Elephant Hunting
Andrew McDonald is the Founder of Credo Living and Co-Founder of Tandem Real Estate. In this article, he talks about a challenge faced by SME property developers.
A number of years back while working in ‘corporate’, we were shepherded off to a hotel for the obligatory department ‘away day’ where we were compelled to bond and slap each other’s backs, confirming what good eggs we were and how we could make yet more improvements in our bid for market domination. In all truths, ‘away days’ when this time is spent amongst people you’ve chosen to build a business with can be rewarding, nourishing, rejuvenating and, ultimately, fruitful. I say this with my professional Coaching and NLP hat on, but on the flip side, if uninspired employees are incarcerated for 48 hours in a faceless hotel instructed to get on with each other while working out a plan (usually while hungover) on how to enrich the CEO and shareholders, then this can be arsenic rather than food for the soul. It is beholden on the company to understand their individuals and what turns them on, rather than assume such tick-box activities are going to float all employees’ boats.
I’ve digressed. Back to my corporate ‘away-day’: one of the tasks we were given (naturally involving someone standing at the front of the room with a flip chart and felt pen) was to brainstorm what makes a successful property agent. Word salad was tossed and we had offerings such as: tenacious, likeable, thick-skinned, hungry, ambitious, a raconteur, legal knowledge, construction knowledge, architectural understanding, planning knowledge, trustworthy, the ability to ‘spin’ (facts & plates), a punchbag, a diplomat, bounce-back ability, a positive outlook, a sturdy constitution (and liver), an understanding partner. The list could (and did) go on…
Since departing the 9 to 5 and splitting my time between running my own commercial agency and commercial conversion platform, I’ve had my view of the property scene rather turned on its head. I speak with a sweeping generalisation here, but the attitude within some agencies towards the SME developer is one of avoidance. To explain: property agents are remunerated based upon a percentage of the property value, assuming a transaction completes. So the bigger the deal, the bigger the fee. And the more reliable the buyer, the more likely the deal is to complete. Some commercial agents will only deal in properties with capital values in the tens of millions and with household-name clients (think: Pension Funds) who seemingly ensure reliability of performance, something not always credited to the SME developer. Often referred to as ‘elephant hunting’, it may be that this agent can go a year (or two) without bagging a big one. Other commercial agents are happy to work on smaller transactions to ensure cash flow and hope to lasso Trunky at some stage during their year (or career). Either way, the agent doesn’t get paid unless the transaction happens. I laud this in many ways as it means the agent is incentivised to shepherd a deal over the line. A core skill of a commercial agent is in managing a transaction, and this involves ensuring all cogs in the deal wheel rotate efficiently. Mostly the carrot is employed but I’ve seen the stick utilised to good effect, too. An agent should be able to use either when the circumstance dictates.
I can’t profess to having an in-depth knowledge of most other industries, or indeed many industries. But I’d wager that commercial agents spend more time providing free advice and at the beck and call of clients, potential or otherwise, than any other industry or profession. The treatment of commercial agents by certain clients can be lamentable. We spend years building up our knowledge banks only to proffer gratis advice on the basis that we may get favoured with some work down the line. If commercial agency was osmosis, most agents would be as dry and parched as dusty old bones. The majority of buying agents will also have a story to tell about a sizeable deal they’ve been working on for some considerable time only for their client to pull out at late notice and offer not a word of an apology or thanks for the hard work gone in. So wearing the two hats as I do now (both as poacher and gamekeeper), I have the privilege of seeing how the industry operates on either side of the fence. At developers’ network meetings, the reputation of the commercial agency industry is often dragged backwards through the mud. I rarely pick a verbal fight here, but if I was to, I would point out that we are bled dry of information and quite often completely undervalued for what we bring to the party. And without thanks. Commercial agents are arguably the grease that keeps the wheels of the property industry turning over smoothly and efficiently. A bit like a rugby no. 6; our work is often intangible, but also invaluable.
I often hear complaints that commercial agents do not return calls, do not take small developers seriously, do not make an effort to help investors find deals. Common courtesy aside, what I would say is: ‘’Why should they?” Pulled from pillar to post with numerous plates spinning on a daily basis, a commercial agent is constantly working out how best to utilise his or her time to get deals done to pay for their two-week break in Dubai. One wouldn’t phone a lawyer or accountant and rage if they didn’t return your call or give you bountiful free advice. So why is the attitude towards commercial agents any different? As an investor/developer, you’re as well to find a few agents you have chemistry with, stick close to them, and give the rest a miss. As an SME developer, your personal and company brand is essential in terms of gaining traction with a commercial agent: at each touch point and interaction, they will be assessing whether they are likely to earn fees through spending time on your requirement or in a deal with you. Pulling out of deals and/or not replying to commercial agents’ communication is also professional suicide for the SME developer: you can be sure that over Thursday night pints or Friday lunchtimes, the biggest transgressors of market faux pas are being verbally slighted amongst industry peers at the local hostelry. And you don’t want that to be you!
On the flip side, since entering the world of development, I’ve developed a huge amount of admiration for the plight of the SME property entrepreneur: they have true skin in the game, neck on the block, conduct an orchestra, are constantly let down by various ‘professionals’ and experience highs and lows which are hard to describe unless you’ve had the fortune (or misfortune) to witness it all. Both property agents and developers need each other, and there are many similarities between these two disciplines within the industry: a primary one being neither see a financial return unless a deal happens. That said, a primary difference is that the agent is highly unlikely to face financial ruin after a deal completes. The same cannot be said of the developer whose work has only just begun when the agent has banked their fee. So, chapeau to the SME developer walking the walk as well as talking the talk. If both sides could acknowledge each other’s challenges a bit more, then I’d be confident of a better working relationship!
Property agency and property development are fascinating fields, and much of my professional network outside of property simply cannot understand the nuances of the game and the wide range of characters involved. Selling widgets or charging oneself out by the hour just doesn’t hold a candle to the crazy world of property agency and development. And this is what makes our industry quite unique, eccentric, and exhilarating.
I’ll leave this article with a quote I heard from a successful private property developer whom I spoke with recently. This was in my capacity as a commercial agent and summed up the relationship between agent and developer nicely. We were having a pleasant chat about our industry and he wryly signed the conversation off with: “Don’t tell me that a property deal is off-market and I won’t tell you that I’m a cash buyer!” We both laughed! If you know you know…
Happy hunting.