From July 2018 CIO Bulletin

“When it comes to investing, most people have a clear idea what their goals are, they just have no idea where they might find it. Not in today’s complicated economy. That’s where we come in,” says Brian Nelson, Founder of NB Private Capital, LLC.

Today’s financial world is as equally intimidating as it is intriguing. However, with the right insight, investing can be one of the most lucrative endeavors you partake in. Real estate investing, in particular, has proven – time and time again – that it can serve as a wealth-building vehicle for savvy investors.

Starting a business may not be a challenge for many entrepreneurs, but maintaining the same is a larger challenge. It’s tough for anyone to start out as an entrepreneur building a new business from the ground up. They say 50% of the businesses get wrapped in one year because of ‘C’ deficient (Confidence, Caliber, and Courage) entrepreneurs. But nothing is impossible for successful entrepreneurs like Brian Nelson, Co-Founder of Nelson Brothers and NB Private Capital, who says,“Be objective. Be authentic. Understand your strengths and weaknesses. Keep a positive attitude no matter what and never lose sight of what is important to clients.”

Nelson Brothers was started in 2007, just in time for one of the largest real estate recessions in history. Not the best timing. The key though was understanding investors. Back in 2009 and 2010, folks were petrified of everything. They had felt betrayed by their traditional go-to investment vehicles. Trust in the investment world was hard earned in the Madoff era. Yet they still wanted their money to go to work for them. They just needed something new. Something different and historically more resilient to recession. Not many investments can fill that void during a recession.

Brian is an optimistic thinker who stresses the importance of staying in touch with clients’ needs. If there is a void in the marketplace that you can fill, jump in. Right now, investors are anxious. Financial analysts and economists are all across the board on where this economy is and where it’s going. We’re in unchartered territory. The natural inclination is to keep money on the sidelines. But the opportunity cost is significant. Successful people are used to having their money work for them. While it’s unclear where to invest, they are clear in what they want for their investment. They wanted income and tax efficiency…but not at the expense of growth. Also they don’t want to have to second guess where we are in the cycle.

We help to help solve many of those problems. At least for a portion of the portfolio.

The right student housing property can provide a 6% to 7% annual income, completely tax sheltered through depreciation with capital appreciation – all on a tangible, brick-and-mortar asset anchored by the historical stability of a major university.

It’s a compelling story. Falling right in line with investors’ goals. That’s why we did so well with the student housing concept. The benefits resonate. People immediately recognize the larger universities like USC, University of Oregon, and Notre Dame which are stable anchors of stability. In general, looking at the data, you see little historical correlation of the economy or stage of the real estate cycle to the throngs of students enrolling at big schools.

If those schools are far from home like Eugene, West Lafayette, South Bend or Provo; students would inherently need a place to live and preferably close to campus. With universities aged by centuries, there is only so much space close to campus. That predictably creates a need-driven asset that may be less susceptible to the cycle. The result can be a terrific investment.

Brian Nelson, the (Principal) founder of NB Private Capital, LLC has led his team in sales, marketing and acquisition of over a $1 billion in student housing through his current firm, as well as its predecessor.

The key is finding that competitive sustainable advantage that few else in the market can replicate…. but that matters to the students.

In a dialogue with Mr. Brian Nelson

How successful was your organization’s journey to date?

Immense. We started Nelson Brothers with 10 employees in 2007. Through investor loyalty, relationships, referrals and performance we steadily grew the business 20% to 25% per year. Then once they grew comfortable with us, our track record and the student housing investment concept exploded. Our new entity NBPC has an experienced team of associates who were with our predecessor of NBPRE. We’ve established a comfortable and easy way of working with investors and with each other in that we all feel like family!

Why did you choose this arena of business?

My family grew up with real estate. My father sold Limited Partnerships in the 80s. Truth be told, I didn’t like it at all. I pursued an MBA because I thought it would allow me the flexibility to find an industry and a purpose I’d be passionate about. I just never thought it would be in real estate. Turns out, I just hated the nature of the business as it seemed that the cycles were either feast or famine. With stabilized student housing, if you buy right, your demand is primarily tied to the university. You’d be hard pressed to find a more solid institution.

In student housing, we found a way to marry the historical stability of a university with the potential benefits of commercial real estate – monthly income, tax shelter/depreciation and capital appreciation.

The marriage of those potential benefit sets seemed to fall right in line with what a lot of affluent baby boomers are looking for. Monthly income, optimized through tax savings, in an asset that tends to appreciate and expand the nest egg over time. Then this investment is something they can pass along to their heirs without any tax hit.

How do you term the word success?

For us success isn’t defined by growth or the bottom line. In my opinion that will come if we execute on strategy and take excellent care our clients. Most people prefer to do business with someone they like, trust and feel like they can have a relationship with. To do that, communication and ongoing dialogue is key. But you also have to be humble enough to admit mistakes, learn from them and show that you are constantly improving. It’s okay to fail. In business, in real estate, in relationships, that’s always going to happen.

In 2017, our previous company, NBPRE was named as the 4th fastest growing private real estate company by the Inc. 500 and ranked #129 as fastest growing
overall in the U.S. That takes in data from just a 3-year period which is phenomenal, especially if you’re a sales and marketing junkie like I am.

To me, success can be a huge litmus test for character. It can be humbling. I felt honored but all the more committed to the clients who helped make it
happen. At the time, we were starting to fall behind on service “We tailor our services to the specific needs and requirements ofeach individual client.” and on investment performance. For me, that meant it wasn’t worth it. It wasn’t sustainable.

Success had to entail the ability to create the value we promised.

What is your focus point?

We love the student housing industry, especially within the college atmosphere. There are the factors of youth and energy. Going from there, it’s engaging
with the students, building relationships and helping foster a community of friendships that can last a long time. To be honest, you wouldn’t believe some of the
amenities the students have today. Sometimes we get jealous. But it’s great to deliver a living experience that is simply unforgettable. For us though, it’s two-fold because we have two different clients: The student tenants at the property and our investors who work with us to help acquire the properties.

For them our focus is on all the benefits we offer. Early on in our business, we tried to simplify it by coining the acronym S.W.A.N. – sleep well at night. If we keep our properties full of students, keep them clean, grow rents and improve financial performance, investors don’t have to lift a finger or have to worry about how the morning news
cycle impacts their nest egg. Those benefits aren’t sustainable if we’re not creating a compelling living environment and fun place to live that’s safe, friendly and conducive to their studies.

Could you talk about your company’s mission and vision statement?

We feel that the three most important values are: Performance, Communication and Relationships. This pertains to the way we work with each other in the company, with our student tenants, their parents and with our investors, even vendors too. If our company experiences a lot of growth but is hindered in any capacity to deviate from these, then it’s a matter of slowing down and getting back to the priorities.

Can you elucidate on the products and services that bring the best out of your company?

Essentially what we do is find what we believe to be well-positioned student housing properties near major universities – and then structure them so people can invest directly. Then we lock in a long-term fixed interest rate, non-recourse (no personal liability) loan which is why I like real estate today. In business, managing expense growth is hyper-critical. In this case, the interest rate is our largest expense. If we can fix that for a 10-year period or so, any revenue growth falls faster to the bottom line.

What’s great about it is that now folks can own a piece of a 900- bed, all-new, fully amenitized, Class A student housing property, for as little as $50,000.

How do you help your employees to manage work-life balance?

We’ve made allowances more for our associates to create more of a balance in their lives and this has been through including some family members participating in social activities after work hours. Our company is also very lenient about offering extra time off when needed and a generous vacation package as well. In my own situation, my wife and kids like to come to the office whenever we have anything special planned as they know that work is very important with my life.

What is your gratifying moment in the company?

My gratifying moment was launching NB Private Capital, LLC with my colleagues and associates who were in large part responsible for the phenomenal growth and success of my previous company, Nelson Brothers Professional Real Estate.