Brian narration: This is Built, a podcast series where you’ll meet the people behind some of the biggest transactions and investments in commercial real estate, and hear how they got to where they are today.

I’m your host Brian Maughan, chief marketing officer with Fidelity National Financial.

And those of us in this business, well we know the buildings...but how many of us know the stories of the people behind those structures?

This time, we’re talking with Joe Cosenza.

Joe is one of four original founders of the Inland Real Estate Group, based outside of Chicago. He and his partners Dan Goodwin, Bob Parks and Bob Baum founded Inland in 1968 and all four of them are still at the helm more than 50 years later.

Inland has bought billions of dollars of commercial real estate over the years. And Joe’s values have held firm: he says if he wouldn’t rent it, live in it, or shop in it, he won’t buy it.

But Joe didn’t start his career in real estate. He came to it via an unusual route…the classroom. He began his working life as an elementary school teacher. We started our conversation there. 

Brian Maughan: Hey, I wanted to tell you a little story before we started, so my father was a high school teacher for a period of time, when I met my wife she taught high school and her mother taught kindergarten for years and years. But my mom - my mom is a fourth grade elementary school teacher for 34 years.

Joe Cosenza: Alright! That was my favorite grade.

Brian Maughan: So I called her and I said, Mom, you'll never guess I'm going to be speaking with Joe, and Joe and his buddies, they used to be elementary school teachers. And now he is the vice chairman of one of the largest real estate investment trusts in the US. What do you think of that? And she said, ‘Well, I'm not surprised because teaching prepares you for everything.’

Joe Cosenza: Wow, she is right on.

Brian Maughan: So if you don't mind, take us back to the very, very beginning when you and Dan and Bob and Bob were just teachers or friends… How did this all start?

Joe Cosenza: Well, three of us went to what is now Northeastern, but it was Chicago Teachers College when we were in college, and that was Dan Goodwin, Bob Parks and myself. We later met Bob Baum we were teaching…That was one thing that was that was, that was my only goal was to be a schoolteacher. Dan and Bob Baum taught eighth grade, seventh and eighth grade, and Bob Parks taught high school. And so while we were teaching. You got together and Dan goes, well, let's do something on the side to improve our income. And we all said, what? And he goes, Well, let's get into real estate. And that's what we did. We raised the money to do each of the lots from family and friends and relatives, et cetera. And maybe five hundred here, two hundred there or whatever. And we built houses, and we painted them and we stained them and we sold them and things did very well. People got nice returns on their money. This is the late 60s…but the interest rates started to get crazy in 68, 69 and 70. And so we thought, Well, this is nuts. You can't predict if a person would be able to even buy the home given the interest rates, and so we decided that we would enter into buying existing properties and we started to buy small apartment buildings and then larger ones, et cetera.

Brian Maughan: Tell us a little bit about Inland today. What does it look like? What's the makeup of the company? Because we've got these four friends that started back in the late 60s buying individual houses and flipping them with, you know, LLC money here and there. Give us the contrast.

Joe Cosenza: We've bought just shy of 52 billion dollars worth of real estate and almost 4000 properties. And within that $52 billion-ish, 28 billion was retail. About nine billion was apartments. About four billion was hotels. And the balance of it, about a billion and a half, was self-storage units around the country and medical office, and some office buildings, although we have almost none now, except the campus that we sit in.

We did form about eight or nine REITS, real estate investment trusts for those who might not know that acronym and out of those, you know, we raised the money, we bought the properties, we managed the properties and then five of them we have put on the New York Stock Exchange in several different forms, and the first one was 2004, where we rang the bell of the New York Stock Exchange instead of the school bell.

Brian Maughan: You've you've been an entrepreneur. You've grown this company with your partners. Looking back, what does it take to be a successful real estate entrepreneur?

Joe Cosenza: Well, fortunately the four of us can bounce ideas back and forth. The true on the job training, I think we're a definition of on the job training. None of us knew anything about real estate. Bob Baum was teaching while he was passing his bar exam and he has been the general counsel for ever in the company. So and the other, the three of us then had our different little segments, like Dan kind of oversees all of the company and the trends and tries to pick the right trend at the right time, and he's done a phenomenal job over the years. Bob Parks was good with investors, and so he is the one that would have talked to broker dealers, financial planners who would bring us investors. He would talk to the individual investors who wanted to invest in our programs, etcetera. And I was the only one gutsy enough to go out and talk to sellers early on when we had no money. And convince them that we did have money and we'd like to buy their property. And it's almost identical today. I mean, of course, it started with four and now we've got as many as sixteen hundred people. But because of the REITs ending up in the different segments in the New York Stock Exchange, I think we're down to about eight or nine hundred people around the country.

Brian Maughan: So it begs the question, picking the right partner is probably one of the first, most important things you have to do.

Joe Cosenza: Well, there are times when people would say, when outside people would say, Well, if I were starting today, what would you advise me to do? And my comment is, find somebody to be a partner.  Money is not the issue. I mean, it's always an issue. But, money is not the key thing the partner should bring to you. He should bring his ideas along with yours so you can bounce back and forth. Otherwise, all you're doing is negotiating with yourself and you're going to come out with the answer you want. So real early on, if we were negotiating an apartment complex, a complex somewhere in the suburbs of Chicago…And we would be sitting down with the seller and the broker or whatever, Dan and I would do it together, but then we'd go off in another room and we'd say, Well, what if he says this? I'm going to say this, and Dan would go, Well, why don't you try this? So we could bounce things off of one another. It's like play acting. And still today, that same idea, always in my head before I start negotiating on a deal. I would write things down. Well, I would like to do… I want to start out with this. And then what if he says this? I'm going to say this, and then I'm going to negotiate. I'm going to wait till that point way at the end so I get all my other points first. And that's the teacher in me. Because teachers, as your mother well knows, are excellent planners.

Brian Maughan: You've seen real estate, commercial real estate change an awful lot since the beginning of your career. Is there any highlight, anything that you look at and say, gosh, ’the biggest difference is,’ is there anything that you can think of?

Joe Cosenza: Oh, absolutely. The biggest difference is…In the 1970s, if you were buying property, most likely, a broker came to you because of your reputation. Thank God, good reputation. Or a seller would blind call you and say, I heard about your company and I've got this apartment complex in Mount Prospect I'd like to talk to you about. Now that is the old fashioned way of sitting down across the table to discuss and try and purchase a deal. And most of that was secretive. Now, what do I mean by secretive? Well, there was no internet, and so there was no way that someone is - that the world is going to know that that property is even on the market. Because of that you were able to do, I think, better deals. Now what happened is the 80s came about and the 90s and specifically the 2000s. The internet became the place where you could find exactly what something sold for, or was on the market.

Today, everyone knows what's on the market today. Everyone knows what you paid for it and that the seller knows that in order to get the best price, he should go to a broker and widely market it around the country. Well, more competition, the higher the price and the lower the cap rate, and unfortunately, that's what you deal with today.

Brian Maughan: So if reputation was such an important part in the early days of Inland, because that's what got you the phone call or that's what got you the opportunity to get involved in some of these deals because they weren't so widely known…What is it now? If everybody knows the deal and everything's on the market and it's competition, what makes the difference today, either for you looking at deals, or for the negotiation to say, Hey, we're the right one to buy, or we’re the right partner to work with? 

Joe Cosenza: At the end of the day when all the offers are in, sometimes we are not the highest offer, but because of our reputation of always closing the deal, we get the bid. Now, that's one aspect. The other aspect is that many times a seller will go to a broker and he wants it advertised everywhere. But he says to the broker, now is there any one or two companies you would go to that you know might get close to my price, my asking price, and that you feel comfortable with? Lo and behold, a lot of times it's Inland. I call that broker first. And so approximately 70 percent of the properties purchased are directly from the seller and broker first. And the other 30 percent was on the market and we bid and we got it because we were Inland or that we paid the highest price.

Brian narration: For years Joe and his partners only bought real estate in the Chicago area…Joe says he could drive to all of it. But then they started getting calls from broker-dealers saying, Arizona’s hot! Florida’s hot! So reluctantly at first, he says he started buying in other states. Then, in the mid-80s, a major change in the laws forced Inland to re-think its strategy…and focus on a different type of purchase altogether.

Joe Cosenza: In 1986, they changed the tax laws. Well, it is the first time that they changed the tax laws retroactively, which really caused problems for everyone who invested in real estate for the tax benefits of the real estate. Not for the pure economics of the real estate. We tried to only concentrate on the pure economics. And so we decided at that point in time, why don't we just concentrate on vacant land around the Chicagoland area where we know when the market gets better again -  it didn't get better till 1993 - when the market gets better again, and that's where people are going to be gravitating toward, we will have land for building houses, building apartments, industrial, etc. And so we decided to do and sell publicly three land funds from 1988 until 1993. And then we started to kind of break away and buy more and more around the country because we started our first real estate trust in 1994 and ‘95.

Brian Maughan: What was the most difficult part of that expansion? I mean, when you know the land so intimately like you did, you could drive to it. You'd been around the Chicagoland area, you had, you know, to your credit, this vision that, hey, we're going to to buy the vacant land and be prepared for when things start to come back. What was the most difficult thing about leaving that kind of known environment and branching out?

Joe Cosenza: Learning other areas. You had to get an education, throughout Florida, throughout Arizona, throughout all these other states. And that is the key before you start buying there. Be comfortable with the area you're in, the product itself, whether it's a grocery, shopping center or or whether it's an apartment complex and you're in one of the cities in Florida. Get to know that area and make sure you know why people are coming to that shopping center, where they're coming from, where the people are coming from to that apartment complex. And why are they living there? Are there businesses close by, what’s the driving factors…Once you know that and you feel comfortable, they start buying more and more around the area.

Brian Maughan: You mentioned that at one point you had sixteen hundred employees, that's probably down to around 900 now or thereabouts. What do you look for in an Inland employee? And how do you keep the culture that kind of, it started with?

Joe Cosenza: You want to hire somebody you're sitting across the table from now - or you're Zooming nowadays, someone who just genuinely seems honest. Also, one who knows the items you should know if you're going into that position.

Now, how do you keep them? We try to educate everybody that we can in the company of the whole picture. You know, what does the mortgage corporation do? What does acquisitions do? What does Inland Private Capital do? We have so many different corporations under the inland flag that we want to make sure everybody knows exactly what we do.

Brian Maughan: We've talked about how you've grown Inland, your experiences. What's next for the company, what do you look forward to most?

Joe Cosenza: Well, what's next, I have no idea! You know, and I'll tell you why. About three or four years ago, we did not own one single self-storage facility. Now we have bought 190 of them around the country, thousands and thousands of self-storage units. Once we learned it, once we knew the business, that was it. We're in, we’re all in. And that's how it happens in most of the product types, like the apartments, once we learned that, we were all in. Grocery-anchored or or shopping centers in general - once we learned it, we're all in.

Brian Maughan: Are you still involved in those negotiations, are you still involved in the deals on a day to day basis?

Joe Cosenza: In the last 12 months, we bought two point eight billion dollars in real estate. That's about one hundred and four deals. Either I'm the front man, and when I mean front man I mean from beginning to end. Visit the property, negotiate with the seller or the broker or whatever. Make sure the due diligence is going well. Make sure the numbers are what I expected them to be, etcetera. Anything goes wrong, I'm the one that talked to the seller and I'm there at the closing to make sure all the closing numbers are right. Absolutely, I'll never let that go.

Brian Maughan: It's an amazing story. I love it for a lot of reasons. I admire what you've been able to build, but I also admire the humility and the way that you've built probably is as impressive, right…You grew up in the Chicago area. Your family is from Chicago, is that right?

Joe Cosenza: Well, my mom was definitely born here. My dad was born in Italy in a suburb of Cosenza, Italy, which is down by the ankle of the boot. And my father came here in 1922. And he opened up his own barber shop in 1927. In ‘28 or ‘29, you know, that was the…That was an interesting era in Chicago. Across the street, a bookie joint opens up and a bookie joint is owned by none other than Al Capone, who because my father was Italian and came from Italy, went to my father's barber shop every day or every time for a haircut. And he sat on my father's chair, of which I have in my office now. Along with my father's cash register back from the early 1900s.

Brian Maughan: So no aspirations to be a barber?

Joe Cosenza: Oh, I did when I was a kid! My father said, ‘You're going to college.’ [laughs] Oh yeah, I wanted to open up this glamorous barber shop and have a connected beauty salon, I had great ideas. And my father shot that down. Thank you, Dad!

Brian Maughan: [laughs] Well you’ve always been interested in retail then, that was the beginning of it I suppose. Joe, you've been so gracious with your time, we have wanted to talk with you for a long time - like you said, I think Inland is a unique story. You and your partners are unique individuals and certainly cornerstones of the commercial real estate market. And I cannot tell you thank you enough for being willing to share your stories with us.

Joe Cosenza: Well, you're welcome, but honestly, thank you for even thinking of us.

Brian narration: Thanks for listening to this episode of Built. We’re taking a mid-season break…and we’ll be back with our next show four weeks from now. 

Built is a co-production of Fidelity National Financial and PRX Productions. From FNF, our project is run by Annie Bardelas. At PRX, our team is producer Ashley Milne-Tyte, Senior Producer Genevieve Sponsler, and associate producer Courtney Fleurantin. Our editor is Isabel Hibbard. Audio mastering by Rebecca Seidel.

The Executive Producer of PRX Productions is Jocelyn Gonzales.

I’m Brian Maughan.

Every story is unique, every property is individual, but we’re all part of this BUILT world.