Christopher Merrill | Harrison Street Asset Management's Co-Founder & Global CEO

So that's been one of our strengths is our DPI and a lot of it has been, we've probably sold six billion dollars last year. A lot of it has been what our play is don't get our funds too big. Let's do individual asset investing or development, highly fragmented, 80, 85% of what we do is individual investment or development, and then 80 to 90% of our sales are portfolios, right? So as these funds are larger and they want to get into student housing or they want it to get into self-storage, they're not going to do five and ten million dollar deals, so not only can we create value at the individual investment level, but then the portfolio creates great portfolio values. And so that's what we just did. Hello and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lachine of Park Madison Partners. Capital is a lifeblood of the real estate industry but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What can we learn from their experiences? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more. Our guest on today's episode is Chris Merrill, co-founder and global CEO of Harris's Street Asset Management, one of the world's largest investors in alternative assets. Chris founded Harris's Street in 2005 with C-Capital from Michael Galvin of Motorola fame. Today, the firm manages over $109 billion across global real estate infrastructure and private credit with over 600 employees stretching from Chicago to Singapore. Chris's career began at Hyattman, a Chicago-based real estate manager as a summer intern at 18 years old. And after only a few years, Hyattman allowed Chris to go off to Europe to build out its real estate team there, making him one of the first institutional investors to break ground and the emerging markets of Central and Eastern Europe. After successfully building out Hyattman's European business, Chris moved on to his next challenge, building an investment firm focused on alternative real estate assets, which was a fairly contrarian bet at the time. Harris's Street has fundamentally shifted investor perception of alternative real estate, helping new sectors like Student Housing, Senior Housing and Medical Office, from the fringe to the mainstream of institutional portfolios. On this episode, we discussed Chris's motivations to leave and establish firm like Hyattman, to start his own business, the benefits of scale, the importance of experienced, local operating partners, and how to build loyalty among your employees. Chris, well, I'm just an awe of you. Thank you for doing this. I really appreciate it. Harrison Street is, you know, you've gone from like the standing start, you know, this entrepreneur started this business what 20, 21 years ago. Yeah, I don't bet just 20, 20 years I say, but yeah, probably close to 21. Yeah, to over a hundred billion dollars. What's the number now of AUM? 109. Yeah. Well, it's kind of crazy. I have really hard pressed to think of someone else in our business who is an entrepreneur who started out as a kid, you know, you had a two-handle in front of your age. Started in the business and then started a business and you're still running it and it's so large and global and you've gone into all the things that we're doing that we're all focused on in the real estate space, meaning real assets and high net worth and, you know, global offices and the many things we'll talk about today. So I'm an awe. Oh, you're too nice. I mean, it's been so lucky, you know, and I've had so many people that have helped along the way. So it's just been a lot of luck, a lot of luck. A lot of luck. Okay, well, is that the pearl of wisdom for the day? I think it's a little more than that. Well, well, I, you know, I don't know if it's the pearl of wisdom, but it's definitely what it certainly helped me. I mean, you know, it's like I said, it's been a lot of fun, a lot of ups and downs, but there are so many people that have just been there for this journey that have helped, whether it's investors, employees, operating partners, etc. So, you know, you've talked a little bit on some other podcasts about your origin story and kind of how you got to Hyattman. So I'm going to kind of skip over that because there's so many other things to talk about. And maybe just talk about why did you leave an established platform like Hyattman where you had really just a great seat and huge opportunity there to start Harrison Street. You know, for me, you know, Hyattman gave me a start. I was a summer intern for many years there. Had this crazy idea to move to Europe, I was the first employee to get moved to Europe with this idea of doing the first real estate fund for Central Europe. And it was nice. Hyattman gave me the shot to try and do it. You know, I was an investment guy and I went over and you know, it was a really interesting thesis. And I won't bore you with a thesis, but you know, as I started finding investors and opportunities in Central Europe, you know, I was sort of calling that to the state saying, okay, I found a building or I found an opportunity, send the money and it wasn't that easy. So it sort of forced me to go develop my own capital relationships. And sort of, you know, luckily we put together the first fund in Central Europe to the second fund. And you know, the thesis really worked out. The cap rates compressed when they joined the European Union. And you know, built a nice team in a business over there. And so I think that kind of put the entrepreneurial bug in me. Yeah. And it allowed me to sort of build a culture. And I came back to the states and I said, boy, that was fun. Like, can we double click on that when you say build a culture? So you're in Poland primarily? I was living in London. We had offices in Budapest, with office in Warsaw. And, you know, you know, built a team of, let's say, 40 or 50 people. And like I said, Hyattman was very supportive. And it was fun because, you know, we were, you know, 3,000 miles away and building a team and a culture. And it was really fun. How did you know how to build your kid and your a deal guy? How did you know how to build a culture? You know, I don't know. I mean, maybe it was common sense, you know, maybe it was, you know, looking at, you know, how I wanted to be treated. But I think for me, you know, what I've really learned and I think why this Harrison Street experiment has worked is if you get alignment of interest rate, it works. And I think if so many people are missing that in this business. And you really need to get alignment of interest rate. And so I really enjoyed doing that. And then when I came back to the States, you know, I sort of missed it. I missed, you know, so much of what I did when I went to Europe was how did you do that? You know, when I was doing since Europe, people thought, Boy, that doesn't make any sense. That's crazy. That's never going to be an institutional market. It was a lot of fun trying to find the new hard in our business. We're such and so much of a commodity business. It's hard to be different. It's hard to be unique. But I really loved it. And so that was what kind of put the bug in lead to try and do it again. So where did the idea of Harrison Street come from and how did you get going? So really, you know, the idea was was one of what could I do to differentiate myself? I really wanted to start a business. I wanted to build a business. I wanted to build a culture. But how was I going to go compete in a very competitive business? So I looked at what worked in Central Europe. It was fragmented asset classes. Why Central Europe worked for me was there was big European funds. People would dabble in Central Europe. Maybe they'd put five or 10% of their funding in Central Europe. So I said, what if I'm the pure play Central Europe guy? And that's how I started. So I came back to the States and I sort of looked at it and said, where are their similarities? And a lot of people were sort of dabbling in medical office, sort of self-storage or maybe student. But nobody really had a pure play business around demographic. So I said, well, okay, what if I start and become the sort of pure play business around demographic assets where obviously you're not timing cycles. They're need-based asset. But they're smaller. They're fragmented. You got to roll up your sleeves. You got to find good operating partners, et cetera. And that's where the idea really came from. It could be a way to create something different, unique, innovative that I thought was quite resilient. But the challenge for me was I didn't have capital. And that was probably 34th the time. When I talk about lock and timing, a gentleman who was a mentor of mine was the former chairman and CEO of Motorola. His family founded Motorola. And he was leaving Motorola Senate by family office. And I was talking to him as I had been since I was 12. He was a mentor I talked to him all the time. And I said, well, I've got this idea around demographic real estate about being sort of this pure play investor in the space. And he said, boy, that's interesting. And we spent about a year talking about it. And he said, listen, I'd love to partner with you and do that. What do you need? And I said, look, I've been a first-time fund before I've gone through the consultant colonoscopies. You know, what I need to do is really build a team. I want to start building a track record. And to me, that's the way to be successful. You know, blind funds are tough. Yeah. So he really was great. And he gave me the capital to build a team and start making investments. How much capital did it take in 2005 to build? You know, it was interesting. Our initial portfolio, we probably had invested $70, $80, $90 million in different products and different strategies, really as a way to sort of prove up the thesis. And as well as syndicate out those deals to investors. Yeah, then what we did is we used those investments and we contributed. to make costs in the first fund and had the first closing within sort of 12 months of starting. But, and that's sort of where the name Harrison Street came from. So, we became partners and Motorola started on Harrison Street in Chicago. And so, what was fun for me, you know, obviously he's his family founded Motorola. He innovation was near and dear, it was hard. And so for me, he was, you know, was always this push on how can we innovate, how can we differentiate what we're doing. And so, that's really how we got started. The whole operating partner platforms, which, you know, clearly defined this, the real estate investment business through through the 90s. And then the 2000s kind of was key to you're getting started. But it's evolved over time to managers building platforms where they, you own a piece of the operator who clearly is so key to having the skill set to be successful. How did you start and how have you evolved in that area? So, I think, you know, there's no right model. For me, when I looked at these fragmented sectors, it was, there were certain risks that I didn't want to take. I didn't want our LPs to be exposed to. I didn't want to be exposed to recourse, cost over on entitlement. So the idea was, let's go find the best local operators and let's work with them and let's lay off certain risks. Also, the segments we're in, when you're in storage, student, senior, it's hard to find one group that's going to be great nationally. I don't think that really exists in these spaces. As much as people even tried today, say, I've got one partner and I can go build across the country. I don't think you can. You know, to me, what we like is I've got a great senior housing partner in the Northwest. I've got a great senior housing partner in Long Island. I've got one in the Northeast. I've got a great student housing partner here. So to me, I think in these more fragmented asset classes, if you're going to get scaled diversification, if you're going to manage risk, you need to work with these operating partners. What we've done over time is we've evolved as we've become more integrated as a business. So we're, I'd say we're almost a vertically integrated manager because we do everything up to property management and leasing. In some cases, we do some leasing, but we've built a team here that has construction design, engineering. So we're bringing it as much to bear in a lot of cases as the operators, but what I don't want to do is pre-development risk and time risk cost over us. So I'd like to say we're sort of almost in between that operator allocator model because in a lot of cases, if there's a challenge, we can step in. If we need be, we can move, you know, we can move operators out if we need be. But what's interesting, how the, how we've also evolved is outside of the U.S., we're becoming more vertically integrated, whether it's in Canada or Europe, you don't have the depth of operating partner. They experience balance sheets, et cetera. So we've had to more create it in other markets. Right. Right. But I think that's part of the secret sauce for us is all these people are jumping into the space. We've been doing it for 20 some years. I feel like we've got the best local partners. So a lot of folks that are jumping in are going to make mistakes by, you know, working with groups that are new to the sector, they haven't really dealt with senior housing operations before they haven't dealt with student housing turn issues. So for us, I think that's been one of the benefits of our platform is just these decades of relationships. We've been very lucky that we've had them. Are your margins, profit margins similar today as they would have been 15, 20 years ago? It's a great question. I'd say, as we've got in larger, you know, as you've getting more scale in this business, I'd say the margins, you know, can get better. But I'd also say things in the business are becoming more expensive, the amount of investment in data of changing the amount of investment in client service. You know, we want to be closer to the client. So we have offices in Seoul, in Tokyo, in the Middle East, getting closer to the client's right client service. You know, there's fee pressure, right? I mean, there's a lot of fee pressure. So I think inherently the margins in the business are getting tougher and tougher. So I'd say on one hand, you need the scale today. But on the same time, you know, the challenges are, you know, people are expensive, data is expensive, fee pressure. It's not an easy business. I mean, it's a very challenging business. I think that's why you're seeing this monster consolidation. Yeah. And I think that's the thing that, you know, what I like about it is that's the easy button is just sell out, you know, that's the consolidation. Let it happen. For me, I love the fact that we can keep building Harrison Street. And my differentiation can be alignment with you, the LP. We're here at Harrison Street. We're not going anywhere. And while the rest of the industry is being consolidated and the firms are getting bigger and bigger, it's leaving this middle market sort of wide open for us. Yeah. So let's talk about how you found colliers when you were looking for a capital partner and why they were the right buyer and then how the firm has grown since then. Sure. It was interesting. They were more of a partner than a buyer. I mean, when I was looking for in 2018, we were probably 14 or 15 billion of AUM. But I've all, what I've constantly been looking for. That's wild. 2005 to 2018, you went from standing start to call it 15 billion in AUM. Yeah. 2018 to 26 just eight years later, you've gone to 109 billion. So there's an organic in there and I'll walk you through that. So, you know, the first stage was all organic. And but for me, it's always been looking, we're the potential defects, we're the mistakes, we're the challenges. So I was, you know, I'd say, you know, what was I probably early 40s, 45 at the time. And one of the challenges is I had a family that don't have the business. And that for me, I was thinking more about what's longevity, right? What would happen if something happened to the family? How can I start moving more equity in the next generation? I didn't want people to get the same bug I got. You know, 12 guys walk in and walk out the door. So I needed to think through an evergreen partner. I needed to think through how do I move equity in the next generation? How do I need to create a line of interest? So what I was looking for was someone that could come in and help me do that. So I needed someone that would be more of a 60, 70 percent buyer because I had to buy the family out and I needed to move equity in the next generation. But I also wanted a partner that would let me keep building my culture. I didn't want someone that was going to sit on my management committee, sit on my investment committee. And so, you know, it was a bit of a unicorn I was looking for is I was looking for someone who was passive but would be more of a majority in the business. So it was lucky in the sense again, another lucky situation was Collier's wanted to compete with a JLL at CBRE. They didn't have investment management business. So they looked at it and said, boy, this would be a nice ad to our business as we want to think about growing our investment management fee stream. So it's controlled by one gentleman, a great, great, great guy, but it was Jay Henick is the controlling shareholder of Collier's had a great meeting with him. And it was tough because the Galvin's or Chris Galvin is like a father to me. And it was not an easy discussion. But the beauty of Chris is he recognized that it was the best for the business. And as much as he did not want to sell his interest and he'd still love to have it, he recognized it was good for the people and good for our LPs and good for it. So he's just such an amazing man and he said, look, it's the right thing. Let's go ahead and with the transaction. So Brock Collier's in very much an evergreen partner. Let me move equity. Let me move carried the next generation. And that allowed us to continue to grow the business. And we, you know, we always like to do first. So we launched the first ever open ended core fund that was 100% alternatives. Right. And you know, so when I started the business and it was sort of, okay, we're going to be 100% pure play. People like, what are you doing? Student housing, storage, how are you going to do this? There's no way you're going to get scale. There's no way you're going to find partners. Then when I started the open ended fund, everyone said, well, core is the four main food groups core is not student senior. Right. And I kept saying, look at how well these asset classes performed in the GFC. And we can get better income, what better strategy and a core wrapper than these asset classes. And so we've had an un, but we've seen unbelievable growth in that product now. And it's I think one of the best open funds there is in the industry. How big is that fund today? It's almost 14 to 15 billion of gross asset value. And you know, it would take somebody a decade to replicate it. It's 450 assets. And it's some of the best student senior assets in the country. And so it's just had great, it's just a, it's a great product. But for me, it's we're always trying to create these first, no recognizing demographics outside the U.S., expand, et cetera. So we just kept growing the business organically. And then I can talk more about, at the right time, about how we, you know, added some other strategies. And a lot of it was in some inorganic. Let's talk about the addition of, I know you've bought some businesses in Europe and consolidated them. And so you've consolidated your European platform. And then I think you've also brought in the U.S., you brought Rockwood under the fold as well. So let's talk about those. Yeah. So let's, let's, we'll go through. So what happened was from 2018 to 2022, Colliers was very pleased with the growth they saw within our business and recognized that they wanted to add other lines of business with an investment management. So Jay, the chairman working with me went out to identify other businesses. So identified Rockwood, traditional real estate, but has a very good debt business identified a firm called Versus, which is on the world area, a firm called Basalt, which does infrastructure. What was interesting is those businesses were added under Colliers, sort of side by side. side with me. So we all had our own businesses in partnership with Kyers. And I'd say over the past two, three, four years, you know, I got to note the folks that ran those businesses very well. And we just spent a lot of time talking. And, you know, I looked at it and said, okay, where are some of the, where's some light space for my firm? Well, I was thinking about how do we want to get into private wealth. We were thinking about adding debt products to our platform. We have an open-ended infra again. With first, we created one of the first open-ended infrastructures around public private partnerships with universities and health systems. And so we were in the infrastructure business. I wanted to add a closed-end side of the infrastructure business. So really sat down with the folks at each of those firms and said, look, we have sort of common ownership. Why not put our heads together and make one in one seven? What's the point of us building, you know, six different HR departments, compliance partners, Luxembourg's offices. Why not consolidate and give the best service to our clients and give them, you know, better product offerings, etc. So we spent the past, you know, three or four years talking and sort of putting them all together under, you know, frankly, Harrison Street just because we were the largest. And so we put them under under one sort of umbrella, but really let the businesses run as is and let the investors run as is. But, you know, put together more of a shared services model, client services model. And to me, what's great is every product is very synergistic. And they all help each other. So each of those businesses have their own IC and their own investment. Yes, yes and no. Some have now sort of merged in. So we've created it. But we've so we've, what we've tried to do is take the best talent across the ecosystem and use them. So, you know, the infrastructure business had some unbelievable talent. So let's put them on our open-ended for structure investment committee. But, you know, their infrastructure closed end funds, we don't need to change. So what we tried to do is say, okay, where's the best talent? Where can we add the most value? And let's look at that as it relates to different committees for the business. And now we look at it's very simple. We're our 110 billion of AUM, North America, Europe, equity debt infrastructure, open and closed end funds. And everything's very synergistic. Everything is sort of mission critical real estate. Everything has an alternative twist to it. And so it's been great. And now we've got upwards of 1000 LPs all over the globe. Wow. And for me, as investors want fewer relationships, we just want to be someone that's relevant to them that says, hey, look at you want to keep Harris's street on the platform, hopefully. And they can offer unique products. And, you know, across the, you know, across the capital structure, you talked about early on alignment of interest as being really key when you went from central Europe to building your business here. What have you learned about alignment of interest as you've put all these businesses together in terms of motivating people and making sure that you gained as much, that you gain as much as you can and don't lose anything in these. The key is, I mean, you know, it was never a cash out situation that was a let's all roll together. Let's all lock arms and let's be aligned with our investors on the outcome versus let's all go sell our business and work another company or have shares in a public business. This was very much let's get alignment right. It's all still be meaningful owners of the business. Let's move equity to next generation. So to me, the alignments, the big issue that I think a lot of investors and consultants focus on, but, you know, I think it's going to be a more and more of a focus as you're seeing the consolidation out there. It's you're going to see a lot of turnover. When firms are sold, you know, you're going to lose a lot of good folks and it's just going to happen. And so for us, you know, that's where I can differentiate Harrison Street where I can have a broader ownership structure. I can be more aligned with the investors and the consultants and, you know, to me, that that's what works. When your people are coming to your investment committee and they're approving deals that they have to put their own money in and it means a lot to them that's important. You know, your asset managers, your client service folks, everybody's got to have skin of the game. If not, you're going to see turnover. And, you know, as all this consolidation keeps going, it's I love it. For me, it's a great opportunity to grow graph to great talent. You know, we've added probably 40 or 50 people in the past 12 months. I'm adding great talent to the business because it's really an opportunity to say, okay, this is an entrepreneurial culture. It's a family business. We say family first. We work hard. We have a lot of fun. And we can do it different from a culture standpoint. And everyone's specific example, like, like, how you keep someone who wants some more entrepreneur, like someone comes into you and goes, Chris, I love you. You're a great man. But, you know, I got to go do my own thing. And what do you, how do you keep so much money? What's your own thing? What do you want to do? You want to go work in our London office? Go for it. You want to go where you want to help us grow in Tokyo, go to our Tokyo office. You want to, you want to learn more about data centers? Why don't you work under data center group? So for me, it's what it's you trying to scratch. And why can't I do it here? Because that's what happened to me is I had the itch I wanted to get scratched. So why can't I incubate that idea here? So tell me what that idea is. If it's, you know, I want to be a school teacher. Well, I, okay, I can't incubate that. But if there is a, hey, I want to go try this. Well, what is that? You know, we had someone here who did a ton of research. A young gentleman wanted to, you know, wanted to expand and learn more about renewable energy and solar. And so we kind of moved him into our infrastructure business and he helped us, you know, not only invest in the solar business, but we put solar on the roots of our storage. So we kind of do a lot of this innovation stuff here. And so try and because I'm it's so near and near my heart, I try and make sure I'm talking to all of our key people about, look at, let me try and scratch that itch for you here. If I can't, no harm, no foul, you know, I get it. And so that's the one thing of the scale is allowing me to do that. And that's where I, you know, the important thing I say to the younger folks is it gets bigger. And I don't, I'm not as close to ever as I, you know, just tell them, you got to advocate for yourself. Raise your hand, jump up and down and wave and say, listen, I'm interested in doing something else. I want to do this. I want to do that. Right. And that, that is one of my favorite things about this business. You know, we have 30 interns this year. You know, we have a lot of new, I love that part of this business. I love challenging people. I love, you know, I was given a lot of rope at a young age by height and a ton. And so for me, it's a lot of fun to do that same thing. Yeah, no, that, that resonates for me for sure. I remember my first job in the investment management business. Someone said to me, if there's something you want to do, like just raise your hand and, you know, do it here. And like, when I heard that, because I came out of investment banking, I was like, really? And I, and I never left the business after that, because, yeah, it just, it's fun. But you know, that what people recognize is it's that hard to come up with that idea. Well, that's what I was going to ask you. Like you, you've clearly been, you know, a manager who's always been on the edge, you know, you are early into student housing and senior housing and cold storage and all the things that are edge. And what were edge 20 years ago? So what is the new edge for you today? The thing for us is deepening relationships. So what I think the edge in this business is what are your relationships? Really? Because I think people talk about I've got this exclusive off market deal. I did this and everyone's full of it, right? So where are your relationships? Because that is your edge, the app set, that's creating the opportunity. So one of the things that we are really doing is deepening relationships with universities and health systems. So we've, you know, we're one of the largest owner of off campus student housing, largest owner of senior housing, medical properties. Let's go deep with those universities. So we're now the largest probably investor in the public or private sector with universities and health systems. So we work with universities and we probably have 40 plus relationships with universities. We don't only build them housing, we also then have said to these universities, why don't we help you with other real assets, power plant, wastewater treatment, whatever it might be. So what we've done is develop relationships with these groups and then we bring in a great group to do the housing. And we bring in a great group to do the power plant or district energy. So one of the things that we've tried to do and it's a very quiet, very quietly we're doing this because it takes a lot of time is let's go develop a 50 year relationship with you and let's do, you know, we're the building, you know, housing at University of Chicago and phase one, phase three, or IIT will do their power plant or so that's been a fun way for us to really deepen our expertise, our relationships. Because now if I'm the biggest owner operator of on-campus housing, well that's great information if I'm going to do off-campus. Because what I'll see is a lot of people jumping into an off-campus deal and I'll be like, well, that's a mistake. I know that I'm building a ton of on-campus. And so it just gives us an informational advantage. So that's been a big expansion. You know, we're doing some really interesting alternative investing in Canada. That's been a great market. We're doing some, we're building a student housing vertical platform in Europe. We're doing some interesting things in European debt right now. So for us, I think we're trying to take these segments and just keep folks on need-based asset and just kind of go deeper whether it's across capital structure, whether it's geographies or whether it's the relationships with those partners. All right. I'm curious how you pick the campuses. I mean, there's a prediction that what, 15 or 20% of campuses or the universities will fail. So how do you pick? How do you pick for our off-campus business? You know, we've got up, we've created a proprietary model, we call HPRISM. And so we've done, I don't know, hundreds and hundreds of investments at universities over the past 20 years. And so what we do is we have a very detailed model that we run everything through so you know simple thing is we're big power for universities we're not doing small private colleges you know very focused on what are the universities that are enrollment takers where we have to give them all the growth of the publics but then within those publics you've got to really understand the supply fundamentals the supply dynamics people are jumping right now into student housing and they're going to get really they're going to they're going to get burned because they're going to markets that they're going to be oversupplied they're not the right location etc so I think you really have to focus on which schools you think are going to be those enrollment takers how are they dealing with you they got to look at international students how they deal with AI how they're doing with virtual learning how they deal with commuter kids so we kind of go through all those metrics and we do the same thing like in senior housing we have a model that kind of looks at you know income age qualifications it's really frankly it's just because we've made mistakes and you know it's taking those lessons learned and saying let's not repeat them I mean you know you know no one likes to talk about the mistakes I do I mean I you know I try and bring them up a lot of times with investors and say look at we've made mistakes in these sectors and I think those scars are making us stronger I mean I tell our team just lean into it you know everyone out there talks about how great they are and how every IRR is unbelievable you know and yet you got to be honest you got to be honest in business and say look we've made mistakes but look at how these mistakes are frankly making us stronger and you just sold a very large student housing portfolio yeah is that just in your normal recycling process and then actually that's exactly what our strategy is so to me I think DPI is a new IRR right I think everyone's pull up it when they look at their TVPI's they say their TVPI is this and their DPI is like nothing and then you see as their fundraising cycles get down you see their TVPI come down as they start realizing we should probably explain what TVPI and DPI are for our audience yeah I mean obviously DPI is just the money in your jeans you know that's what capital let's put capital let's give Ken put it back to investors right that's the challenge right now and the TVPI is the sort of manufactured internal performance metric where people will say this is my IRR my IRR right now is X percent but you've returned no money and that's all internal valuations and as they then raise future funds you see as they have realizations you see that that number come down can I quote you on DPI is the money in your jeans I like that so that's been one of our strengths is our DPI and a lot of it has been you know we've probably sold six billion dollars last year a lot of it has been what our play is don't get our funds too big let's do individual asset investing or development highly fragmented 80 85 percent of what we do is individual investor development and then 80 to 90 percent of our sales are portfolios right so as these funds were larger and they want to get into student housing or they wanted to get into self storage they're not going to do five and ten million dollar deals so not only can we create value at the individual investment level but then the portfolio creates great portfolio values and so that's what we just did we just put a bunch of our different operating partners together put a portfolio of a dozens two housing assets and sold to a larger group and we've done that a ton of times and that's again if our fund goes from two billion to five billion to eight billion to ten billion we can't do that so as funds get bigger and bigger I love it because we will be the you know we'll go do the hard work and we'll sell to you so talk about how you're playing in the data center space because data centers as we know are such capital hogs and make you were quoted as saying something like you prefer powered shells over a wildcatting how do you play in that space given keep you want to keep your fund size as well so yeah so it's interesting so what we do is we do there's a couple of mission critical has been a big theme for us we started the data center space probably 12 years ago and it was mission critical so you know we have a couple investments in our infrastructure business around mission critical assets the carrier hotels very monopolistic wherever one comes together in cities and there's all limited amount of those assets across the country very mission critical so we have a number of those investments in our evergreen infrastructure fund we also have a dark fiber business a business that sort of connects the data centers in our infrastructure business and then in our real estate business we look at what I would say powered shells and I almost equate it to a net lease business we're not in the business of buying land and trying to fight for power for seven or eight years we're not going to go do something in the middle nowhere that's AI related right it's if there is an opportunity where you've got entitlements you have access to power and we've got line a site to a long term lease to a hyperscaler that's an investment will make it's very much a net lease type opportunity and so that's probably I'd say that's 10 percent 10 percent or so of our business so it's it's not a big part of our business because we've got such a tight funnel in terms of how we look at it but you know if we can find these right opportunities you know we think it makes sense but you know you got to be very careful and I think there's going to be a lot of people burned with a lot of land that they don't that they can't get access to power and so it's powers the the big thing and the deals are becoming so big it's really amazing where's the next wave of growth for Harrison Street you know I think that you know we want to keep getting better and better what we're doing I think the next wave of growth is really these demographics are global so we can continue to grow our business in Canada we can continue to grow in Europe potentially Asia but I think for us it's you know when you think about universities it does stress amount of deferred maintenance and the need for capital and the importance of education the important you know as people are living longer the need for senior housing assisted memory care so I just think within healthcare and education there's just so much opportunity and really deep enough relationship so I think you know we're going to continue to do what we do and continue to look for mission critical investments and the nice thing is we don't have any pressure on okay you are we've got to get this quarterly growth we got to get back quarterly growth we don't really have that pressure it's really about you know this sort of missing middle this middle market that we can play in and you know really just trying focus on performance and differentiating what we can offer because we've just got to be relevant we want to be relevant we don't want to just say hey you know if you have that you're invested with this manager that's great let me show you how this compliments that strategy we're not trying to replace other managers we're trying to compliment other managers right right in the high net worth channel I believe you launched the first ETF oh yeah we have an infrastructure ETF yeah it's you know so we have a yeah so we have a private wealth business that has a series of interval funds and you know we launched an interesting ETF in the infrastructure space it was new it was unique there's a big interest obviously from the retail channel to get exposure to infrastructure is not easy and so that's been a nice product to add and now what's fun about having the private wealth business again it's a very small it's probably three or four percent of our business right now is we're really working with how can we create really unique creative products to sort of target that retail community that high net worth market the RAAs etc and so what's nice is that that market really understands education they get health care and so it's a nice story to tell you know the high net worth investor you know who everyone's dealing with a loved one that's got health or memory issues people dealing with their kids go into school so it really resonates on that sort of platform so that's going to be a big area of growth for us over time you know right now it's a small part of our business and you know the ETF invests in public or private securities it's in public infrastructure investments and then we have an infrastructure fund that will invest in private funds and direct deals right right well I mean having being able to start launching in that high net worth channel will be an important growth engine for the business yeah it would be interesting you know we'll see what it does you know it's it's again like I said there's no overly pressure on it it's you know for us how can we expand relationships with groups and offer access to products and you know structures that work for those and that that's what's that's what's fun about yeah yeah how do you organize that that you really are so global and have 600 people plus how do you organize sort of for culture and for alignment of the team yeah I mean we have a great leadership team I mean each one of the businesses that came together has great leaders themselves you know everyone's aligned in a culture vision and I think it's a lot of coming together we try and communicate a lot you got to communicate a ton so I think it's a lot of communication on what we're doing why we're doing it I think it's really encouraging all the teams to get together all over the world and really you know spend time is affirmed together and then I think again it's creating that alignment you know creating financial lineman's creating growth opportunities but you know to me at the end of the day it's communication it's transparency you know what are you doing why you know you don't want to be a firm that the employees hear something you know they see the news is on Bloomberg and then they find out oh my gosh the company's been sold or did something and so I think you really have to communicate a lot and I think you know we do a lot of town halls and you know sometimes we probably over communicate in some cases but I think that's the way you got to do it do you share investments strategies across the different yeah yeah for sure I mean that's the beauty of it is you know frankly we're not going to do a strategy unless it helps the other strategies that that's been that that's been the governor on what we do if the new strategy doesn't in some way help the platform we won't do it so that's kind of a governor itself but if okay we've got an infrastructure fund so now I can say to the university president hey we'll put your real estate here and we'll put this in the infrastructure fund You know, I can say they're not pretty partnerized. have a debt fund that can provide you debt financing now. So to me, it's getting creates us very sticky to all of these relationships, if you like. And so that's always the government. I say, how does that new product tell me where the synergies are now, and how is that helping? Where's the informational advantage, and where the opportunity that's created, whether it's access or informational advantage? - You're still a really young guy, but do you ever think about-- - Oh, you're still nice. - Well, you are. Do you ever think about legacy? What's important to you? - I do. It's interesting. The first time I started thinking about it, it's one of my sons is really interested in the business. And it was this summer, he had a great internship. He's a young man, Charlie. He has been to be a junior in college, and he had a great internship in real estate. Not with me, with another firm, and really learned about investing in development and cap rates, and spent a lot of time with me this summer. Kind of, it was a lot of fun talking about the business. - Yeah, yeah. - Everything I started thinking, man, this is fun. This is fun, and I do in the sense that there's so many people here that what I don't want this culture to end, and so I don't want it to be, okay, I get to a certain age, and we sell the business, and now everyone's working for an insurance company or something, I don't want them. I do want this to be something that can continue to grow. I want people to be rewarded. You'd love to find a way to continue to innovate in the space. It's very hard, and the real assets face to innovate is really hard. So trying to push that. So, to me, I would love this thing to keep going, because it has been so rewarding for me, and in a way where the rewarding part of the business is, you think of what you do every day, right? You're investing for peoples, and a lot of cases, people's pension funds, but how you're doing it, right? Watching what we were able to do during COVID, how we took care of people at the senior housing properties, was really rewarding. I get notes from parents on, they're so happy with how their kid is doing it, their student is doing it, the universities, and the safe, well kept housing. So it's kind of fun, and so I use those letters and stuff, and I share them with the firm. So it's kind of a rewarding business. You're doing this mission critical investing, which is kind of cool. - Chris, I started out by saying how impressed I am with you, but wow, having watched probably hundreds of people try to launch businesses like this, you've managed to figure out how to do it in the truly entrepreneurial way and build something that's truly of scale and differentiated. So you did that, and you're still going at it. So it's really fun to watch all the things you're doing, and I think your movement into energy and digital has a lot more legs to it. They probably haven't even started seeing yet, and I'm curious to see what you'll end up doing in Asia. I know you've made some hires there, and that's a whole new something, so. - Well, I would say Nancy, I mean, we've had, I mean, my partners have been, I mean, they're all a lot smarter than me, and they're just great people, and we've had such a great team of folks that have been together. And then the other thing is the investors and the consultants have supported us since the beginning, and they've continued to support us, and I mean, how do you thank them for that? And so for me, it's like, the thanking is waking up every day and just saying, "Hey, we got to deliver." And we've just had so many people that have helped and supported this thing. That's been amazing. - Yeah. Any words of advice for those college-aged kids who might be listening? - You know, the one thing I do always say, not, you know, take it with yourself, but I always tell the college folks, I always want to sit down with our interns or our analysts, is just be patient. If you want to be in this industry, your value is on having done things in repetition, and I think, you know, for me, if you find yourself with a good organization, you have good mentorship and you're being challenged, just stick it out, and your value is that repetition. And so I always say, you know, frankly, this is an industry you just got to be patient. And, you know, it will come, make sure you're in an organization where you have good mentorship, and you're learning and you're being pushed. You know, raise your hand and ask for more, but if you are, then don't worry about what your title is and jumping firm so you can have a bigger title, and just be patient, you know, for me, that worked. And I think that's what this industry is. It's repetition, it's doing things, and seeing things, and that's where your value is really, really comes out. - Amazing advice. I can't thank you enough, Chris, for doing this. Appreciate it. - You're so nice, Nancy, to have me. (laughing) (upbeat music) - I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from Real Estate leaders that you know normally find in the mainstream media. So if you're enjoying this show, please remember to follow it on your favorite podcasting app so you never miss a episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in for more information about our firm. Please visit our website at parkmadisonpartners.com. (upbeat music)