Finding the Insider’s Edge with James Nelson, Principal and Head of Tri-State Investment Sales, Avison Young

James Nelson serves as Principal and Head of Avison Young’s Tri-State Investment Sales group based in New York City. Throughout his illustrious 25-year career, James has facilitated the sale of over 500 properties and loans, amassing an impressive total valuation exceeding $5 billion. Since the inception of James' sales team in 2018, their impressive performance has culminated in closing over 150 sales valued over $2.5 billion. 

Beyond his brokerage success, James is also an experienced investor, having launched two real estate funds with an impressive aggregate capitalization surpassing $350 million. 

He is an active contributor to the commercial real estate community and regularly imparts valuable industry lessons on his podcast, “The Insider’s Edge to Real Estate Investing” (available on Apple podcasts). His recent book, The Insider’s Edge to Real Estate Investing (available on his website and on Amazon) is a Wall Street Journal bestseller. James also guest lectures on real estate at prominent institutions such as Columbia, Fordham, NYU, Wharton, and his alma mater, Colgate. 

James has been recognized as one of Avison Young’s top sales professionals, included in Commercial Observer’s Power 100 and CoStar Power Broker, and awarded the Edward S. Gordan Deal of the Year award presented by REBNY. James has worked with notable clients such as The Archdiocese of New York, Breaking Ground, The Carlyle Group, JP Morgan Chase, Salvation Army, and Vornado, among others.

Enjoy the show? Have a guest in mind? Email us at podcast@aystrauss.com to let us know your feedback and who you want to hear on the next episode.

Connect with Aaron and the A.Y. Strauss team:

• Our website (www.AYStrauss.com)
• Aaron's website bio page (Aaron's bio page)
• Aaron's LinkedIn account (LinkedIn)
• Our Twitter account (@AYStrauss)

Transcript

A.Y. Strauss: Hello everybody. Welcome to The Dealmaker's Edge. Today we're really excited to be joined by the one and only James Nelson, a longtime friend of mine. He is the principal and head of Tri-State Investment Sales at Avison Young, which is a privately held global real estate advisor. And to date, James has been involved in at least 500 property and loan sales totaling more than $5 billion, and his accolades are extremely lengthy. We won't cover them all in the intro here, but one of them was, he was just recently named the winner of the 2023 “Young Real Estate Professional of the Year” Award given by the Real Estate Board of New York, as well as being recognized in the Commercial Observer's “Power 100”, which highlights professionals from the commercial real estate industry who have made a substantial impact on the New York City real estate market. And he's also in this year the author of the bestselling Wall Street Journal book, The Insider's Edge to Real Estate Investing: Game-Changing Strategies to Outperform the Market. And I know you've been on a speaking book tour. You've been promoting the book. People are really excited about it. We're going to get into that for sure. But he's also founded two real estate funds. The capitalization of over three $50 million. He's lectured at Columbia, Fordham, NYU Warden, and Colgate, which holds a special place in his heart as his alma mater. Anyway, James, I'm not going to ramble all day. We want you to talk, but we're really happy you're here. We've known each other for a long time and we can't wait to tell your story. 

James Nelson: Aaron, so wonderful to be here, and it's been so great knowing you all these years, and you are doing all the right things. You are out there. I'm always seeing you at events, and this show is just an extension of all the value that you bring to your audience. I'm a fan. I listen to your shows. I get a ton out of it. So just really excited to reciprocate. My only correction to your intro is I'm not the one and only James Nelson. In fact, when you google James Nelson and I kept talking to my SEO people, I said, "Why is this James L. Nelson popping up?”. And he seems like a great guy. He's an author out of Maine who writes these bestselling maritime fiction books. So maybe I had to actually come up with this book so I could end up higher in the SEO search. So there's no confusion that I'm not some fisherman in Maine, but I'm a real estate broker and there's of course a baseball player as well by the name. So, I'm not the one and only, but maybe if you're talking about commercial real estate in New York, yes, that's me. 

A.Y. Strauss: Yeah. Certainly the one and only as far as I'm concerned, but broadly speaking, in real estate, absolutely one and only. And again, it's just, I'm really pumped you're on, and I look up to you for all the things you've done and you do. I know you spent a lot of time mentoring and growing your team. We're going to get into all of that. But what I'd love to do for the listeners who don't know you, the very few I will say, maybe you could just talk about your personal background, where you grew up. We touched on where you went to college, but maybe some of the early years and just how you first started to break into the business would be wonderful.

James Nelson: Sure. So, born in Vermont, grew up in Wisconsin. Left when was 10 years old. So my father was a doctor. He got a job in Washington, DC, so moved there. The family lived in Bethesda, Maryland. And you know, early on I was always hustling, whether it was your typical lemonade stand. But then I even increased up my game. There were these community gardens and I just planted rows and rows of these flowers, zinnias. I don't know why I remember the type of flower, but I was growing all these flowers and selling flowers curbside that was kind of under my early entrepreneurial ideas and was there and had a great childhood growing up and ended up going to boarding school where Dead Poet’s Society was filmed as a point of reference. St. Andrew's, Milltown, Delaware. Went to from there, Colgate University. I was a swimmer, so had an incredible experience there. Come my senior year, I had all my friends have investment banking jobs. I had no idea what I was going to do. I thought maybe I'd go out to the West Coast to make movies or something until I realized no one was paying me to do that. And it was $5,000 in credit card debt and had this opportunity. I went up to the career service center and found out that Massey Knakal was holding their deadline that day for the resume drop. So I put my resume in. This company was co-founded by Paul Massey, class of 81 from Colgate, and the rest is history.

A.Y. Strauss: Amazing. We met years ago when you were there, and I remember you've always been an athlete, you've continued your athleticism. I remember you were biking in from Connecticut to the city. I'm like, "who is this guy?" Yeah. 

James Nelson: That was a long time ago. For a while I tried that. That's a little, it can get a little rough on the way coming in and I'm not just the actual track, but yes, trying to navigate through the Bronx and all the bus lanes and everything. So I haven't done that for a while. Maybe one day again.

A.Y. Strauss: If we see you swimming in the East River, like Kramer from Seinfeld, then we'll know to call somebody. But I got to say I was very impressed with the fact that you've always sort of taken a leap and pushed the limit and a lot of confidence and it comes through and I think that's one of the core ingredients you need to be successful, believe in yourself and you've always pushed yourself. And then at Massey, you were a star. I think you were right out of the gate. Really successful in sourcing deals, and originating new business, and you rose to be a partner there. And it was all about the territory system. And maybe you could tell me about some of those earlier years. 

James Nelson: Sure. Well, all the credit goes to Bob and Paul for that matter on that platform and their vision of the territory system and seller representation and finding this niche in the market that no one was really focused on. And so to really attack it in a really institutional type way. And it really made getting into the business easy because you were able, it was very manageable to be able to focus in an area, really learn the neighborhood and become the expert. And I talk about that in my book, whether you're a broker, whether you're an investor, whether you're an attorney, having that specialty, having that focus and really becoming the expert made a huge difference because when I started out making my calls and going and buying for these listings to sell these properties, I'd be up against veteran brokers at other firms who had been at it a lot longer than I had. They had a lot more deal experience, but when it came to the Chelsea neighborhood, I could run circles around them because I knew every single trade, I knew where the rents were, where the rezonings were taking place, and it was really a great way to start off in the business.

A.Y. Strauss: Amazing. And it's funny, I've been seeing Bob Knakal being more active on LinkedIn lately, and he's talking, he's naming brokers that have sort of come up and he's sort of become a godfather in the industry for spawning successful brokers that have gone on to legendary heights themselves. And then obviously that was sold and it you sort of became Cushman Wakefield and you were there for about three years or so, and maybe you could talk about that transition. And you went from this more niche firm, which really grew, I mean, it was a very sizable brokerage. Well regarded, really sort of crushed that middle market that you were in. And then all of a sudden you find yourself in a global enterprise. Talk about how that transition was for you and some of the positives of that environment. 

James Nelson: Sure. So by that time, I had spent the first 17 years of my career at Massey Knakal, right out of college, and how rare that is, that you have someone right out of school with a company that long. But again, incredible environment and people, and we were having a lot of fun building this. And by the time we sold to Cushman [& Wakefield], we were selling four times the amount of properties in New York City as the next brokerage firm. We had really dominated the market. We were already into retail, leasing, and finance, and we were at an inflection point and we were out looking for a partner to grow the business nationally. And Cushman came in and made us an offer we couldn't refuse. And it was actually a seamless transition because we literally showed up the next day and we stayed in our office. Here are your new business cards. Keep doing what you're doing. And, now we were part of this global full-service company. So obviously if we had client relationships who had business outside the city, we could now help them out. Certainly, if they had other real estate needs, whether it's office leasing, property management, those kind of things. So I had three incredible years there at Cushman, built up a great team, and then had this opportunity to come over to Avison Young to build out their investment sales platform here. But yeah, it was a great transition. We obviously went on, some of our partners stayed at Cushman and many of the brokers are still there. And, as you referenced in that recent article that came out, you see Massey Knakal brokers now spread out as well all over the city.

A.Y. Strauss: For sure. And you know, Avison Young, [it's a] great firm. I've been following the deals you're doing following the growth of the firm, they've been adding a lot of talent, especially in that New York market, which you're really heading up on investment sales. Maybe talk about your team a little bit. For years and years, I've watched you grow your team. It's extraordinarily hard. You've worked with professional advisors and coaches and you've really imbued this wonderful culture. You sort of attract great people to want to work with you in a collaborative fashion, in a team fashion. I look up to that a lot. I'm trying my best to do that here. Not easy. Maybe you could talk about some of the starts and stops and ebbs and flows and the growth of that team. And now your team is, I don't even know how many you are, but it's always a really sizable headcount, but the right people doing the right things at the right time. And I think in brokerage, people are a lot of lone wolves, but rare that they really have that lockdown team that you've built.

James Nelson: Well, I appreciate you saying that, and it is very perceptive. Massey Knakal was obviously a very collaborative place and there are a lot of firms out there, brokerage firms that are very collaborative as well. But there's also to your point, a lot of places where you come in and here's a desk and a phone, and it was always surprising to me to think that there are some of these brokerage shops where you could be competing directly with a person across the hallway from you, so to speak. So the vision I had when I came over to Avison Young to build out the sales team was exactly what I'd been doing my entire 20-year career at this point, which was to have one unified sales team where we all work together. And I think that's really the secret sauce of what we've done. And you know, sure there's plenty of brokerage teams out there, but I don't know of a single brokerage team that represents a company covering the entire market like we do. So we are divided up by asset class. We have asset-class specialists, in multifamily, retail, and office development, but we all come together every single morning to talk about what's going on. Assignments we're working on buyers in the market because especially today we have multifamily owners who've said, "Okay, it's time to sell. I want to shift into retail, or vice versa". And so the fact that everybody is involved and contributing to this, and that's not just by sharing information, we're sharing commissions. And I don't think it's been done at this scale because I think your culture, it can certainly take you a really long way, but at the end of the day, I think you have to match that with the compensation as well. So we have one person who wins, everybody wins on our transactions. And I think that's our special sauce and we're really proud of that.

A.Y. Strauss: I love that. There's no question that besides making more people successful and the overall growth of the firm and your business successful, the clients can feel it. I'm sure every client that calls can feel the tangible difference when someone's excitement about the deal versus, "Hey, you know, it's a job. Okay. Whatever". That excitement sort of bleeds through an organization. So credit to you, and we're going to talk about the book as well, but you hit on something today on the market. It's obviously a weird market. I'm not much of a prognosticator myself. I'm sure every day you're asked about the market. What I'm hearing, and again, you're at the front lines, is that people are gearing up for more activity in the second half of this year and sort of getting ready. Some people have to sell, maybe some people think it's, you know, obviously way too late to sell, maybe too early to buy. We're in this sort of stasis period, but maybe you could talk about the velocity. You've been doing deals in good markets and bad for a long time. And I'm sure you're going to be thriving today and in a long time in the future. But a snapshot of where we are right now in this moment. Obviously, it's sort of like a tale of two cities in many ways, but maybe give us a real-time view as to what's happening from your desk.

James Nelson: Sure. So again, it's the question we get asked 20 times a day, how's the market? What are you seeing out there? And it's so specific to what and where. So I mean, I'm assuming we're talking mostly to a New York, or at least a tri-state audience. I know you're very active in New Jersey as well. And I think it wouldn't surprise me if it's very similar there as well, which is, ever since last June, okay? And this was kind of the double whammy of covid hitting, right? And so we know how quiet 2020 was. And what it is, is when there's uncertainty, what happens is buyers, sellers stay on the sidelines, right? So you see transactional volume really drop. Okay, then we would suddenly, we kind of stabilized. People were back, we had a vaccine and figured it out. We had this huge run-up. Actually, the first half of last year was unbelievable. Very busy. And then rates started going up and as soon as rates started going up that's when you saw buyers. And certainly, sellers again, start moving to the sidelines saying, "Okay, we're going to wait". Sellers didn't want to sell into this market. Buyers are saying, "Okay, I don't know how to value these things". And I think there's also that feeling where, hey, if I wait, there's going to be better opportunities to come. You know, whether it's distress, bank sales, whatever it is, six months a year, there's going to be better opportunities. And so we've seen, for example, Manhattan in the first quarter of this year, dollar volume was down over 70% over the trailing four quarters. Okay. And the reason for that is, you know, what's really getting impacted is the larger transactions, which are very difficult to finance. Now, the number of sales that's only down by about a third. Looking at the kind of the trailing four quarters, but it's challenging, look, and to no doubt with rates going up, there's downward pressure on pricing and so we're trying to navigate that difficult to finance. You're certainly not getting the proceeds that you were before. So we're seeing a lot of these situations now where loans are coming due and owners, have a decision either they can pay down their loan, except the higher interest rate or they sell. So I think we're finally at an inflection point here where, and I'm glad that the Fed finally paused rates where it, for a while, it just felt like the rates were just going to keep going up and up and up. And again, for an investor, very difficult to underwrite when you're negotiating a deal now, but you're not going to end up finalizing your loan terms for another, you know, 60 days. There's risk there. And also if you're planning to hold it for three years, or five years, you need to know that you can exit. Trying to determine what is that terminal cap rate, and what is that gonna look like in the future very difficult if you don't know when the light at the end of the tunnel is. So I think we're finally getting to that point where it's starting to flatten out. We're seeing more traction in the market because I think buyers are getting off the sidelines for sure. Sellers are realizing, you know, look, it might not be ideal times to transact, but many of them are saying, "Okay, well look, I've got a dozen assets in my portfolio. These two, they're just not, you know, I can throw good money after bad, or I can try to take as many chips as I can off the table and try to reapportion them". So we're seeing certainly some of that. But above all, it really also depends on what asset class are we talking about. Cash flowing, multifamily, mixed-use. Retail's actually been having a great run. Office, depending on, again, what you're talking about, whether it's class B or C or A or trophy. Totally different stories. So, whenever we talk about the market, we try to get really specific on what and where. 

A.Y. Strauss: A hundred percent. And you know, one of the things I want to ask you as well, and then I think we'll probably spend the latter part just really getting into the book more, mental aspects In your career. You're in a very competitive business. You've been very successful at it for a long, extended period of time. A lot of pressure cycles, team management dynamics, client demands, the marketing lift, and the wonderful efforts you've done there. How do you sort of manage the mental aspects of the business? Besides exercising, I know you're working out. Are you meditating? What is it that sort of keeps you going and, the engine running day to day? Because it's just a very stressful thing. 

James Nelson: Well, I think, and it was just coming from a lunch where I was telling someone about this and he's been at this for a long time as well. I mean, we love what we do. I know you love what you do, and it's a lot of fun. I mean, yes, there are challenges and there's stress, but I love the fact that every single day is different. Every single day I'm learning something new and you're meeting all different types of interesting people. And so, that makes it a lot of fun. But as far as you know, the stress and look times like these when the market takes a big dip, I mean, it's tough, right? But I think what's changed for me over the years is the first couple of years I would ride these deals up and down like rollercoasters and I mean, you know how many times things happen outside your control. Right? And I get so worked up in living these deals every minute of the day. And I show up to work every day, I still start my day early. And I do everything possible within my control to have a good outcome. But there's going to be things that don't go your way. And most of the people in this business, the majority are great people. And every once in a while you run into someone who is not a great person. And unfortunately, that's just, I think that's any business and that's part of it. And so you can either hold onto that and you can get angry and you can be resentful. And I used to get really worked up in those situations. Guess what? It doesn't do any good. So I think you just, you have to kind of go into this understanding that there's going to be ups and downs, there's going to be things that happen outside of your control, and you just have to focus on what is in your control. You just keep showing up and you do the best job you can. And of course, you're going to make mistakes along the way, and you're going to admit them when you do. And carry on. So, (I love that.) Yeah. So that's my answer. I have not figured out a way yet to take it easy, so to speak. Like I just. I get excited about so many different things, and I know we're going to talk about the book. And I mean, you're the same way, right? You've got a very active practice and here you are doing a podcast, right? And yes, it's wonderful to give back and do this, but it's just, we do it because not only it's fun, but it's, I think it's what makes it interesting and (a hundred percent) also the ability to give back.

A.Y. Strauss: Well said. And you know what? Everyone prognosticates, everyone has stress. No one knows what's around the corner. So do everything you can in your power today and let a little go because you're so supercharged, you're going to be successful no matter what you're doing. Now, you talked about sort of getting into the business. Correct me if I'm wrong, but the book was really tailored for somebody who's looking to start their investment career and wants to get the benefit of a veteran who's really seen it all, been there, done that, and seen all the problems and pitfalls in the industry and every which way a deal could go sideways. Go well, go poorly. Anything in the middle. Maybe you could talk about the impetus for the book, some of the feedback and reception you're having, how it impacts your business, some of the themes, and just, I know you can talk about it a lot, but I'd love to hear it for anybody who has not familiarized themselves with it.

James Nelson: Sure. So for the first 20-plus years of my career, I'd always get asked the question, "James, how do I learn how to do this? How do I figure this out? What's the book?" And there was no book. I mean, we all learned on the job. And you still, I mean, there's no doubt this is an in-person business. This is something, and for those of you listening who are just getting to the business, find a great mentor and you do learn as you go. But it's nice to have a roadmap and kind of figure out how this all works before you get into it. So, I think the impetus though, ultimately was Covid and sitting at home, in April, and May, not knowing, are we going to be in this for days, weeks, months. Hopefully not years. And as you mentioned before, I'm a big fan of coaching because I think you have to be able to take a step back and think about the big picture and not just be on that transaction treadmill, so to speak. And I remember one of my coaches and mentors, Blaine Strickland, told me, "James, what are you going to do with this time? Are you going to just ride this out, stay in touch with people, or are you going to do something where you would never have the opportunity to do this if you were back in the office"? And so it actually, that didn't start the book, but it did start the podcast, and out of the podcast came the book. But yeah, I mean, I think as a broker and as an investor myself, I'm in a really good vantage point to share with people how to do this, what works and what doesn't work, because I've seen hundreds, thousands of deals. So getting a sense of how you go about this and then my own perspective as an investor and how I look at opportunities, I really hope is going to not only teach people how to do it but really inspire them. The goal of the book is if someone has never invested in real estate before or is new to it, they'll read it and say, "Okay, I've got it. I know what to do". Right. And for the veterans in the business, some of it might seem obvious, but they say, James, some of these things that you're talking about, because again, the name of the book, the Insider's Edge to Real Estate Investing, How Do You Gain the Inside Edge to Outperform the Market? I think that's really what's there for a lot of the veterans. So it's been incredible and big thanks to Rachel Hartman, my writing partner to help get this done. And I had a big team, a lot of effort. I have Anna Lee on with us now who is handling the PR and helping to continue to get the word out. So I'm so grateful to the team because certainly, I could not do this if this was just a solo project. 

A.Y. Strauss: For sure. And it's funny, we've bumped into each other at a conference. I can't remember which one at this point, but it wasn't too long ago, and maybe it was ICSC and you'd send something like, “I'm a bookseller now” like I have to do commercial real estate. But, everywhere you go, the book is lined up and it gets wonderful publicity and feedback and what a way to credential yourself and to give back, obviously promote, and to crystallize your thinking on the industry. What would you say to somebody entering the business today? I mean, they're hearing you talk, you've put in 20-plus years of really tremendous effort. You're really at the apex of your career and you're constantly pushing yourself. Somebody getting into the business today, it's obviously a different world than when you started, and it will be considerably different in 20 years from now. But what are the traits you're looking for when you're bringing somebody onto your team? What are the types of things you're telling somebody who manages to squeeze into your calendar for coffee and they're saying, you know, I want to be the next major broker? I want to be a major real estate investor. Obviously, there's so much that goes in, but what are the key themes you think are non-negotiable?

James Nelson: Well, the business has certainly evolved in the 25 years that I've been doing this, and it will certainly evolve a whole lot more in the next 25 years. But there are things that have really remained constants, and I think this is a business about the people and sure, AI will help us automate and do our jobs better, and there's tremendous amounts of data out there that can now be leveraged, but the first interview I ever gave on my podcast was with Bruce Ratner, prolific developer. He is built over 50 projects in the city, and I kept asking him, "Bruce, how did you do it? He said, “James, it was about the people, it was about the specialists and how to bring them together". And I talk a lot about that at the beginning of the book and all the team members that make a transaction possible. So yes, you, if you're listening as the investor, the buyer, but you're going to need a great attorney like Aaron. Hopefully not just one investment sale broker, but hopefully you're cultivating a lot of relationships with different brokers out there to find great opportunities. But it's about the people and those relationships. And this really is a team sport. So you kind of asked earlier also about, finding the right people. And I love Jim Collins, find the right people on the bus in the right seats. Right? Or as Gino Wickman from Traction says they get it, they want it and they can do it, GWC. And that's what you're looking for, right? And there are plenty of people out there who want to be the lone wolf, right? And do it all on their own. And maybe they can keep more of the deal for themselves when they have that mindset. But I think that's also a short-term mindset, right? And if you really want to build something and you really want to scale something, it is about the people and the platform and how you really institutionalize that process.

A.Y. Strauss: Amazing. So, James, I can talk to you all day. And I know you've got a busy schedule and I know we're probably around 30 minutes in. Anything I didn't ask you, you wish I would've asked you? Anything you didn't think we got to, you'd like to cover? 

James Nelson: Well, I think one of the number one things, and you might be listening to this and hopefully this will inspire you enough or at least pique your curiosity to say, "Okay, well I'll check out the book". Maybe listen to a couple of the podcasts. Try to see about getting into investing, but if you're listening to this right now and you're new to it, I'm guessing probably the number one thing that's holding you back, unless you're independently wealthy, is, “Okay, James, this sounds great, but I see these buildings that are selling in New York and they're millions and millions of dollars. I don't have millions of millions of dollars in the bank. How do I get into this business?” And I think it's that fear, that lack of capital on how you actually start, right? And it's a really fair question, right? And so a lot of what I talk about in the book is the value you bring to the table, first and foremost is the opportunity, right? So let's assume you've specialized and you have that business plan, and you have that expertise on how to reposition that asset, right? And you find that opportunity. If you find a great opportunity, there are plenty of partners out there. Who you can find, who'd be willing to partner with you, who has that track record, have those capital relationships for you to get started in your career, and if you do enough of those, then one day, yes, you can go off and do these transactions on your own. So, I just want to say that because a lot of people might be listening saying, “okay, this sounds great,” but again, I'm too early in my career. I don't have the money to invest at this point, and that shouldn't hold you back. I was very fortunate that a couple of years into my career, I invested in a great opportunity as a limited partner. And that's actually how I've done the majority of my investing is as a limited partner. And once again, coming back to that point earlier about the people. For me, yes, the numbers are important, and the business plan is important, but it's really important who the person is, and who is the sponsor, right? So that's kind of the one thing I would leave everyone with. 

A.Y. Strauss: Couldn't agree more. And so inspirational, so practical on the advice. And I know if you're listening to this now, you're going to watch James continue to hit levels of career he did not think possible previously, but he always never ceases to amaze. James, I really appreciate all the, the time you've given us the conversation, the friendship. Can't wait for people listening to this to check out the book if they have not yet. And to be continued, my friend. Keep doing everything you're doing and more, and look forward to seeing you in person real soon.

James Nelson: Thanks again, Aaron. This was a lot of fun and wishing everyone all the best.