Building Better Futures: Greg Winchester

Greg Winchester is the founder and CEO of Summit Investors, a firm specializing in commercial and residential real estate investments in both North America and Europe.  Along with his wife Jan, he's the founder of the Winchester Institute for Real Estate Development at the Harbert College of Business.

Transcript

Narrator:

Welcome to the Harbert College of Business podcast with your hosts, Sarah Gascon and Currie Dyess. Today's guest is Greg Winchester. Winchester has over 35 years of experience in banking, finance, and real estate. He's the founder and CEO of Summit Investors, a firm specializing in commercial and residential real estate investments in both North America and Europe, along with his wife Jan. He's the founder of the Winchester Institute for Real Estate Development at the Harbert College of Business.

Sarah Gascon:

War Eagle, Greg and welcome to the show. So great to have you today.

Greg Winchester:

Good morning and War Eagle. Thank you.

Currie Dyess:

War Eagle Greg. We recently celebrated the naming of the Winchester Institute for Real Estate Development to honor you and your wife Jan. Can you share it with our listeners about why it's important for you to give this incredible gift?

Greg Winchester:

Certainly. So it's for this major gift. There's several reasons why it was attractive to Jan, and I think first of all, I had been part of a amazing industry, the commercial real estate industry in America, which makes up 13 point a 5% of the GDP of the country's economic force. And this is a way to give back to an industry, which gave me an incredible opportunity over the years. Secondly, it was a way to really impact the industry and future generations to raise the bar of real estate development in the country. The third thing is that Auburn is a very special place to my wife and I. Our four of our kids have gone to Auburn. I've served as an adjunct professor and also head of industry relations with the real estate development program at Auburn. So I've seen the potential that an institute like this offers for Auburn University. Auburn has all the ingredients in place to have a World-class institute.

Sarah:

Yeah, you've had a unique journey. How did you find your way to Auburn?

Greg Winchester:

Well, I think one of the aspects of my career that's a takeaway is we have, it's all about relationships. And so relationships evolve around networking and doing right with people in the business world. And so my relationship with Auburn began with my daughter who enrolled back in 2007, I believe as an undergraduate, and she was a member of the equestrian team. And then I had a company at that time, Trimont real Estate Advisors in Atlanta, and we were hiring financial analysts every year, anywhere from half a dozen to a dozen and a half financial analysts every year. And some well-regarded leaders within the company came to me and suggested that we start recruiting at Auburn. And they had met the real estate professor at Auburn at that time, Dr. Harris Hollins. So Dr. Hollins and I got to know each other. I lecture him several of his courses, and then he started sending us great Auburn graduates to join our company and to become part of the financial analyst program. And so we had a great relationship from that standpoint with as an employer and over the years, all of these employees excel. And then he asked me to be on the advisory board for the Masters of Real Estate Development program when he and Dr. Professor Michael Robinson rolled it out. So it was an interesting opportunity that came to me. I wasn't a graduate of Auburn, but over time I got to know Auburn through my kids and also my relationships with the business school and the Master's of Real Estate Development program.

Currie:

Greg, in an ideal world, when you think about 5, 10, 15 years, however long in the future, what are some of the outcomes that you really wanted to see when you dreamt this thing up? What are the outcomes that you wanted to see and how would your institute affect and impact the commercial real estate world?

Greg Winchester:

Sure. Well, I think first of all, there was a great team put together by the two deans of the business school and the College of Architecture Design and Construction, four faculty members who really delved into this issue and figured out the best way to structure something to impact industry long-term and also raise the bar at Auburn. And looking at that, there's really kind of four areas where the institute can bring things forward. Number one is just the new education initiatives. For example, the institute helped launch the new real estate minor program at Auburn. There's other education programs that Dr. Justin Benefield is working on as our head of academic affairs for the institute. So there's a very wide area of future educational that can occur. The second is somewhat akin to that is professional development. There's many working professionals that do not have the need or the time to come back and do a full-time degree or part-time degree, but they might want to take a course or come to a seminar on a particular subject matter and obtain a professional certificate.

So real estate being such a wide area, there's many, many opportunities for that. The third is industry outreach, and we've already started that five years ago when we developed the city builders program, the city builders program, which is a way to really connect industry with the university and the university with the industry has developed amazingly well over the last five years. And so there's a series things that occur in city builders that we can amp up and amplify to bring the entire Auburn real estate community together so they have a gathering spot, both industry and students and faculty. And then fourth is research. Auburn being a major research university, there's plenty of areas of need and potential in real estate for research, and I think Auburn in the long run can provide some of that.

Sarah:

Okay. Let's get into some commercial real estate. What major trends are you seeing in your industry and how are you positioning yourself to take advantage of them?

Greg Winchester:

What I love about real estate is it's such a dynamic industry that changes constantly. So you have to be on your toes in the top of your game to secede in it, and oftentimes many things occur that you have no control over. So you have to be ready to pivot or change whatever course and direction you're on no matter how painful it is. But the first thing I tell everybody who goes into commercial real estate is never forget it's a cyclical business. It goes up and down. It can be because of overbuilding or oversupply. It can be because of interest rates. It can be because of what's going on with financial institutions or capital providers in terms of their availability to fund. It could be related to geopolitical politics. Many, many things influence the built world. So that is the first rule I would say, of being successful is recognizing that in terms of where things are going today, it is such a broad spectrum and different parts within the spectrum or doing or performing differently. So right now, some of the hottest spots in commercial real estate for the foreseeable future or data centers, certainly affordable rental housing, neighborhood shopping centers are back in vogue, and those are some of the hot spots In recent years, industrial warehouses and e-commerce related facilities have been incredibly successful and with robust development and demand, it seems to be waning some, but there's still a huge insatiable demand in that sector.

When you look at the residential sector that really flows into real estate, we're talking about mixed use communities, development of large tracks of land into subdivisions or townhouses or the single family rental homes. That is a very active sector now, it's a niche sector. It takes a lot of expertise to successfully do those projects, but there is a huge demand for good affordable housing, whether it's affordable rental apartments all the way up to rental, single family homes, apartments, everything in between. There's a huge demand in this country for affordable housing, and it's not just apartments.

Then the office sector is clearly in the most challenged category right now as a result of a lot of the shift to work from home that was accelerated by Covid. I think a lot of that knife has fallen, but there's still more pain to come. I do think you're going to see some of these office developments and buildings, particularly the older vintage or the projects that are not desirable projects from an employer standpoint, that these over time will become obsolete and will change uses or needs. I think a good analogy on the office space is what has happened with shopping malls over the last 20 years in the country.

Now the office office market is much bigger than the super regional shopping malls, particularly when you look at the gateway city. So it's going to be possibly a longer term haul, but there'll also be a lot more uses because a lot of these properties can be put to a lot of different uses, and some of 'em are in fantastic locations, and so they'll quickly adapt, but it is not going to be a quick solution overnight. I think high quality office buildings are going to do well. They're already starting to perform better, and I think great places to work and live and play are going to do extremely well in the future.

Apartments have continued to do well right now. They're suffering from oversupply, generally speaking around the country, but I think the lenders and investors are putting the brakes on it. High interest rates have impacted apartments. We're starting to get some relief two ways. One is interest rates are slowly starting to come down, and secondly starts a new multifamily projects is way off. Then the hospitality sector, hotels and resort properties, of course in different degrees. Some got really hammered during the pandemic, others actually excelled during the pandemic and it's a very wide sector. Anything from a limited service hotel all the way to a five star resort, I think high quality properties will again continue to do well. I think there has been a pullback on supply and that having great operators is a key to success in that business. There are other sectors such as self storage, medical office buildings, the medical real estate area. Depending upon the markets you're in, some are doing well, some are suffering from oversupply. I think generally the medical sector is doing very well, but it is not as high volatility of a sector as you might see in some of the others.

Currie:

Greg, we read an article, it's been a while, but I believe it was an interview with Kevin O'Leary and he was talking about how we’re headed, we're headed for some rough times in the real estate space. I'm going to do my best to recall this, if I remember right. He was saying that as the commercial sector has some hard times, the banks will be less likely to lend in those spaces to let's say small businesses. But my thought is that if the supply exceeds the demand, then shouldn't that be favorable to small business? They be able to maybe pick a better location or get a better rate. I guess what I'm asking is, is this a good or a bad thing for small business? Well,

Greg Winchester:

I think there's one side obvious. The real estate side and well located real estate projects like excellent mixed use projects in great locations are going to attract tenants, whether it's national or local, that are going to succeed do well and the tenants will do well. I think there is, on the retail side, a need for balance between local tenants and national chains or regional chains, and being able to figure out the proper tenant mix is a challenge and an opportunity for every retail developer and those that do that well, their projects do extremely well. LI think that the lack of retail construction over the last 10 to 20 years has really created a nice balance within the retail real estate market today, and it's been actually over the last 24 months, one of the better performing areas where maybe this article is coming from is certain high density urban locations where there may be issues with prime or employment or job growth that retailers are suffering there and there's no question about that. So again, real estate is two things. Location, location, location, sponsor, sponsor, sponsor. It is very hard to give sweeping statements about any one thing in real estate because of those two reasons.

Currie:

Yeah, well said.

Sarah:

Yeah. We did have a question about economic conditions such as inflation, unemployment, and global events, which is all happening right now. And how does commercial real estate finance, how is it impacted by those events?

Greg Winchester:

Well, commercial real estate finance over the last 18, 24 months was definitely impacted by the record increases in interest rates. And two years ago, the breaks were put on and the market came to a halt, and other than certain asset pipes, mainly apartments and high quality industrial developments, money was very hard to find. Since construction is down and interest rates have started to move downward, some, the market is starting to come back. It's not coming back with a roar, but it's coming back for well conceived, well leased projects. And so trades are occurring and that should continue to move and afford trajectory. Now that things have changed, that there still will be calamities and problems you will hear about as a result of what's happened with interest rates over the last 24 months as owners run out of cash to support their projects at the higher interest rate levels, at the same time well conceived projects will continue to move forward.

On the geopolitical side, I can't really say that anything comes to mind that's really been impacted by that in the United States. If anything, I think particularly the southeastern United States and the Sunbelt looks more favorable than it did as a result of geopolitical events. I do know that onshoring is for real and that you're hearing more and more about it, particularly in the industrial sector where there's a need by major companies to pull back certain supply chain needs into the US or in many cases into Mexico. And that is causing changes in leasing patterns and developments you can see in certain markets where new major manufacturing facilities and onshoring or creating tremendous job growth in those markets. I'm thinking of for example, Phoenix with the semiconductor plant that's going in there. It's creating lots of job growth and that has just a ripple effect on commercial real estate, whether it's housing, apartments, retail, hospitality. It's a long list. So I think that as you see more manufacturing facilities built in this country, it's going to be a very nice tailwind for commercial real estate.

Currie:

Greg, shifting gears a little bit. You are the founder of Summit Investors, right? It's always different whenever you are risking your own time and money to start a business. What made you decide to be an entrepreneur and start Summit Investors?

Greg Winchester:

So my journey into Summit Investors was a long-term journey. Initially, I spent the first 17 years of my career as a commercial real estate lender, first with a major regional bank. Then secondly, with a national mortgage REIT. And as a lender, you take a very conservative approach and you're essentially looking at taking capital and putting it out for a short period of time than getting 100% of that capital back at a defined rate, and there's not the kind of upside you would see as an equity investor. Then I had as a co-owner and CEO, a commercial real estate financial services firm for 20 years, was owner of it for 13 years along with my partners, and we essentially got to see how a lot of major financial institutions and investors both on the debt and equity side were deploying capital. And that's when I started seeing a lot more of the risk side of the real estate, particularly equity investments on development deals or distress deals.

So when we sold our company, I had some excess capital, so I decided that it would be appropriate to just start really an investment company for our family that would focus on the areas which I had the most expertise in, which is commercial real estate and where I had a lot of contacts and information. So I just kind of naturally moved over into more of being an equity investor with personal family capital. So the disciplines are very similar to what I had to employ over the years. It wasn't an abrupt change. It wasn't like going into a totally new industry. It was basically taking a skillset I had developed and just applying it to our own capital.

Sarah:

What would you consider your biggest successes in business and how do you handle your most significant setbacks?

Greg Winchester:

Well, I think the biggest successes in business that I look back on are being able to run headfirst into challenging situations when markets have collapsed. So back in the late eighties, early nineties, real estate was in the biggest really depression it had ever been in since the Great Depression and thanks to some incredibly wonderful people that I worked with. We didn't just put our head in the sand. We said, okay, we're going to work through this one asset at a time, one borrower at a time, do the right thing, not slash and burn, not cut and run. We're going to work through this in a logical way because we know real estate is cyclical. And by doing that, we were able to prevent a lot of unnecessary losses, careers being damaged, jobs being lost. It created for an orderly transition to the next upturn in the cycle.

The second one was, I would say when nine 11 happened, our company's main client was Lehman Brothers who was located in the World Financial Center across from the World Trade Center. And Lehman Brothers was totally displaced from their headquarters in downtown New York, and all of their employees were scattered in the department we were working in, and I was very glad that we were there, our company, to basically provide backup services and redundancy services for them after nine 11. So their business operations were able to continue on. Their borrowers were not interrupted, their investments were not interrupted, we just kept things going and there was a lot of things we had to do beyond just our normal job to make sure things worked well. During that, one of the wonderful things we did was we were a part of the first commercial real estate securitization that was floated after nine 11. It was over a billion dollar securitization,

And that was a very important transaction for the bond and investment banking world to look at. So they could realize that despite what had happened on nine 11, we still had a robust commercial mortgage backed servicing, commercial backed bond market. The next one I would say was when oh 8 0 9 came along, a lot of our clients failed or were in trouble, and we actually came in and we had a special servicing unit that had just terrific talent and people in it, and we were able to work with our clients to help them work through their trouble assets and foreclosed properties. And actually our business went up after oh 8, 0 9. We had a wonderful model where we used to say in good times, our firm did good in bad times, we did great because somebody had to come in and clean up things.

So we had great talent, great people and clients that were willing to work with us, and we were able to work through a lot of solutions. And I think the big break I had was I had gone through that in the late eighties, early nineties and had seen the wisdom and the benefits of approaching things in a well thought out smart manner versus a panicked manner. And then finally, I would say that being able to with my partners sell our company, Trimont Real Estate Advisors to a well capitalized private equity firm that understood the business that wanted to grow the business that was looking to provide career opportunities for many people. And today, that firm has more than doubled its employees and clients. And I'm really proud to see this success that that's carried on for many, many people. And then the final thing is on the investment side, has been able to engage my children in helping review look and monitor a lot of these real estate investments so I can pass on to them a little bit of college.

Sarah:

How do you align your business goals with your personal value and how has that influenced you throughout your career?

Greg Winchester:

All businesses reflect and their culture is impacted by their leadership and the character of the leadership manages matters tremendously. And I think that you have to establish on the front end both for yourself and your team, what those values are and what the standards are. And it's not just to post them on a wall on a poster, it's also to live by 'em. And sometimes you have to make very hard choices and that in the short run will result in a loss or not as great a gain for the long-term good of the organization. So in terms of the business world, that's how I view leadership in terms of guiding a company forward in terms of values and the culture.

So in terms of being a leader or involved in managing and running teams and companies, the first thing you need to do is work on yourself. You need to say, what can I do to make myself a better manager, a better leader every day and work on that? Because we're all, when you first go into it, you're just not prepared. You have to learn it. And the sooner you learn it, the better. The second thing is humility. Humility is huge. You have to recognize when you're wrong or where you need outside counsel. I used to have a boss who said his goal was to be a master of delegation, and he was very good at that, but it did teach me a lesson that as things got to higher and higher levels, I had to really trust the people that were working within the organization underneath me and empower them, encourage them, and guide them and be a resource for them and not try to do everything myself. So there's different points along the journey where you have to change as a leader and where you have to bring along the next generation.

Currie:

Greg, in addition to creating the Winchester Institute for Real Estate Development and being an adjunct professor, you said that is important to you to pass down some information to your kids and then also the folks within the organization to empower and help them grow. Why is it so important to you to pass down this information to the next generation?

Greg Winchester:

Sure. Well, I think first of all, much has been given to Jan and I. I think it's important to take those blessings and pass them on to the next generation and to share whatever it is that can be shared, whether it's wealth, wisdom, or just working with people. And I think that that makes for a better world and a better country, and also for better families, better lifestyles. I think those of us who've been in real estate, commercial real estate for a long period of time can remember back 30, 40 years ago where the way you learned this business was through the apprenticeship model or maybe going and taking some industry association courses, but it requires much more than that now. It requires a lot of training, a lot of interaction with professionals and universities like Auburn that are offering educational courses like this are to me a great benefit to not only the industry, but also to the country. If you go back and you look at the history of banking in America over the last 40, 50 years, so many of the great calamities were the result of excess real estate binges, and a lot of that could have been prevented. Even if you prevented half of it, the amount of damages and career losses that could have been eliminated would've been huge. So I see education as a way to reduce that unnecessary pain and suffering.

Currie:

Greg, what leadership principles have been most impactful in your career, and how do you cultivate leadership within your own organization?

Greg Winchester:

So from a leadership standpoint, I think it's important to lead by example and to be there when needed. I think humility is incredibly important. I think showing up and not running away from issues is extremely important. I think executives and leaders have to be effective. If you're not effective, your business or your organization is not going to secede. So you have to think every day about how can I be effective with this business and how can I move forward? The other thing I would mention is that you have to be innovative. We used to have a principal in our company that every year we're going to come out with something new to serve our clients. And whatever that innovation was, some would last long term, some would be temporary, but customers expect to see continued value being added. I think adding value to your clients is important.

I think too often businesses just look at providing a good or service to their clients, but the really successful businesses add value for their clients. So both parties succeed in the long run. And then of course, the principle of excellence, particularly in the area of customer service. I used to remember meeting with financial institutions and I said, what's the one thing we could do that would be better than our competitors that you've been using? And they would make statements that absolutely shocked me. Like, well, if you would return phone calls, that would be the first thing. So I mean, excellence is key to everything in terms of within the organization and also with serving customers.

And then I think the ability to be flexible and being willing to change and pivot. There's so many changes happening so rapid in the economy these days and in the world that if you don't have that mindset, then you, you'll be lost. When I got into commercial real estate 40 years ago, it was essentially a local, or maybe at most regional business. Today, it's a global business with capital moving across the globe, developers moving across the globe, investments moving across the globe. That did not exist to any major degree 40 years ago. That has dramatically changed. So the ability to accept and adapt to change, and akin to that is the ability to think strategically and to look forward and anticipate what's coming versus just looking in the rear view mirror.

Sarah:

Yeah, that's really great advice. Do you have any additional advice for our current students or recent grads? We have graduation coming up in a few weeks. Any additional advice for our students wanting to get into the commercial real estate career?

Greg Winchester:

Sure. I would say that first, it's a great industry and a fascinating fun industry to be a part of. If you like, both the financial world and the built world and being able to see where the money is going. Real estate is a wonderful place to start a career. I would suggest that if you don't really know where to start with a large organization, it could be a large brokerage firm, be a large bank, it could be a large investment shop, go there, become a financial analyst or young broker or whatever, and just see a lot of transactions. And then when you're there, find within the organization people that can serve as mentors to you so you can adapt a long-term thinking, particularly in terms of building a career. I think most people that go into real estate oftentimes are very unsure as to where in real estate they want to go.

And that is often impacted by their managers and the mentors they bring into their world. You can really get greater clarity by trying to number things, but having some good mentors. Don't be afraid to fail. Everybody in this business fails at some point or the other because it is such a risky business. So don't be too hard on yourself, but always be aware of the risks that you're working on. And then finally, I would say try to find an outside mentor that you can go to every 90 days on a regular basis that can mentor you in both career, your business and life that can help you as you move forward on your journey.

Currie:

If you could only say one thing to your students and the MRED program the last day of class before they went into industry, what would it be?

Greg Winchester:

I would just say integrity and character win in the long run.

Currie:

Brilliant. Yeah, beautifully said Greg. There is so much that we could unpack and we could probably talk about finance and real estate and leadership and entrepreneurship all day long. And first of all, I would love that, but I know that your time is really valuable. So wrapping up, how can our listeners keep up with your journey? And if it's okay with you, how could they maybe contact you if they have more questions about this process?

Greg Winchester:

Sure. I would say number one, you can find me on LinkedIn and you can connect with me through LinkedIn and follow some of my current activities. The second thing is come to some of the Auburn Real Estate Institute, CityBuilders events. We have a website, we have now a LinkedIn page, just come to the events on campus or when we come to your city. And the benefit of that is not just keeping up with me, but more importantly keeping up with your peers in the industry. And then the third thing is I do have a website for my company, summit Investors, so you can see some of my current investment activities and advisory activities. So those would be the three ways that I would suggest to people that want to stay in touch with me.

Currie:

Awesome.

Sarah:

Yeah, it's been such a pleasure speaking with you today. We really appreciate it.

Currie:

Yeah. Thank you so much for your time. This is really valuable information.

Sarah:

War Eagle.

Currie:

War Eagle.

Narrator:

Harbert, Inspiring Business.