E339 | Fog of War: Navigating Uncertainty in Commercial Real Estate with George Pino

Hey George, how are you doing today?

I'm doing well, thank you.

Hope you're doing well as well, Chris.

I am.

Is that a coffee you're drinking or.

It is coffee.

It's still 11am where I'm at and.

Well, like most commercial people in commercial real estate, I pretty much drink coffee throughout the day.

Yeah.

So I come from the commercial and I know that feeling.

So the question we internally, we always joke about with people in the company is now do you black cream or cream and sugar?

You know, what's the person's preference?

Yeah, black, straight black for me.

Although you know, one of the younger agents in the office has got me in the afternoon switching to a mushroom type coffee which I'll see out, see if that lasts or not.

Okay.

I at one point in time was doing the like the, the ones were like the nitrogen that you could do almost from like a kegurator or whatnot.

Nice, man.

That would make the hair on the back of my neck stand.

It was so caffeinated that I'm like, I can't do that anymore.

But yeah.

Hey again, thanks for coming on.

Why don't you start out letting people know a little bit about your story and how you got into real estate?

Okay.

Well, like a lot of people actually kind of fell into it by accident.

And my story started right out of college.

I had a company that I had started in college and was working on it, but it was very seasonal and for a college kid it was fantastic.

Did allowed me to travel during college and do some other stuff.

But you know, I had a right after graduating.

It was the wrong or slow season for that business and I had some free time.

A friend of mine called me up and said I'm working at this real estate company and they need some help.

Are you interested in, you know, a short term part time gig?

I said sure, why not?

Not doing anything else.

Next thing I know that turned into 30 plus years of a career.

You know, they got.

I got offered a permanent position in two in two weeks there and determined that it was a good opportunity and wanted to know more about the industry and kind of just went from there and grew from there.

Now it's interesting because like you said, most of us fall into this and I was in college, I was going for engineering.

And then towards the end of my, I think it was like start my senior year halfway through I realized, you know, as a civil.

So I'm like, do I really want to go on design bridges the rest of my life and then end up doing you know, construction management and getting in real estate.

And I'm like, man, that glad I did that change because I would have been bored just sitting there.

But as you mentioned, most of us fall into this space with that kind of falling in.

What kind of commercial, you know, what does CBI do?

CBI is a full service commercial, full service commercial brokerage company.

Now we do quite a bit of retail.

We do leasing sales, but we also have office people, industrial people.

Myself, I still do transactions.

I am a single tenant net lease representative.

Mainly buyers for the most part.

I love finding buyers and helping them reposition assets on their investments to achieve the goals that they're trying to do on their investment goals and or even life goals sometimes.

And so that's actually probably the funnest part of the job as opposed to a lot of the management and the other stuff.

But we also sponsor syndications as well as working with international clients coming into town into the United States to expand them throughout the US we have 27 affiliate offices around the country.

Okay, so you're not just, you know, call it the California.

You're basically spread throughout.

Well, we spread throughout.

We have the ability to transact in all 50 states.

I myself, I think I've done 38 states.

I want to retire once I hit all 50.

Of course, surprisingly, Hawaii wasn't that hard, but Alaska and North Dakota, wow.

Hard to find some good investment properties for a lot of my clients up in those areas.

So I actually, it's funny you mentioned that too because people ask us like, you know, with our note business, you know, how many states?

I'm like 42.

And they're like, wow, you know, that I'm like, because I want to get to 50 and I can actually tell you the states, you know, Alaska, Hawaii, North Dakota, South Dakota, Oregon, Washington.

And so I can tell you the states that I haven't been in yet.

And you know, I want to get to.

But like I mentioned, I actually have somebody for you in North Dakota who, you know, has got some investments up there that I could always connect you with.

So trying to knock one off your list for you.

You've been around the block, you know, and been around for a long time.

What's something about your journey that is either whether unique, a learning experience, just share something with all that vast knowledge, you know, something that people could take away.

Well, when I first started the industry, you know, my first thought was ignorance is bliss.

But ultimately what I've really learned from that is, you know, ignorance was bliss initially in my mind.

But I realized that, you know, it wasn't helping anybody or myself or my clients and really just the educational process.

I think that agents that want to be productive and continue to be productive and maintain their clients and maintain the deal volume need to actually make it a part of their journey to be educated on what's happening new in the market.

Whether for instance, you know, the average commercial real estate agent is about my age and they are white and they're male.

That is on average the right now who is transacting in commercial real estate.

The issues that we're finding is that, you know, a lot of them don't adopt or are afraid to adopt some of the newest things, whether it's technology, whether it's marketing techniques, whether it's branding and things like that or you know, like to stuff right now is AI.

And so I think that ultimately through the journey and through the career, what I've learned is that number one, just like anything else, when it comes to the world, the survival of the most adaptable is going to be the one that's going to end up winning.

So you have to be very adaptable.

And part of that adaptability is just understanding where the trends are going, but also what other factors are coming into the industry that are going to influence how you do your business in the next one, two, five years and make plans to incorporate that in.

You know, whether it's AI avatars, whether it's, you know, what are you looking to do and how can that work for me so that we are leading the pack, so to speak, or you're the ones trendsetting and testing out new things.

And that's always been our core philosophy behind that.

And when it came to the real estate side, and that's pretty much, you know, what we looked at.

And really it does adapt quite well to personal life as well.

You know, I always tell agents, new agents starting off, if you're going to wait to learn everything in the market, you'll never do a deal.

Because after 30 odd years, I'm still learning stuff every day.

No, and that's great advice because a lot of special real estate companies may have been family or been around for a long time and I'll use a phrase, old school way of doing things and not trying to adjust.

And I know somebody who has been buying up some certain asset classes and you know, I think they see value add in ways of implementing some new technologies like building management systems and really analyzing where's the money going on utilities and some of these other expenses and how to mitigate some of those.

And all of a sudden, you know, you got a big building, you bring your expense, you know, utility and expenses down, you know, a good chunk.

You know, everything's based off a cap rate.

And no I raise, no I goes up.

They just, you know, added value just by implementing some technology that could have been a, you know, it could be a $10 million deal that they put $50,000 investment into that just made, you know, added a million to $2 million in that investment.

Absolutely.

You know, I think that's one thing that a lot of investors are starting off, don't really understand or really how to utilize the create or rather how to create that value.

And you know, for every dollar that, you know, you just mentioned the cap rate scenario, but you know, ultimately what that really means to any investors, that for every dollar that is either saved or increased on the NOI, that will increase the NOI is equivalent to a 16 to $20 based upon current cap rates valuation on a property.

You know, and that in itself is the power of that leverage in working in it.

So you want to look at what can one make you more efficient, make it a little bit better, or even something as far as like watching out trending, what's happening in the trends.

You know, for instance, we used to, I used to do a lot of multifamily investing and you know, something as simple as dishwashers may not be as popular these days, but you know, washing machines inside the unit would be fantastic.

So you can take older buildings, and there are a couple of really good companies that make a washer dryer that works well all in one that fits right in a dishwasher.

And they only cost about $1,500.

But, you know, what we do is we go in there and we say, we'll remove this dishwasher, but I'll put in a washing machine dryer set for an extra $50 a month.

Okay?

That increases the value right there on that.

You know, $50 a month is $600 a year on a cap rate basis.

Multiply that by 15 times at the low end, 20 times.

You know, that's a $12,000 increase for a $1,200 spend.

That's how I look at it on investments and also not just on the investment side, but also when it comes to, you know, with our agents, like, you know, on the how can we incorporate that kind of leverage and, and the ability to be able to do stuff, whether it's utilizing new tools to become more efficient or whatever.

So yeah, absolutely agree with you.

Great points.

And that's interesting about.

Again, I agree with you that you find more people nowadays, because a lot of people tend to who are renting also, I think, spend more time eating out than they do actually using it.

And now if you have the washing, it's probably more.

Washing of clothing is probably more important than some of the dishes and stuff.

But.

Yeah, and they're willing to pay that extra 50amonth just for the convenience, not having to pick up their clothes and walk down to the laundromat or the.

Or if your building's large enough, the laundry room there.

Yep.

Another question I have is kind of more about your philosophies and if you have a core philosophy or principles that you live by and how you treat your investments, your partners, your clients, you know, if there's anything there that you like to preach and speak about, it'd be great.

Well, you know, a couple.

I mean, when you talk about clients and things and investment strategies, probably the core investment strategy is a little bit different.

But when it comes to our clients and when it comes to people that we work with and things like that, you know, ultimately, the way I look at it is, can I add value?

Can I help them?

I mean, it kind of goes along the lines of the investment strategy as well as how can I add that value and whatnot.

But at the same time, it really goes.

Goes back to, you know, the old school mentality of do the right thing or, you know, I think there was a book that was quite popular about 20, 25 years ago called Everything I Ever Needed to Know I Learned in Kindergarten, and which is the golden rule, treat others like you want to be treated.

And surprisingly, if you follow that rule, it's amazing how many other little life issues do not pop up.

But, you know, as a reminder, you know, we have a holding company and, you know, you had mentioned the coffee, but, you know, I have a mug here or coffee cup says Pono Asset Manage Management, that's our holding company.

And Hawaii epono is the Hawaiian word for essentially to do the right thing.

So we're always looking for socially responsible investing opportunities, giving back to the community and things like that.

Now, as an investment philosophy, I think one of the ones that is probably a little unique and different than most others out there is that.

And this is what I tell my clients as well.

The reason I bought this property is as an investment.

So I should be looking at it every year and making sure that it's performing as good as any other asset that may be out there, that's another opportunity.

It doesn't matter whether the market's down or whether the market's up or what I paid for that property, because ultimately I'm looking at the returns.

And so if it makes sense for me to sell that property, even at a small loss, if I can exchange it into a better property that's going to give me a better return, whether it's a cash flow or appreciation play or whatever it may be, then that's what I'm going to do.

I'm not going to wait till I, oh, I can turn a profit of a dollar.

I can sell this.

Now.

Instead, I'm looking at my personal investment saying, you know what, this one's performing well, but if I sell it and buy this one, it's going to perform a whole lot better.

My money.

So always take a look at your assets and what you're working with and make sure that they're performing as well as other opportunities in the market.

It's interesting because I was talking to somebody about that, and I think a lot of investors miss that point.

Yeah, and I was speaking to somebody about, and, you know, I've worked, you know, many years at a W2, and they're working in W2 and stuff.

And I told them, I'm like, your investments are just like a job.

If you've got a better opportunity that could come up that is better for you from whether personal financial, like, you evaluate one versus the other, and it's like, okay, do I stick with this one or do I make the leap?

And of course, now the similar risks of the one you have, you kind of know what you're getting it, you know what's getting involved and what needs to be done or whatever case.

And this new asset slash job, you're basing it off of certain information and certain due diligence you have.

I'm like, it's very similar, you know, it's, you know, that's how you kind of should look at it, is if you're going to sell an investment, you know, just don't sell it to sell it, you know, just like you just don't move a lateral job just to move.

There's got to be some type of reason, whether it's the time, you know, or whatever the case may be.

But also, you got to look at it long term.

And if you're going to take a loss on something, it's still okay because you're moving to something that you can potentially recoup it and grow where My construction management background.

You know, I used project when I was project manager.

The hardest projects were the ones that were, you know, not only were they not making a ton of money, but they're most challenging because contractors got a business tough owner.

The ones that went well, those were easy.

Learn as much on those.

Of course, there's.

You got to make sure sometimes you make that shift.

And people, like I mentioned, people.

Yeah, it's a slight, you know, it's keeping your eye on the goal and what your end goal is.

I think, you know, it's not a investments shouldn't be a set it and forget it type of thing where, you know, ultimately when it comes to the investment side, especially with us, you know, I always buy with the intent for my personal assets.

I should say not.

Not necessarily syndications or sponsoring deals, but on personal assets I'm always buying to hold.

That being said, I'll always at any time sell any one of my properties if it makes sense to do so.

And I'm always continually looking at it.

I mean, I may not actively be going out and putting the property on the market unless I determine that, hey, here's the opportune time.

The investment horizon is kind of ending.

For this, this particular investment, I need to move on to something different.

But generally speaking, I mean, the last asset I sold 72 units in Texas.

We weren't going to sell it.

And somebody came up to us and offered a substantial increase in the price versus what we had paid for it about seven years previously.

But our intent was actually to redevelop and add some units onto it.

It was a much larger property.

We figured we could add approximately 18 additional multifamily units and create the value that way and then go out through that route.

The offer he put in front of us essentially had all of our profit.

So I immediately said, yes, I get my profit, I get my returns and no risk sold.

And I wasn't going to wait and say, hey, this is.

I was going to redevelop it.

I wasn't going to say, no, I'm not going to take this offer because.

And I'm not going to sell it until I redevelop it.

It made sense to sell it at that point.

So we did.

Recently sold a personal asset as well, that we weren't looking to sell it.

But also in the opportunity came and somebody reached out and stuff and now they own the proper next door and they're interested in this one as well.

And basically it was like, make an offer and then they made an offer.

And I was like, okay, that's actually, you know, it wasn't a low ball investor, you know, type of offer.

It was like a real offer.

And I'm like, great, let's do it.

Yeah.

And we closed, I think two months ago on it.

And it's like, fantastic.

Yeah.

See those are, that's the, I think that's how you have to kind of look at it.

Always be open to the opportunities that may come out, but you have to vet it out.

And I think that goes with almost anything in life.

But, you know, if we want to core down to that philosophy that you're talking about in general.

Yeah, yeah, we talked a little bit about people, you know, not making shifts or whatnot.

What's another area where you see, I'll call it people who are newer to the business make mistakes that, you know, you might be able to help them try and avoid or just that you see a lot of people making that.

You're just like, oh man, I wish they would have done something.

Well, a lot of times they look at, I mean, I think the biggest mistake for newer investors coming into it is they, they get focused on one metric, meaning cap rate.

I need a cap rate that's going to be 6 and a half percent on this transaction.

I need a 6 and a half cap.

6 and a half cap.

61 and a half cap.

And even if I put a 6, 4 in it, some of those investors won't even look at it.

But what they're losing sight of is there's reasons why their properties have higher cap rates.

And when you're looking at an investment strategy, an investment item, I mean, you have to, more importantly than the acquisition, it's the exit strategy.

How are you going to exit?

What are your assumptions on exiting?

Can I, when I, when the lease is over, am I going to be able to exit out of this particular property that may have a higher cap rate, but.

Or are the leases even sustainable when it comes time to renew those leases?

You know, taking a look at the whole picture as to why it is and where it is there, I think that's the biggest mistake that a lot of newer investors look at.

They just look at, hey, it's a cap rate.

So you, you have a lot of investors buying tertiary properties and markets because they think they have a really strong tenant base, like a Dollar General or, you know, one of the dollar stores, something along those lines.

And in reality, those rents may not be sustainable in that market when the lease comes due and you know, they're going to be hurt down the road, whether it's four or five, seven years.

Down the road or the other thing we've seen in our area is when you've got those dollar generals or some of those bigger blocks in the strip mall locations, you know, if they've got 10,000 square feet, next thing you know, you're breaking that up into 3 and 4,000 or 25 foot spaces because nobody's leasing that big a space anymore.

And so that's one.

The other one with cap rates that, you know, when I speak to people about, two is ignore the fact that yeah, it's a great cap rate, but your roof's only got five years left to it.

You might have to, you know, the, the parking area may have to get redone or some of the H VAC systems may need to be replaced.

There's other components to the building that are have significant capex that, you know, you got to make sure that you account for that coming down in the next five years, which is going to have a serious impact on your numbers.

Absolutely.

And you know, a lot of people don't take a look at that.

And I think the other, the other one of the biggest connections or issues that we run into a lot of times is that not just the cap rate issue, but also what am I going to, you know, how is my investment performing and not looking at the whole picture, as in, you know, not taking into account if I exchange and go into something larger, I'm going to have a little bit more tax benefits and that's actually more cash in my pocket with depreciation, things like that.

And it was phasing out the new big beautiful bill that was passed previously reinstated that.

So there's a lot of properties that are out there and for the right individual, that works out perfectly for them and can be returned substantially more.

I mean, I've even have investors that have invested in zero cash flow properties that or ZCFS that the yields are still 11 12%, you know, and it's a safe potential investment depending on what they're looking to do and how they're, how their finances look.

So there's a lot of different opportunities out there, but not looking at the end goal and figuring out what exactly you're trying to accomplish and not letting your broker or agent know that Then that agent, you're taking away half the power of that agent, which is being able to advise you on what are the best opportunities for you to achieve those goals.

As we start to enter and wrap up this episode, I do like to do a quick, I call it lightning round, which nothing ever with me is lightning because I love to talk.

But if you were in a few words to describe the current real estate market, how would you describe it?

Military term, fog of war.

A lot of stuff going on from multiple directions and it's really hard to see what's happening.

And also there's a lot of outside influences that haven't really impacted as if haven't had as big of an impact as of yet that they still may.

You know, like, such as the tariffs.

You know, a lot of the tariff issues and spending hasn't even hit because it really, even though they went into effect back in April, people were holding back and forth.

And we really started first started seeing on the retail side tariffs starting to take effect in sales in June, end of June, July.

So it's still a little early though to really see what, how is that going to play out?

Is the consumer confidence going to come back?

We're also seeing that with across the board though, there's a lot of money that's ready and willing to come in and step in to invest into properties.

It's just that they're not, they're a little bit concerned.

I think there's a lot of construction also that's been slowing down mainly because the ideas of cost of construction.

Except for certain markets.

I mean, some markets obviously, you know, New York and Florida, you know, New York for the first time since COVID had a positive, more people in the office than they had out of the office.

Meanwhile, you know, other sub markets like Los Angeles, we're still down 34% from the height of people going into the office pre Covid than today.

You know, seeing those changes in the market, it's hard to see and see where it's coming.

But I think we're seeing a lot more, less gray skies and more blue skies because I think there's a lot of opportunity.

It's just that people aren't sure exactly where to put their money yet because there's a lot of stuff that's also going on.

Yep.

No, that's.

I love that fog of war example.

And I think one thing people forget about is because everything, a lot of today's society is based on everything being so instantaneous and happening immediately.

And you know, the interesting Component that is real estate is like a train and it's like it moves.

But it's, you know, what happened three or four months ago, you're finally starting to see today.

And people forget like, yeah, properties are under agreement 45 days ago or what's closing today.

What can happen over 45 days or even more.

And like you said, even longer.

Tariffs, taxes, interest rates, it takes just.

Because if rates go up or down today, you know, that really doesn't get felt for a little bit more down the road.

Three or four months.

Yeah, yeah.

Yep.

At a minimum.

Commercial realm.

Yep.

Yeah.

I mean, it kept going down, but in certain markets, but it wasn't immediately at that point in time.

Yeah.

You know, I think ultimately it's a lot of mindset as well.

I mean, meaning, you know, one of the things when I do a lot of training with different agents and one of the things I've always mentioned is that, you know, business doesn't stop.

It's not like it's a consumer in the sense that, hey, you know what, my income's a little bit lower, so I'm going to stop going out to eat.

I'm going to stop doing this.

I'm going to stop buying things.

Business grows, it keeps going.

Even during downtimes.

There are companies that are expanding and companies contracting, which allows opportunity.

So it's more about the adaptability.

Again, going back to that with the agents being able to see where the opportunities lie.

You know, whether it's growth in down markets for certain types of companies or it might be downsizing for other types, but you can match those together.

And it's now a win, win situation that you just created.

And you look like a rock star because you just did this during a down market.

And in reality, it's just identifying who needs what.

Well, George, thanks for coming on today.

If people want to reach out and connect with you, what's the best way for somebody to reach out?

Best way is actually probably just via email.

And, you know, it's gpinobicommercial.com and that's usually the fastest, easiest, quickest way to get a hold of me.

Great.

Thanks for coming on today and look forward to speaking with you in the future.

Thanks for having me, Chris.

Thank you.

Take care.

Thanks.

Bye.

This episode of the Paper Trail podcast, I interview George Pino with CBI Commercial.

It was a great conversation where we dive back.

I got to dive back into some of the old war stories that I used to deal with in commercial real estate where George is a commercial broker, got offices across the United States but really shared some just overall philosophies on investing.

And one that really kind of hit home is in regards to people always wondering the next deal and understanding how to get out of a deal into a new deal.

So we talk a little bit about that.

Talk about the economy.

I love this term fog of war in regards to the type of environment that the current markets were in right now because of so many external components impacting real estate.

It really has an impact of people don't know and it's kind of like you're in a fog just waiting for it to clear, see, you know, the dust to settle and see what happens.

So hope you enjoy this episode that I did with George Pino of CBI Commercial.