Deborah Smith is Co-Founder and Principal of The CenterCap Group, LLC and heads the firm’s Strategic Capital and M&A and Execution efforts. Prior to forming The CenterCap Group, LLC, Ms. Smith was Co-Head of M&A and a Senior Managing Director with CB Richard Ellis Investors (CB Richard Ellis’s $40 billion AUM investment management business). She joined CBREI in July 2007 to co-head the build-out of the firm’s M&A efforts and led the firm’s negotiation and acquisition of a majority interest in Wood Partners (one of the largest multifamily developers in the United States) in 2008.
From 1998-2007, Ms. Smith worked on mergers and acquisitions with Lehman Brothers, Wachovia Securities, and Morgan Stanley. Ms. Smith has been involved in more than $100 billion of mergers, acquisitions, and restructuring transactions. Ms. Smith has a Bachelor of Economics, with honors, and a Bachelor of Law, with honors, from the University of Sydney.
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Before we begin, our readers are interested to know about how you got started in the first place. Did you always want to be where you are today or was it something you were led to? Share with us your journey.
Deborah Smith: Thank you for having me here. My name is Deborah Smith, I’m the CEO and co-founder of the boutique investment bank, The CenterCap Group. I have been an investment banker since I finished college. I actually fell into finance by accident. I had plans to be a tax attorney but as timing would have it, I took a job working at a top tier investment bank instead. I had no idea what investment banking was or how it worked, and I certainly didn’t know anything about finance.
To be honest, I wasn’t sure I would last as it didn’t take long for me to figure out that I didn’t have the financial training or knowledge, even at a rudimentary level, to perform the job. I look back and wonder what my interviewer saw in me to want to take a chance. I grew up in the dairy farming community, first one to go to college, and I didn’t own a suit that fit me properly. In hindsight, I was way ahead of my skis. Yet, here I am, 25 years later, I outlasted most of the college peers I started with. I guess my interviewer recognized I would go the distance – long before I did. I worked at Wall Street firms for years before co-founding a boutique investment bank over a decade ago. We are still going strong.
Turns out I am pretty good with numbers. I have been involved in over $100 billion of transactions. Importantly, I still love it.
Tell us a bit about your current focus. What is the most important thing that you’re working on and how do you plan on doing it?
Deborah Smith: I am proud that CenterCap has continued to grow, probably despite the odds, and every year has been better than the last. We are in an industry that doesn’t have a whole lot of women in C-Suite spots. That is changing, but it is the industry we grew up in. We are a women owned firm, and we are the only women owned investment bank of our kind that I am aware of. I hope our journey serves as inspiration to others to take the leap and go for it themselves. Anything is possible. As to where we are today, I think we have built a hugely successful capital raising business and completed over $4 billion of transactions in the past twelve months or so.
We also took on a couple of contrarian type opportunities in the retail investment management and shared working spaces – and got them both done. We are looking to expand our business more into the non-transaction consulting arena, too. Through our consulting side, this year we have advised clients with a collective +$2.2 trillion of assets under management on assignments ranging from corporate valuation opinions, investment allocation mandates, manager and investment underwriting services, and track record and attribution analysis.
Secondly, we also have a unique combination of public REIT experience and private market financial sponsor / investment management experience which we are always looking for ways to capitalize on. The challenge with the public markets is we do not have a balance sheet, so we need to distinguish ourselves on the basis of advice, experience, and expertise. Thirdly, we began making direct real estate investment ourselves. Each of the partners at our firm has spent time acting in a principal investing capacity so we think it’s time to really start taking our own advice.
Some argue that punctuality is a strength. Others say punctuality is a weakness. How do you feel about it, please explain.
Deborah Smith: Every kid understands that the school bus isn’t waiting for them, and it is a long walk to school. Early lesson in life. Be punctual. As an adult, I believe punctuality is a sign of respect. It is a true measure that you do not believe anyone’s time is less important than yours. So, for me, I am rarely late – however, I am rarely early. I like to be right on time.
How important is having good timing in your line of work and in the industry that your organization operates in?
Deborah Smith: Being a successful entrepreneur necessitates good timing. The real estate markets are always about timing. The combination means timing is really very important. Simple example. The most straightforward way to create shareholder value in my line of work is to buy low and sell high. You want to be a buyer when the price is right and sell high when the price is even better. How that translates for us is to take on assignments and opportunities that position us to capture that value creation.
Founder of Virgin Group, Richard Branson, states “Timing is everything in life, and it’s particularly crucial in entrepreneurship. People often equate success with luck, but it usually comes down to impeccable (and carefully mapped out) timing”. Do you agree with this statement? Please answer in as much detail as necessary.
Deborah Smith: I suspect the answer is probably a little bit of both. But sometimes I don’t think the distinction is always so clear. As I look back on my own career, I recognize that the twists and turns, career advances, and directional shifts were all because an opportunity knocked, the timing was right, and I took advantage of it.
Timing or luck, or both? I look at the journey of our firm. Our brand is All Things Real Estate. Was it wise to start CenterCap – a boutique investment bank with this mantra during the worst financial crises in history? There are plenty of times I think we were crazy. Brazen and crazy. But on the flip side, it turned out to be a pretty smart move. We believed at the time, and still do, that the real estate middle market needed an advisor who also really understood real estate itself. While that may sound obvious, we have focused on building our brand around that idea. My co-founder and I had been working for CBREI‘s global investment management business in charge of their global M&A practice and we felt that advisors who had boots on the ground knowledge were lacking. We also had amassed a huge network of both users and providers of capital so we felt that we had a unique role to play.
We were independent, with no research or trading capability, and we took no outside money. We were also in our 30s, so perhaps now it’s easy to understand the brazen comment. What we had was a boatload of real estate knowledge, expertise, relationships and analytical strengths to secure clients. Today, that concept is also defined by our original thinking, niche and unique ideas, our sometimes contrarian views, and for ability for raising capital for off-the-runway companies and opportunities. We may see the opportunity but we need investor willingness to believe the timing is right. Without that, we can’t successfully execute. Our deal success rate is pretty high and I would say a significant amount of our business is from repeat clients and from referrals. We don’t take on a client unless we believe we can get it done. We came full circle – because that confidence is all about understanding timing.
As a leader/entrepreneur/CEO, how do you decide when to put the pedal to the metal and when to take a break? How do you time the key moments in your career?
Deborah Smith: It’s like sprinting and walking. There are times when you have to, and should, do both. We can’t sprint all the time because not only do we not have the endurance to run at that pace forever, but also at some point it has diminishing returns. It eventually shows up in substandard productivity, creativity and well-being. We all need breaks to recharge. There is also downtime between big assignments. Take a break – there is going to be another sprint. In our business, there always is. Life is a marathon.
Branson also states “If you’re starting to feel like you’re just going through the motions and losing sight of why you started, it might be time to take a break”. But how do you decide when to take a break?
Deborah Smith: I know I am due for a break when the ideas, the energy and focus going into that very first call of the morning have the early signs of “grind” attached to them. Not even a cup of tea gives me the boost. This where timing is everything. Sometimes a short-term break is enough – I love to run, and some of my best thinking actually happens when I am not thinking at all, so I put on my running shoes and just take off. You can assume I run a lot as a result … Other times, it requires a longer break. A serious recharge. A “weekend away doesn’t suffice” kind of recharge. It takes me at least a couple of days to stop checking my phone every ten seconds. A change of pace, change of scenery, a really step back is necessary. Besides why say no to some sun and sand?
“Timing can be everything when starting up. It can be the difference between building a thriving business and not” How has good timing helped you achieve success in your career or business? Are there any particular examples from your career that you would like to share?
Deborah Smith: I had talked previously about understanding the market, our clients and our relationships. Where these three intersect comes down to timing. It’s our job to be there when it does. Many times it’s about liking an opportunity then finding an institutional home for it. Other times it comes to us and we help complete it.
In all cases, our evaluation process starts with the question – can we get it done? Can we find a buyer? A seller? An investor? A partner? If we don’t answer that affirmatively then we don’t advance the process. Life is too short to work on things that we do not believe can be done. Let’s take a sector – apartments. Hasn’t everyone rented an apartment at some point or another in their lives, or even now? Well, the apartment sector has gone through many evolutions, even over the past ten years. A sector stable offering today are smaller footprint apartments that have lots of building amenities and social gathering shared spaces. Micro-units are another type, and then there are coliving apartments. We were proponents of these forms of housing long before they were institutionally popular.
Then there is the role of technology. The real estate sector is one of the last sectors to truly embrace technology. But the time is here. Things are changing. We are seeing technology begin to permeate every segment of the sector. Those that resist will eventually be left behind. Technology is more than doing old things new ways, it can be the catalyst to creating a new, new thing altogether. A complete revamp. For an investor it has the capacity to change the entire risk-reward investment equation. How exciting is that? Time will tell. But for us, we see these opportunities and we are constantly evaluating how we can play a role and what do we need to do, if anything, to be part of it.
“When you’re thinking of starting up, ask yourself: ‘Is the community I want to serve ready for this idea?’ It could make all the difference!” Would you like to add anything to this piece of advice for all the aspiring entrepreneurs?
Deborah Smith: Having worked with our fair share on early-stage companies I have learned that one of the key reasons we, and they, went on to flourish is adaptability. Yes, adaptability. It ties into my thoughts around timing, lifelong planning and grabbing opportunity when it knocks. These concepts all have something in common – adaptability. To build a business, you have to be able to respond if your idea isn’t working the way you want. Similarly, you have to be flexible to position yourself to exploit information, market changes etc when the events arise. Do not get so set in what you think should be. Understand what you are good at, what is the core foundation of your idea, and then be adaptable to everything else around it.
COVID forced many businesses to adapt fast, some did so successfully, others failed, it was a lot due to good or poor timing. What are some of the big lessons you’ve learned during the pandemic?
Deborah Smith: We have been one of those firms that succeeded during COVID-19. The real estate markets have been so strong. It has been interesting to watch the media focus on sector weaknesses in the retail and hotel sectors, and less focused on how strong the rest of the market is. It goes beyond single family skyrocketing prices. There is nothing more exciting for a real estate investor than market disruption. Particularly, when it isn’t liquidity-driven. This cycle, the strength in industrial, logistics, data centers, and cold storage – all supply chain-related – has been incredible.
Then there is life sciences and lab space – directly responsive to the pandemic. Then there are the changes driven by population migration – office, multifamily for starters. Booking a moving company has never been so challenging – nor has trying to relocate to a handful of states. The real estate investors who saw these changes coming have prospered. This year alone, we completed a $3 billion transaction in the logistics space, last year we penciled a huge transaction in the shared office working space and again, earlier this year we penciled a very targeted deal in the retail space. We were deliberate in taking on these assignments, believing we could get them done, and believing in their overall success. The lesson for us – if we saw these changes happening, we should have been investing too. Our timing could not be better as there is still a lot more changes unfolding.
Business is all about overcoming obstacles and creating opportunities for growth. What do you see as the real challenge right now?
Deborah Smith: Our biggest challenge in today’s market is how we continue to grow and recruit talent without compromising culture. It was already tough finding good talent that would fit in with our culture before the pandemic. As a wisely astute colleague told me – we can’t afford to get hiring it wrong. Our top line is growing strongly but we need to continue backfilling the ranks. We are focused on it. We also appreciate the value of candidate diversity. More diverse thought is a pathway to creating value and optimal outcomes. I had commented before that I think the C-Suites in our space still lack diversity. This is an issue but addressing it is complex.
Too much of the diversity conversation is wrapped up in hitting metrics, training and mentorship ideas. All these concepts are important, but where I think our industry struggles is getting the wealth of diversity candidates applying for positions. I doubt there are many firms in our industry that get as many resumes from diverse candidates and women than they do from men. As such, I am a big proponent of figuring out how we can tackle diversity at the high school and college level. Finance may not be for everyone but I would like to see it considered a viable option by a lot more of our youth than it is right now.
Your insight has been incredibly valuable and our readers thank you for your generosity. We do have a couple of other bold questions to ask. What fictional world would you want to start a business in and what would you sell?
Deborah Smith: You know I am investment banking, right? Working with numbers? I could spend my entire day trying to think about this and still come up empty. So let me improvise and borrow from a childhood television show – Doctor Who. We would live in a timeless world where I could sell time travel to go back and redo events of the past. After all, who doesn’t agree that hindsight is twenty-twenty. Who wouldn’t enjoy living that out for a day?
Before we finish things off, we would love to know, when you have some time away from business, what is one hobby that you wish you could spend more time on?
Deborah Smith: Not sure you would call this a hobby, but I am a big believer in apprenticeship programs as an alternative for college. There aren’t enough of the later in the United States right now. It has the capacity to lower the cost of college and provide viable alternatives to those who don’t think college is the right place for them – or worse, they otherwise feel they have to attend college for whatever reason.
Our youth should feel liberated in the wealth of viable options they have about their futures. We will have succeeded on this front when the question for our high schoolers isn’t which colleges you are applying to, but what would you like to do, and what avenues are available to get you there. There are so many ways to create wealth in this country and the apprenticeship path has the capacity to play a huge role in that process.
Jed Morley, VIP Contributor to ValiantCEO and the host of this interview would like to thank Deborah Smith for taking the time to do this interview and share her knowledge and experience with our readers.
If you would like to get in touch with Deborah Smith or her company, you can do it through her – Linkedin Page
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