SEASON 1, EPISODE 4

Co-President & Chief Innovation Officer at Stronghill Capital: Jack Cohen on Mistakes to Avoid at the Closing Table

Release Date: July 28, 2022

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Jack Cohen has 41 years of experience as a leader, manager, originator and administrator across a diverse portfolio of career initiatives, though mostly in commercial real estate.

Mr. Cohen is a non-executive Vice-Chairman at 3650 REIT, and a board member at: CRESimple, Hillcrest, Brokers & Engineers, Ascot, Forum Real Estate Group, and Academic Approach.

Mr. Cohen began his career with Cohen Financial in 1981 as a loan originator before taking the lead of the firm as CEO, a title he held for twenty-five years. Mr. Cohen recapitalized the firm six times between 1998 and 2013.

Mr. Cohen has held several Professional Affiliations, including Association President of Chartered Realty Investor and Commercial Real Estate Finance Council (“CREFC”), Commercial Real Estate Finance/Multifamily Board of Governors (“COMBOG”) and has sat on the big board at Mortgage Bankers Association (“MBA”). Mr. Cohen holds several honors and awards including the CREFC Founder’s Award and the Mortgage Banker’s Association COMBOG Award.

Mr. Cohen, personally, is a pilot, and maintains an Airline Transport Pilot License and a Single Pilot Type Rating for a very Light Jet. Mr. Cohen is also a second-degree black belt in Tomiki styled Aikido, a NAUI certified Scuba Diver, an active Crossfitter, as well as a rock climber.

What's discussed in this episode...

1:30 - Jack’s 41 years in the business

8:00 - 3 Things you need to do to succeed

9:15 - The mistakes Jack has made

16:00 - What changed the way Jack looks at deals

20:00 - How Jack manages his times

This podcast is brought to you by ProDeal, the data room for deal teams. We work with some of the largest and best lenders, sponsors and law firms who use our platform to organize and track due diligence.

Transcription

Intro:

You are listening to the Closing Table by ProDeal, the Commercial Real Estate Industry Insiders podcast. Closing deals is what separates the good from the great in this business. That's why we pick the brains of the world's best lawyers, lenders, developers and brokers. We have a reputation for getting the deal closed. Stay tuned for insider tips on how to succeed at the closing table to bring your business to the top. Now let's start closing some deals. Welcome back, everyone. I'm your host, Ian Group. And today I am here with Jack Cohen. Jack Cohen is the president and chief innovation officer at Stronghill Capital, a balance sheet commercial lender. Jack's career has spanned over four decades. This is a must listen episode. But before we dove in, just a reminder that this podcast is brought to you by Pro Deal. The Data Room for Deal teams at Pro Deal, we work with some of the biggest and best lenders, sponsors and law firms who use our platform to organize and track due diligence. Without further ado, let's dove into today's episode with Jack Cohen. 

Ian Group: 

The first question I want to ask is I was looking at your bio online and says you've got a 39 year career, mostly in commercial real estate, but I can't imagine having a career that long without being good on executing on deals. So I'm just curious, what is has helped you have a career this long and to be this successful?

Jack Cohen:

So first, I'll correct your first assumption. In fact, I celebrated my 41st anniversary in the industry on January. On June 1st. Yes. So I joke that I've made three great mistakes in my life. The first one was going to work for my dad. So in the business life, companies primarily, like little ones, needed the asset liability match and therefore they wanted first mortgages in commercial real estate. And so little companies like Union Mutual in Portland, Oregon needed market reps. So the mortgage banking world was buttressed by guys like my dad, who had a market geographic exclusive. If you wanted to do business in Chicago with Union Mutual or Hancock or Equitable Buy, where you could only do it through my dad's business. And that was a precursor to the Larry Melody’s and John Fowler's of the world that became CBRE and HFF. But so mistake one was going to work for my dad, but I joined my dad as a mortgage banker and I learned the business as as an originator. Maybe ten years in, I decided that my dad was a deal guy. 

And my experience in the real estate business is that most of the business, certainly historically and maybe it'll change, but most of the business is made up with deal guys. Deal guys. Transactional guys are reactive, tactical and transactional. They just in our deals, I guess it's like going to the driving range and hitting golf balls through the batting cages and hitting pitches. For some reason, I was more of an operator, more strategic, more forward thinking, more proactive as well as did transactions. So in the 1990 my dad made me president of Cohen Financial. That was a fucking joke because he was a micromanager and a control freak and at a point in time I basically quit. And to my dad's credit, he said, Now you're the future. I'll step out. And so one of my brothers and I stayed, and we had a plan to take a very little business and grow it. And so our view was to build what today you would recognize as an investment bank. You would, you know, originally investment banks were stock and bond shops, right? They were transactional. But the investment banks today, the Goldman Sachs, have a principal business and advisory business and and a agency business. And so that's how we re characterized Cohen Financial. 

So in my 35 years at Cohen Financial we went from 200,000 of 200 million of origination, 200 million to servicing to 35 billion of origination and 6 billion I'm sorry, 35 billion of servicing and 6 billion of origination. And that was kind of a stair step variable. We we put $80 million on balance sheet. We built a direct lending business, we had a servicing and consulting business, we had the transaction business. And so it was a way to house deal people to focus on, you know, whether they were a principal, an agent or an advisor. Did they focus primarily on risk or pricing or the focus in a transaction? And so that was kind of the step variable. Fast forward between 2000, between 1998 and 2013, I recapitalize Cohen Financial six times. It was the sixth time that I lost control on a trade to Guggenheim Partners. Guggenheim, two weeks into the deal, the guy credit Guy Guggenheim says, I want to run your business. And I said, Well, let's be honest, you can't run a meeting. How are you going to run my business? So why don't I take the year? I'll teach you how to do it, and at the end of the year, I'll turn it over to you. So I did that at the end of the year. I turned it over to the guy and I said, What do you want me to do? Do you want me to leave? But he says, No, you can do whatever you want. You don't even have to come to work. I said, Well, that's not my style. So I went back into doing transactions and I quickly got bored doing dumb debt and I started focusing on structured finance and on equity. And then I got this idea. The idea I got was, could I become a mentor capitalist? Could I back the next generation of real estate entrepreneurs? And so my alter ego is Dark Knight Ventures. If you go on the website, you look up Dark Knight, Dark Knight Ventures dot net. That's my personal, personal holding company. It's where I've invested money. It's where I sit on boards. It's where I do consulting, speaking, etc.. And that gave me the opportunity to essentially leave Cohen Financial. 

I went to London and went to work for a small business consultant that did consulting globally for small businesses with super funds. Super interesting, but you couldn't make any money because these are little companies, right? You couldn't charge real fees. And taking, you know, stock in their business made no sense because you were trading intellectual capital for a bet whether or not they were going to execute. So when I came back to the States, I left and came back to the States a year and a half later. I started doing consulting and Dark Knight, and it was really more I was looking for a deal or a business or a job, but I ended up doing salting. Somebody would say, Jack, I don't have any job for you, but can you give me a week of your time? I got to do blank. And that led me to helping some colleagues start 3650 REIT, mortgage REIT. So we ramp that business up. And then I got tired of that a couple of years later, all the systems and business processes that I put into place. I told the guys I would leave. I didn't want to do conduit transactions. So I left and found an assignment for ArrowMark, which led to the position at Strong Hill, which has led to my dual responsibility as Strongsville and ArrowMark. So, you know, I think, you know, you didn't ask about career advice, you asked about success. I believe there's only three things that a professional has to do to be successful, but you got to do it every day. You got to acquire skills, accumulate experiences, and develop relationships. And so I'm kind of a grinder. I'm a journey guy, not a destination guy. 

And so I've always been not just forward thinking, but open to new ideas and being willing to zig and zag. So the confidential business evolves because I mean, I was early to the street doing securitization, debt, brokerage. I was really we were the first mortgage banking firm for actually the first firm that did third party servicing. Servicing was done by mortgage bankers as a tip from life companies or Midland got created, as you know, because of the securitization business. They were third party mortgage bankers, but weren't originators. We were really the first originator that originated for servicing and did third party servicing. So none of these were brilliant insights. They were just, you know, tactical evolutions that allowed course corrections. So I've always been not looking for the next great thing, but aware of, you know, business trends and business opportunities. And that has led to me, I guess, if you define success as being in the game 41 years later and still going, Yeah, I guess that's successful and I'm still engaged and energized us. I joke that I have made every mistake an operator can make and still survive and prosper. And so those life lessons, you know, lead me to the old joke. You have 41 years of experience, or do you have one year of experience that you repay repeated 41 times? I have 41 years of very, very different experience. 

Ian Group: 

Thank you for all that. By the way, on the vein of making mistakes. Since this is a podcast focused on deal closing called the Closing Table. Any of those mistakes that you remember while closing deals or transactional, by the way, or maybe in sort of like the larger life deals that you've worked on? 

Jack Cohen:

Well, I would lie if I told you that I've never had a deal go bad. You know, my dad used to say, make the deal or learn the lesson. This is not a closing table, but it is a transactional mistake and you'll laugh about it. You're not old enough to remember back in the seventies and eighties they're coming out of Texas. Was this concept of a national developer. Right. Development was always local, maybe reasonable. Trammell Crow was really the first, but there was a guy named John Hewlett who had the manage companies, and he had a guy that opened up a office in Chicago. And I'm cold calling and they're trying this guy and I get three loans from him, development loans, construction loans and permanent, permanent loans. Pen guy says, I need a forward commit so I get a a forward commitment from a life company for each of the three loans. And then he he then says a new construction loan. 

We did the construction loan, all three construction loans, and we did that. Everything's going fine. And then one day a guy comes in and he says, you know, we've now paid off the construction loan and we've moved into the life insurance company, you know, permanent loan. And he and he says, I have some money to buy the property. I'm sorry, what? I have somebody to buy the property. Well, you can't sell the property. You have a loan that's locked to prepayment. Well, how can that be? Well, you wanted a forward commitments. You wanted a forward commitment for ten year fixed rate loans because you were de-risking your open ended construction loan. Yeah. That's on page 37 of our property handbook. I said, well, as part of the corollary in page 37, in your operating comp, you can't pay off the loan any of the three loans. And I learned an interesting lesson just because it was a big shot working for a big chance didn't mean he knew what the fuck he was doing. He didn't. They had a playbook that was controlled by John Hewlett they were merchant builders, and this guy didn't understand what a permanent loan was. So it kind of was really an early lesson about asking questions. Right. I tell salespeople then when you're out talking to a borrower. He universally doesn't know what he wants. If he does, he's inarticulate. But if he knows what he wants and he's articulate, you probably weren't listening. So start over. And so that's always been my mantra. I don't want to be a product salesman. Right? My experience with loans that go bad is when I sold a product as opposed to designing a capital structure for a particular transaction. 

So the more questions you ask in the beginning, you know, it's kind of like the way you guys built out pro deal, right? You didn't just start, you know, doing keystrokes. And when you had a client, you didn't just say, sign here, right? We had to do some pre-work and design work and we had to spend a little money to make sure that the prototype worked. Do you know how few people do that in the dealer world? And so there there's a great closing mistake, you know? You know? Yeah. Yeah. And and, like, be careful what you ask for, right? You know, because, you know, by and large, I've enjoyed the industry because I've enjoyed the people. But if you think about it, the story's about crooks, but by and large, aren't really bad people who are, you know, manipulating you to a closing and then changing the deal, you know, like that. That's not our universe. So mostly these are people who didn't understand the unintended consequence until right at the closing. So the more design work or whatever you guys would call it in pro deals that is done in a transaction, you know, in advance, I think the better off everyone is, but everyone is just reactive. Right. Inbound. I got this one. Oh, yeah, this looks good. I'm going to go do this deal. And they don't ask the questions because they're afraid of two things. Either finding something out that it will kill the deal or being asked the question in return that they don't know the answer to. Like too few people say, Yeah, and that's a great question. I don't know the answer to that. Yeah, but my colleague down the hall does. Can I get back to you tomorrow at 3:00? Yeah. Can we have a bigger discussion about that? I don't know if that's responsive, but that's what jumped in my head. 

Ian Group: 

I love that. I think about that all the time. You know, as I am working at Pro Deal, if there is something that that I don't know the answer to or even something I need to collaborate with a colleague on. And this was true as is true now or even when I was practicing real estate law. It's you have to be a little bit humble to say, I don't know and I'm going to go find out because you don't know everything, especially the earlier you are in your career. I've always kind of found that in the real estate industry you learn via osmosis. You really learn from just doing and listening in on calls and being around others. That's the only way if you don't know everything. Haven't been working for 40 years and you might tell me you don't know everything. Also. 

Jack Cohen:

I and I and I don't. And I learn every day. But it is so funny that you say that this young generation coming out of college seems to be in a big hurry in their job hopping, and they're trying to get to some place. I can tell you, all I wanted to do is to be to be a boss of the business. And by the time I got to be president Cohen financial, it was years later that I realized I didn't have the foundation. I wasn't ready. And and, you know, and you deal with this work from anywhere stuff. You and I can work from anywhere. Right? But that guy right out of college, he doesn't know what he doesn't know because he's only doing the homework assignment that somebody gave him. Right. And this idea of sitting around and listening to somebody else and. The phone or being grabbed to go into a meeting. 

I'll tell you a funny story. True story. I'm 24 years old and I'm overwhelmed trying to figure something out, analyzing a deal. And of course, this is, you know, in the early days, we have VisiCalc, which was before Lotus 1,2,3 which was before Excel. Right. Like my dad walks in and he says, Are you busy? No, Dad, I'm just getting my nails done and eating bonbons. Yes, I'm busy. What the fuck are you bothering? Come on, grab your coat. We're going to a meeting. I said, really? Who are we going to see? He says, Don't worry about it. We're going to see Sam Zell. I'm going "Who the fuck us Sam Zell?". Why, why, why? Why is this so important for me? Right? I'm 24, right? So we happened to be in the same building as Sam Zell. And my dad owned the building with some other investors, and we got the Zell's office. And my dad was banking Sam Zell when he was in University of Michigan doing, you know, student housing. And they were friends and colleagues. And so there's all this yelling and screaming and good natured fighting back and forth. And in the middle of this, Sam Zell looks at me and he says, young man. And I go, Yes, Mr. Zell, you know what the difference is between eccentric and weird? No, sir. He says talent. I've never forgotten that. He was saying that he was eccentric because he was talented and as opposed to being weird. And and I'll never forget that. But I also then he come and turned to me and I don't remember the context was. But it changed the way I looked at real estate. 

Okay, this is 41 years ago and I still do it. He says to me, Unit ties, I'm sorry. What? He says, Appraisals do not pay debt. Service companies will call you up and say they have a $4 million appraisal and I have a $3 million loan. And everyone's going to say, Yes, don't do that. I said, What should I do? He says, Look at it as loan per square foot and debt service per square foot, because you can always pick up the phone and call leasing broker and ask what it's going to rent for per square foot or what it'll sell for per square foot. And so to this day, when I look at a deal, I don't give a shit about the LTV, I don't give a shit about anything other than the basis per square foot and what the debt service coverage ratio is and what the rent is. And the sale comps are per square foot. That's where I begin a transaction. 

Ian Group: 

Very cool story. Very cool. I feel like we could end there, but I have a few more questions. So, okay, so you are the Chief Innovation Officer at Strong Hill. You also mentioned Dark Knight Ventures. I'm curious just from a personal maybe productivity perspective, what, if any, tools, technology that you're using, you know, what's what's kind of the favorite your favorite tool in the shed? 

Jack Cohen:

So I only have one skillset energy. So I'm really blessed with a lot of energy and I am a time management. I don't want to say guru, but really discipline. And when I run meetings and stuff, I'm a time Nazi. And so meetings start on time, they end on time, then I don't waste anyone's time. So I have and again, it's not technology, although somebody could create an app for this. I'm a big believer in a framework I call red blue black. So black is everything you do today for future benefit. So it's your strategic work. Blue is everything you do for your day job. So for me, it's, it's focused on revenue, right? It's new business development, etc.. And then red is the lifeblood, right? Blood red. It's the shit you just got to do. It's paying bills, it's your expense reports. It's that kind of stuff. If you sit down and I do this, if you sit down every quarter and decide based on what you have to get done, how you want to spend your time percentage wise. And I give you an example, this will make some sense for you percentage wise. You then say, I'm going to spend 50% of my time in black or 40% in blue and 10% in red. 

Then I am a biorhythm guy, right? I'm up early, but I go to bed early, right? To go to bed early. I can't be working 2 hours before I get in bed or I can't sleep. So I'm best in the morning. I do black work and hard cold calling in the morning. I do read work after lunch because that's in my low and so I literally pack my calendar. I start with a master list of to do's across not just Strong Hill and Dark Night, but Arrowmark partners. I have a list of things I have to do. I also have, you know, things going on in my life. I went back to aviation, I got to typewriting to fly all the citation jets. So. These are you know, I got to make time to study flying out, to make time to flight plan, whatever they go on my list. And then I literally put them in red balloon slacks for the week and then I make appointments with myself on the calendar. And so I do all my kind of thinking and planning over the weekend, and then I go Monday through Friday night crash on Friday night. But my mom used to say, if you want to get something done, give it to a busy person. You know, like technology wise, look, you know, there was a time when I could do a spreadsheet, you know, and today can I look at some of these Excel and and understand it? Yes. But, you know, I'm an Outlook guy. I'm SalesForce and, you know, I barely can do, you know, PowerPoint if somebody will set up the template for me. Right. So, you know, I'm 65. I figure I got another 30 years left in the business and on and on and on. On that basis, I kind of think some of the other people, you know, technology will be their thing. But I have used systems and processes to create to optimize my journey. And one of them is that time management system.

Ian Group: 

Our listeners, however many there are, might want your coaching and time management be included. So yeah. 

Jack Cohen:

I do it. I do it all the time. I do a lot of time and I teach it. I teach the classes here and you know, for time management. And it's all about hacks, it's all about tricks. I mean, I had a guy who's impossible to one guys works for me, the bitch about him, everyone loves him, but he hasn't returned calls. And so we were talking about this and he felt really bad and he says, you know, I just I just time like, you know, I'm on the phone and then somebody calls and I say, I am on the other line. I'll call you right back. So I said, stop. He says what? I said, what do you do when you say you're going to call him back. What do you mean? I'm back on the other call. Well, give yourself a note. I said. Okay, take go by a little slim sticky, the one inch kind. And when you're on the phone with Jack and in calls then and you say you're going to call him back right in and tag it to your computer. Yeah. Like a week later. A week later, he calls back and he says, I know that you think that was the dumbest thing I know, but I'm telling you, that little hack changed my responsiveness to everyone else. And then we started talking about public time versus private time. Right. You know, you can't be he can't be on the road and then expect he's going to get back to people on the phone or take care of the writing shit I need him to do so, you know, picking times in the day to do certain things and days of the week is all it takes if you'll be disciplined to make appointments with yourself. 

Ian Group: 

Yeah, we're just about out of time. So why don't you tell me where your next flight plan is headed to? 

Jack Cohen:

Literally. I am Tuesday flying to Palm Springs to see my dad. He is 92. He was in the hospital. He had COVID and pneumonia, but he's out. And so I'm going to go see him for a couple of hours and then I'm going to fly to Austin because we're going to do an all company meeting in Austin next week. So that's literally my next flight plan. But right now, my two biggest and two biggest focuses at work at Stronghill and here in part not a not a promo for you, but I'm really dialed in on our closing process and retooling it and retooling it in the mind and within the mind way of now pro deal as new technology that didn't exist for us in a systemic way. And then, as you know, it's important to me that it connects to the front end sales force and the origination. But the back end and whether we go into a data warehouse and then go into surveillance and asset management, or we go directly into surveillance and asset management. So that's my next flight plan for business. I got to get this closing process dialed in.

Ian Group: 

Well, we love working with you and the team. And and I just want to thank you for your time today. Great conversation. A ton of golden nuggets in here. And I think our listeners are going to really benefit from it. 

Jack Cohen:

Okay. Well, I hope no one was offended by me using the F word, but maybe somebody'll you know. 

Ian Group: 

Time will tell.

Jack Cohen:

All right. Thanks. All right. 

Ian Group: 

See ya.

Jack Cohen:

Thank you. Bye bye. 

Outro:

Thank you so much for listening to today's episode of The Closing Table, the Commercial Real Estate Industries Insider Podcast brought to you by ProDeal. If you're ready to start closing some deals, I highly recommend checking out ProDeal. Here's why it's a due diligence platform that helps deal teams streamline track and organize due diligence. It's especially helpful for big deals, portfolio transactions or shops with high volume, with endless amounts of documents, checklists and emails. Isn't it time that you and your team use a tool purpose built for your deals? For more information, please visit our website at prodeal360.com and request a demo. Tell us you found ProDeal on the podcast and will give you 30 days for free if you'd like. Daily content and advice on how to rise to the top, please be sure to follow us on LinkedIn and Twitter. Now let's go start closing some deals. 

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