Russ: Welcome back to The BusinessMakers Show, coming to you today from Station Houston, a real cool accelerator here in Houston with a live audience in front of us. I’m very pleased to have as my guest, Justin Segal, President of Boxer Property. Justin, welcome to The BusinessMakers Show.
Justin: Thanks for having me.
Russ: You bet. Tell us about Boxer Property.
Justin: Well, Boxer is a privately held commercial real estate company. We own and manage office buildings, hotels, shopping malls, and some other assets. We have about 16 million square feet that we control, about, somewhere between 12 and 1300 employees; we’re based in Houston, and we have properties all over the country.
Russ: So, how long has the company been doing this?
Justin: Almost 25 years. My brother started the business when he graduated from law school and I was still in college, and we’ve been at it ever since. Typically, the properties we purchase are distressed assets when we get them, and they need a lot of attention and care to get them back into a position where they can be valuable on a long term basis, and the operations piece is very intense. It’s like running a 12 ring circus.
Russ: Ok. So, when I was invited to have the opportunity to interview you, this description of really a company that uses technology a lot was presented. You and I talked about it; it’s quite impressive. So, share how all of that happened.
Justin: When my brother started the business, from day one it was very organized, so we’ve always had a culture of, kind of, understanding, what our processes are, what our procedures are, where our information is, and we existed that way for a long time in somewhat of an analog world. Even though we were early adopters of technology, we did our first salesforce implementation in 2004, we were on document management since around that time as well, but really it started accelerating very dramatically around 2010, when we found ourselves in a position where we were able to grow rapidly. It was a time where the market had been through some crazy gyrations, and we found ourselves in a position where we had a strong track record of buying distressed assets. We had access to capital, and normally in commercial real estate you don’t have those two things at the same time, but we did.
But we realized that because of the intensive nature of our operations, if we doubled, tripled, quadrupled the size of the business, we would stumble on operations. We had organizational capacity constraints as opposed to financial or deal flow. And, at first we looked at that and said, alright, we’re going to solve this problem by hiring excellent people, you know? And they’re going to be really good at all these things that we need to do, and while there are many excellent people out there, it was, proved too difficult to find enough of them that could carry us through a period of tremendous growth. So, we turned instead to technology, and fortunately I have a background also in technology; I’ve run a software business. I spent some time in Silicon Valley working with venture backed startup companies, so I was at least comfortable with that.
And, the combination of having a real need to invest in technology, a background in it, and starting with a pretty organized business in the first place put us in a good position to really move forward with it aggressively, and we have.
Russ: Ok, you know I’ve been around the software business a lot. I’ve been around system implementation, and just because you have a good experience doesn’t guarantee success. What do you attribute the success to that you’ve had at Boxer Property with product development?
Justin: Well, I think, you know, what we started with was a focus on data, and we understood that even, you know, in a world like commercial real estate, where you would think it’s, you know, bricks and mortar, it’s a physical asset. It doesn’t move, you know, even in a world like that, the data image of the property or of the company is critical. So, the first thing that really drove our success, I think, was having the patience and the understanding of the value of investing in a good enterprise data platform. Once we have the data, we are able to start using it in ways that powered our decision making. And that’s the next part, is we went from a world where we had to walk around all the time to see things. You know, we were limited by how many properties we could inspect, to a world where the information about the properties would draw us to where the problems were. So, we went from walking around, to managing by exception.
I think making that shift was very important, because it let us make better decisions and used our resources more effectively.
Russ: Was there really a noticeable time when that happened?
Justin: You know, I would say, 2011 and 2012 were, that was the time when the blinders came off, and we said, you know, we are certainly and always will be a real estate company, but we’re equally a data company, and a business process company, and an analytics company.
Russ: Were you copying some other sort of commercial real estate package that you were familiar with to a degree, or was it all, you know, kind of original design?
Justin: Well, I think we, I would say it’s original design, but what we were really copying was what we were already doing. So, we would have 10 different people doing a particular thing, and they would all be doing it in similar but different ways, so you could never compare what was happening, and it was hard to train somebody. And, you know, once we took the best of those 10 different versions and codified it, and put it into a system that was replicable, and scalable, and trainable, and repeatable, and so forth, then we found that consistency across the company was very valuable in itself. But being able to have data about what was happening was really beyond the limited vision that one person could report when you call them to ask about the property. That was where things really took off, and you know, really we were just taking the things that we wanted to do, that we said that we did, that we sometimes did, and did them consistently, and that was a huge step forward.
Russ: Ok. So, as you know, new hire training a big thing now? I mean, teaching them your system has to be of paramount importance.
Justin: So, there is training, but we deliver training typically in YouTube style snippets. We have, you know, 2-3 minute videos that people do.
Russ: Ok. Well, I know it’s a success story. Not only that, but the system started working so good that you actually decided that you had a software company too, right?
Justin: Yes, well, so we built a system for our real estate company and we realized that although it was working very well for real estate, the fact that we were dealing with real estate was somewhat arbitrary, and other industries were experiencing the same problems that real estate was experiencing, and so we’ve spun that off as a separate venture, and have a bunch of clients in a broad range of industries that are using that product now. But the thing that’s interesting about it to me, and this is true for real estate as much as it is for any industry, but we’re talking about real estate, so I’ll say, is that we’re past the point now where just knowing things in one person’s head, or in a group of people’s heads is enough to run a business. In my opinion, we’re entering a time where you really need to understand the data behind your business, whatever that business that may be, and the good news is that if you do that, then you can compete.
And if you do it well, then you can excel, and the ability to change the nature of your business is very important, because like many businesses, real estate is being disrupted. In some ways, largely, it’s the technology that is disrupting real estate, and it’s the technology that will help us rise above that disruption and not get caught under it.
Russ: Was there a big debate when you decided to do this, at some time? I mean, I’m always interested in those points in businesses where an idea surfaces and gets executed upon, but I know a few that have been at this same point with you, and have stepped out there and failed. I gather that you’re not failing with it in other industries, so share a bit of that story with us.
Justin: Sure. Well, you know, the interesting thing was when we realized that the way that we were operating was not unique to us, and not unique to real estate, we saw this huge expanse open of how we could try to deploy this product to the market. And the first debate was assuming that we want to do this, do we want to go vertical and focus on real estate, and say hey, we’re a real estate software provider, or do we want to stay abstract and go broad? And we felt that if we focused too much on real estate, we would be typecast, but at the same time, if we go too broad, then it’s only certain companies and certain people that kind of understand how this abstract approach can work for them. So we decided to try to do both at the same time. So, we’ve launched an in-house entrepreneur program where we’re working with a small number of kind of highly motivated entrepreneurs who want to start a business around a particular type of implementation of the product.
So we have a number of industries that we are now developing kind of pre-configured versions of our system for, and it’s interesting because the software product alone is a spin off from the real estate company, and now we’re spinning off from the software a number of other verticals; hotels, distribution companies, insurance, you know, and the list goes on. When you become organized, it takes so much chatter out of the system, and you can use the time that you used to spend chasing problems and divert it to other things. In many cases, it’s expanding our product offerings.
Russ: Well neat. Well, I’m still curious though about this step, you know. I mean, I understand that you looked at your system and you decided, well we’re not doing anything that’s really unique in business, so it can be taken outside, but, I mean, was there, was there a first idea? What sparked it?
Justin: You know in the real estate business we have a lot of tours with lenders and with insurance companies. The insurer always wants to come and see and make sure that you’re operating, you know, a clean office, real properties, that there’s not problems out there. And those meetings would typically have a very small amount of time in the conference room, and then you would be out looking at properties. And we found that the balance was shifting, and eventually we would only be in the conference room, and, and our lending partners and insurance companies would be coming back with their risk managers and their compliance officers.
And then maybe the one time where we really kind of got an idea that this was happening was, a friend of ours who is in the medical space, kind of runs, effectively, a distributed hospital system with emergency centers and so forth, came to our office. He saw what we were doing, and he came back with 15 people, and they used our boardroom for the day, and we spent about 4 hours with them, then we left. They had lunch brought in, and they spent another 4 hours talking about their strategy, and we said, this has, you know, you guys are in a totally different business. And they said, well, but it’s, you’re doing all the things that we’re struggling with, so we want to see how you’re doing it. And they had their consultants, and their implementers, and, it was a bit of an eye opener.
Russ: Great. Well, Justin I really appreciate you sharing your story with us today.
Justin: Sure. Thank you for having me.
Russ: You bet. And that wraps up my discussion with Justin Segal, the President of Boxer Property. And this is The BusinessMakers Show.
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