean, uh, you know, it's it's tough out there. It's tough being a tenant out there. I just was going through the drive-thru of a local spot the other day, and you know, they've now instead of increasing their prices, they've just are passing along the credit card surcharge to the consumer. And so if you use a credit card, you're paying an extra two and a half percent or whatever um to cover their costs.

SPEAKER_01 41:38

So Taco Bill is five bucks still, but it costs seven dollars to process my credit card.

SPEAKER_00 41:43

Yeah. Exactly. So um, so I think you know, it's it's people are gonna find a way to make it work because that's who we are as humans. We're, you know, we figure it out, but um, I think it's it's the new reality.

SPEAKER_01 41:59

Awesome, Jesse Smith. Thank you for spending a little bit of time with us. I've seen your phone ringing 17 times while we've been here. So I'm sure there's 18 properties you have to run to, but really appreciate your time. Really appreciate you what you're doing. You're on a rocket ship. Anyone who's looking at doing uh a property management switch or considering it, Jesse Smith is your guy. He is the best in the business, he is incredible. Hit him up with a phone call or an email or however you get a hold of him.

SPEAKER_00 42:29

Thank you. Awesome, thanks, Chad. Appreciate it. Awesome.

SPEAKER_01 42:33

All right, guys. We did it. Nice. How long did we go?