Four and a half years ago Anthony Grosso co-founded First National Realty Partners in suburban New Jersey. Today, his private equity firm has a team of over 20 professionals and manages a substantial portfolio of retail, office, industrial and multifamily assets.
From building a private equity firm from scratch to finding the perfect deal, Anthony shared his experiences on what it takes to succeed in the world of CRE.
What’s your background? How did you get involved in real estate?I was in the investment banking business for many years. I raised money for other guys, not just in real estate, and I noticed principals on the deal side were making a lot of money. I always wanted to be a principal and saw real estate as the perfect opportunity, so I left investment banking and started raising money for my own deals.
Our first deal was a mixed-use building with eight apartments and two storefronts. Now, we’re doing an $18 million deal and have even larger ones in the pipeline.
How did you overcome the initial challenges and build your network?The hardest thing about starting out is that you are beginning from a standstill. You don’t have a track record or a reputation in the market and you need to get other people to believe in what you’re doing. To overcome that, it’s essential to generate relationships from day one.
Networking plays a big role, and while attending events and other traditional networking practices help, the best way to grow your network is to do great deals and perform for your initial equity partners. When your investors have a positive experience working with you they will refer you to others. That’s how you really grow your network quickly.
What is your strategy for success?It’s all about finding deals. There are three key, distinct parts to this business: finding great deals, raising capital, and finally, hands-on asset management.
Different firms have different strategies on what constitutes a great deal, but for us it’s all about making our money “on the buy.” Your calculations aren’t going to be right 100% of the time, but you are likely to be successful if you buy a property for significantly less than intrinsic value. Of course, not every seller is interested in unloading their property at a major discount, which is why it’s so important for us to constantly reach out to everybody in our market and make offers. We have a saying, “You've got to drop your hooks in the water to have a chance at catching a fish.”
Lately we’ve done several deals with motivated sellers. Whether they inherited the property or are simply looking to redeploy capital, these people just want to unload their asset and we are happy to give them liquidity. But you’re not likely to find these owners if you aren't relentless, and while we make lots of offers, we are always ready to move on. If you don’t get your price just move on to the next one. Don’t get married to a deal. The fastest way to ruin your entire business is to do a bad deal.
Which assets work well in today’s market?We’ve been finding success in service-based retail. In fact, I see the current plight of big-box retailers as an opportunity. When someone like JC Penney leaves town, nimble investors can create value by transforming that empty big-box into something that better fits the local environment. We’ve found service-based retailers, like grocers and gyms, are strong fits, especially in an area that has successful mom-and-pop shops nearby. Of course you have to be careful about how you do it, the last thing you want is to buy a property and have a major retailer close down, but right now I’m bullish on service-based retailers.
I also think industrial is hot right now. We have a couple industrial properties and they are doing well, but ultimately, my philosophy is to go where we can add value. That means it’s important to be able to adapt to shifts in the market, and to do that you need to be open minded and constantly looking for fresh opportunities.
What skills do you need to be successful in the industry?The single most important thing is following up. You need to be entrepreneurial, get in front of people and relentlessly follow up. In our office we don't use a scientific term, we call it hounding. Whether it’s finding a deal or getting a lease signed, we follow up until it’s done.
I think coming from the investment banking world helped me with this. When I need a certain amount of capital to finance a deal, I don’t stop calling or talking to people until I have it. It doesn't matter how many institutional investors or high net worth individuals I have to call. I’ll call them as many times as it takes to fund the transaction.
It’s the same thing when it comes to asset management and leasing. Don’t just hang up a sign and hope people come to lease your space; call everyone and their brother. Everybody in your market should know you have space available. In my experience, that’s the type of mentality needed to succeed in this industry. You do what you need to do to get the deal done. The more calls you make, the more offers you propose and the more deals you look at, the better chance you have of being successful. It’s really that simple.