[00:03:11] Intro: Celebrating 10 years and more than 150 million downloads. You are listening to The Investor’s Podcast Network. Since 2014, we studied the financial markets and read the books that influenced self-made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Kyle Grieve.

[00:03:40] Kyle Grieve: Welcome to The Investor’s Podcast. I’m your host, Kyle Grieve, and today we bring Larry Connor onto the show. Larry, welcome to the podcast.

[00:03:47] Larry Connor: Thanks for having me.

[00:03:49] Kyle Grieve: So one thing that really stood out to me when I was learning about you was your just disregard for the word impossible in business and in other areas of life.

[00:03:58] Kyle Grieve: Your business model and mindset are just very, very different from the industry standard. Can you maybe explain why you built your company this way and how it’s factored into your success?

[00:04:08] Larry Connor: Sure. So think about this, Kyle. If you truly want to be exceptional, if you want to be the best, you want to be a lead. Don’t you, by definition, have to be different? If you’re like everybody else, You’re going to end up at or close where everybody else is. So I think it’s a willingness, a mindset, to be different. By the way, don’t be different just to be different. Be smart different. Don’t be disruptive to be disruptive. Be smart disruptive.

[00:04:43] Larry Connor: Don’t set ceilings. Like, someone says, well, that’s impossible. In my experience, 97 percent of the time, that’s just someone’s opinion. And so, a fellow told me one time, I think it’s almost 20 years ago, and it really rings true. You will never outperform your own self-image. Think about that for a second.

[00:05:10] Larry Connor: You’ll never outperform your own self-image. So yeah, we just think we get a bunch of talented people. We think it’s a team sport. We don’t care what anybody else thinks. We don’t care that we’re different. We don’t care if we fail, we’ll fail, we’ll fail fast. We’ll learn. And the results have worked out pretty well.

[00:05:31] Kyle Grieve: So another area of your business that I found very fascinating was the characteristics that you search for when you’re looking for new talent to help build the business up, like you just kind of mentioned there. So you’ve noted that you don’t hire from within the apartment industry, and that’s actually been vital to The Connor Group’s consistent performance.

[00:05:47] Kyle Grieve: Can you maybe expand a little bit on your reasoning for taking this route and maybe why you think that has fueled your own performance?

[00:05:54] Larry Connor: Yeah, so a short history lesson. When we started, my partner and I, we had a fundamental belief The departments are just like any other operating business. And we had background knowledge, experience, some success in operating different kinds of businesses.

[00:06:13] Larry Connor: And so we said, we think we can bring a different type of operating model to the industry, do better on what we call customer satisfaction, because we never call them tenants. Okay. That we could control costs, have higher productivity, find sources of revenue, and give the resident a great experience. And in the first year or two, we did hire a few people from the industry.

[00:06:39] Larry Connor: Problem was our ideas were so radical. They thought we were crazy. And in fact, that kind of followed us the first six, seven, eight years, like we’d go to buy properties that we’d work with brokers. And they’d be like, oh yeah, you guys, everybody says you guys are crazy that, and so we finally just, After a couple of years said, we’re going to hire all people who share common beliefs, common philosophy, and ultimately kind of a common culture.

[00:07:11] Larry Connor: We’re just going to do it our way. And we believe people are the number one key to success. And given that, yeah, I think you can make the argument if you said, What’s the number one thing that separated you? And that is we hired all people who have never done it before. And just built our own models and own systems and processes.

[00:07:34] Kyle Grieve: And so what kind of adjacent or different industries do you usually end up hiring from? Where did you end up finding a lot of that talent?

[00:07:42] Larry Connor: Yeah, it’s very eclectic. So we hire for personalities. So, for example, we can tell you what we call the big six. Anybody in a leadership role and they’re all important.

[00:07:55] Larry Connor: I’ll go through them quickly. One, you got to be able to motivate and inspire people who work for you. Two, you got to be super organized, really good at multitasking. Even though we’re in a low tech business, we run a complex operating system. Three, you got to have Accountability, self-accountability, and you got to be able to hold each other, other people accountable, but do it in an honest, direct, constructive manner.

[00:08:23] Larry Connor: Four, you got to be culturally aligned with our philosophies and beliefs. Five, you got to have grit. We define that as passion and perseverance. Six, you got to have a work ethic. If you want to come in at eight and leave at four, hey, that’s great, but this isn’t the place to work. And so we, wherever we can find that.

[00:08:41] Larry Connor: We have two or three super successful people who are from, by the way, the media world. A couple of them from print, one of them from TV. We have people from retail, we have people from service industries, we have people from logistics distribution. So we don’t get hung up on where you went to school, what your GPA was. We’re far more interested in the content of your character and have you had success. Managing and motivating and leading people.

[00:09:15] Kyle Grieve: So when it comes to investing, I really like looking at first principles. So, whether you’re buying real estate, owning shares in Amazon stock or buying a local business, I think one vital area to consider is value, right?

[00:09:27] Kyle Grieve: And if you can buy an asset below its intrinsic value, you’re going to be very, very well set into the future in terms of both mitigating risk and also obviously having a good upside. So, can you outline some of the specific assets that you focus on buying and how intrinsic value and price kind of affect your investing strategy there?

[00:09:44] Larry Connor: Yeah, good question. Let me give you a, maybe kind of an interesting answer that I’ll speak to. And by the way, this is true, as Kyle, in any kind of investing. So let’s take a typical year, we’re in 18 markets. We’ll get information on roughly 700 to 800 properties that throughout the course of the year come for sale.

[00:10:07] Larry Connor: Our team, which is small, it’s about a half a dozen, but really elite, will do initial analytics. We’ll underwrite about, let’s say it’s 700, about half of them, about 300 to 350. We will physically, around the country, go visit 175 to 200. So a tremendous amount of legwork. And we’re going to do both quantitative analysis as well as qualitative.

[00:10:37] Larry Connor: And we’ve built all these proprietary systems and questions we ask and profiles we do. And even though we started with 700, went to 325, 175, we’ll buy maybe 8 or 9 properties. So basically 1%. So at the end of the day, like so many other things in life, It’s about hard work, determination, discipline, and perseverance.

[00:11:04] Larry Connor: So there’s not like, and I think you probably, they’re not like silver bullets, people think that. Okay. Anybody maybe gets lucky. They bought Amazon early on or Facebook or whoever it may be. And yeah, we, we look for different things. And so we look for what we call businesses. These are going to be large luxury apartment community.

[00:11:30] Larry Connor: The average acquisition we do is an 85 million property. We look for a great property in a great location. with barriers to entry, meaning demand, lot, strip, supply, long term, that we can massively increase bottom line within 24 months. If we can’t improve the bottom line at least 60, 6 0 percent in 24 months, we won’t buy.

[00:12:00] Larry Connor: And by the way, that’s obviously easier said than done, but maybe that’s why we buy out of 700, we buy 1%.

[00:12:08] Kyle Grieve: So let’s kind of unpackage that 60 to 80 percent kind of boost in operating income that you guys are able to do within quite a short period of time. So obviously this is going to be a pretty significant boost to the intrinsic value of the apartments that you buy after you decide to sell them to someone else.

[00:12:24] Kyle Grieve: So I’m interested in understanding a little bit more about what are some of your key strategies for how you go accomplishing this.

[00:12:30] Larry Connor: So we have a four or five pronged. attack. So we’re going to look at, interesting, first thing we’re going to do is we’re going to look at customer service or resident.

[00:12:41] Larry Connor: Many times these are large, super nice located, the assets are nice, but they’re really poorly run. In fact, the worse it’s run, the better we like it. And so when we get there, we do a very unusual on site due diligence. When we see if it’s a train wreck, that’s perfect as long as it’s got everything else we’re looking for.

[00:13:04] Larry Connor: And so we’re going to go in and address that. We’re going to bring our own team of people, management, sales and service. We’re going to really focus on customer issues. We’re going to fix those. Then we’re going to think about where we can decreasing costs and increasing people productivity. And by the way, you can increase productivity and reduce costs and have a better customer experience, not worse.

[00:13:29] Larry Connor: Then, we’re going to look at the typical, can we raise rates? Is there anything on the physical facility we need to improve? We’ll invest huge dollars if we need to. Many times, by the way, it’s an operational play. You don’t have to do the capital. And then we will, people will pay for value. So maybe we can raise that rent 100 or 200, but they’re not going to take it if you don’t give them perceived value.

[00:13:54] Larry Connor: And one of the really unique things is. We have an exceptionally high what’s called resident retention rate. So the industry turns over about 60 percent of their units on an annual year. We only turn over about 45%. It doesn’t sound like a lot, but if you’ve got a 300 unit property, that’s 45 less units to turn over.

[00:14:21] Larry Connor: And the people who stay generally will pay a higher rate. Because they perceive value, then the people are coming in. You aggregate all that together. It’s very hard to do. That’s why there’s virtually nobody in the industry. We haven’t found anybody in the industry who does it like we do. But it’s also the reason why you end up extracting.

[00:14:40] Larry Connor: If you look at our returns, which your viewers are probably interested in, over the last 32 years, our average annual return to our investors after fees is 30. 4%. Yeah. 30. 4 IRR. And over the last five years, it’s like 38%.

[00:15:01] Kyle Grieve: Yeah, that’s very impressive. So I want to move this conversation on to more about risk.

[00:15:06] Kyle Grieve: So it’s impossible not to see while I was researching you that you like doing some very thrill seeking adventures that you’ve been on. And whether that’s skydiving out of balloons from insane mounts of heights or visiting Marianas Trench, the deepest area on earth, or even traveling into space to see the International Space Station, you seemingly enjoy doing some very risky things.

[00:15:27] Kyle Grieve: But, as I dug more and more deeper, I felt that maybe you don’t view some of these things as being super risky. For instance, you’ve said that I’ve had this belief that you never take unacceptable risks. So can you maybe share a little bit on, why you enjoy doing some of these activities that maybe seem risky to the naked eye, and then maybe weave that into your views of risk in business.

[00:15:51] Larry Connor: Very good question. You’ve done your homework. So let’s talk about the business side first, and then I’ll go over to the personal side. So here’s an interesting stat that basically we had this belief from day one. We believe we can really limit downside risk. and really ratchet up upside opportunity. And so let’s look at the numbers.

[00:16:16] Larry Connor: In the last 32 years, we’ve done 231 acquisitions of a partner communities around the country. We’ve lost money on eight. So it’s like, what? Like 96, 97%. Yeah. How would you like to do that in a stock market? I sure can. Yeah. So we think people don’t understand risk. Why take risks when you don’t have to?

[00:16:42] Larry Connor: Can’t you stack the odds in your favor? By the way, it’s much harder to do, but it’s not impossible. And so that’s what we’ve done a visit. We carry that over like we will do no project. The last one, which actually we just celebrated the one year anniversary of like two days ago. We built the largest hot air balloon ever built in the United States.

[00:17:06] Larry Connor: Flew it to 38,000 feet, myself and four Air Force pararescue guys. Stepped off the thing, did a five man formation, set a world record. Nobody’s ever done a halo jump that high and got everybody on the ground. Well, the reason why is we won’t do a project like that unless it meets Two standards, and they both start with S.

[00:17:29] Larry Connor: Number one is safe. Number two is successful. So in every single thing we’ve done, we’ve been able to manage down risk in a significant manner. And so I think that’s about philosophy and it’s about people and it’s about approach.

[00:17:46] Kyle Grieve: So as you kind of alluded to here, The Connor Group, once it acquires these assets and is able to improve the operating income bottom line there and in as that short period of time.

[00:17:58] Kyle Grieve: You then are usually looking to sell it. So I’m just interested in learning a little bit more about, the price that you’re paying and maybe the price that you’re selling for that if you can share it. So, what’s your sweet spot, I guess, in the multiple of let’s say operating income that you’re buying these in.

[00:18:13] Kyle Grieve: And then, what are you able to then sell it for once you are able to improve the operations there?

[00:18:19] Larry Connor: Yeah, so fair question, but you have to constantly adjust. So if you look, we’ve done well in up markets, we’ve done well in down markets, we’ve done well in markets that have traded sideways because we keep adjusting the return expectations.

[00:18:35] Larry Connor: So we never look at, let’s say, the multiple is or the cap rate, based upon today or history. We are always forecasting the future. And so, for example, like last year, 2023, U. S., nobody’s buying apartments. Like, we didn’t sell a thing. That’s the first time in 14 years we hadn’t sold anything. We, on the other hand, bought a billion dollars.

[00:19:01] Larry Connor: Like unbelievable buys. So, we’re counter cyclical. When everybody’s buying, we’re selling. When people are selling, okay? I mean, so you have to have the faith and the discipline and the systems to be able to make those adjustments. So is there a typical property that we buy? So, yeah, we’re kind of eclectic buyers.

[00:19:28] Larry Connor: But if you said, well, give me a profile. Generally, they’re going to be suburban. So, yeah, we’re Generally, they’re going to be in what they call Class A locations. Generally, they’re going to be 10 to 15 years old. And they’re going to fit the other profile barriers to entry, dramatically improve the bottom line.

[00:19:45] Larry Connor: And so, we think the thing to really, kind of, to think about that will dictate the outcome of your investment return are three fundamental things. And by the way, this is true in buying, we believe, any kind of operating business. Number one is, how much can you improve the bottom line? Number two is, how long does it take you to do that?

[00:20:10] Larry Connor: Number three is leverage. By the way, you can make a fourth point to quality of the asset. And so we’re really good at combining all those together and compressing the period of time and using prudent leverage, not over leveraging, but using smart leverage and always buying high quality assets.

[00:20:29] Kyle Grieve: So, when you end up selling these properties, who are you usually selling these to? Is it, private owners? Is it venture capital, private equity, or other asset managers?

[00:20:39] Larry Connor: Yeah, so I would probably bifurcate it into a couple of different groups. So, group A is going to be institutional owners. We’re in a lot of what you would call high profile lifestyle markets, Denver, Colorado, Austin, Texas, Tampa, Florida, Charlotte, Fort Lauderdale.

[00:20:59] Larry Connor: You get the idea. So you got a lot of institutional buyers there. By the way, we also operate in the Midwest where we’ve done super well. That tends to be more private capital, but it’s generally one of those two groups. But again, it can be, it just depends upon the asset and who’s in the market. Groups move in and out of the market. Like there hadn’t been a lot of institutional money in the market. It’s been a lot of private capital. That’s rapidly changing right now.

[00:21:26] Kyle Grieve: Your business has been around here since I think 1992. So you’ve survived through, 30 years of market cycles and gyrations going up, going down, going sideways. So I’m interested in learning a little bit more about, how you’ve engineered your business to kind of withstand, especially these down markets, such as, the great financial crisis.

[00:21:46] Larry Connor: We don’t withstand anything. We are built for turmoil. So like the great recession, we did unbelievably well. Real forward to COVID. Okay. COVID, by the way, very serious. Very real. We just decided not to participate. So it’s mindset. Why? Well, wait a minute. We’re in a fundamental business. We didn’t wait for the government to tell us we were. We all met on a Monday when COVID had been officially announced and said, wait a minute, we’re a fundamental business.

[00:22:18] Larry Connor: We have an obligation to take care of our residents. This is eight o’clock on a Monday morning. Everybody’s got till five o’clock. We have 12 different departments here at the headquarters. How we’re going to support the people in the field. And we did that. We never closed for a day. We never closed our offices here.

[00:22:34] Larry Connor: We took great care of our associates. We did a lot of really unique things, some of which have been publicized to really show appreciation for our residents, show appreciation for our associates. And, and so we love turmoil. We love disruption. The more convoluted stress the market is, the better for us because we have very permanent capital, we have very patient capital, we have total control of our capital, the largest monetary investors are us in house, so we’re not under any pressure dictate to make short term decisions.

[00:23:15] Kyle Grieve: So obviously I don’t want to take away from COVID and the seriousness, but, during these concentrated times where things are, are not so good, such as, you mentioned the great financial crisis COVID last year, have you noticed that the years usually After those years, you end up doing getting really good results just because of the discounts that you’re able to make purchases at.

[00:23:38] Larry Connor: The short answer is yes. We bought last year nine assets. We recently had a reason to review those nine. So I’d hand a short note out to some of our investors. Like we’re going to kill it with these guys and we model it. You should never say anything that you can’t back up and we have a long history of backing it up.

[00:24:02] Larry Connor: And yeah, I mean, when you’re buying a property, I could give you some different examples. I’ll give you one. I won’t go into all the details, but essentially this asset was in a high profile market, should have traded for probably 86, 87 million. The sellers who were very institutional, so they just decided to sell.

[00:24:29] Larry Connor: There was no financial pressure, but they just decided we’re remixing the portfolio. Get rid of it. Sell it. We bought it for 70, 500, 000. Today, it’s probably worth about 110, 000 to 150, 000. But again, those are, I mean, it’s not easy to do. I’m not trying to say, oh, yeah, wake up and you just do this, but seize the opportunity. Seize the moment when everybody runs to the sidelines, we turn and go the different, the opposite direction. And we move in a disciplined, in control, decisive man and that’s worked well for us over the years.

[00:25:13] Kyle Grieve: So let’s move to the other side of the cycle, which is probably the side that most investors want to participate in, which is when the cycle goes upwards.

[00:25:20] Kyle Grieve: So obviously many investors get caught up in the wave of euphoria and greed during these times and the real estate market unfortunately is incredibly ripe for this behavior with, especially I guess retail investors, just with the ease of accessing capital when times are very, very good. So Can you tell me a little bit more about how you utilize, market cycles to your advantage when trying to find maybe well priced deals when that’s challenging to do and maybe how you mitigate some of your risk during those times?

[00:25:47] Larry Connor: Yeah. So fair question, but we think about it completely differently. So just, you have to think about the apartment industry. Okay. About, I don’t know the latest stats, but roughly 70 percent of all the apartment communities in America are not institutionally owned. So it’s a very fragmented market. And if you think about it, let’s say for example, let’s just pick a market. Dallas, Texas, we’ve been in Dallas 20 years, great market.

[00:26:23] Larry Connor: There are literally, I forget the latest numbers. I think it’s like 1.1 million apartment units. Well, how many of those are mismanaged? I mean, stop and think about it. Keep in mind, most people think about real estate investing as a passive investment. You put your money in, maybe there’s a third party management company.

[00:26:49] Larry Connor: We think about it completely different. We think about a living, breathing, operating business. We operate it like an operating business, not a passive investment. So all we have to do Is go find that 1 percent that are great assets in great locations that are all screwed up and we go buy them. So whether the market’s good or bad or static, at the end of the day, Kyle, if we improve the bottom line on a property, 60 or 80%, the only thing you and I are going to argue about is how much more it’s worth.

[00:27:25] Larry Connor: And we may not agree upon that, but we’re both going to agree it’s worth more. Thank you. As long as you bought a good asset in a good location. So that’s why we can make money in any cycle. You are absolutely right, by the way. For most of your investors out there who are doing this passive, man, you got to be careful.

[00:27:43] Larry Connor: Like, you did not, we went out publicly in 2019 and said, The market had moved from premium pricing to the absurd. We were really public about that. We were still able to buy some things because we can kind of find these hidden gems. And then COVID hit, the market shut down. We went aggressively in and bought a bunch of stuff. Soon as the market, the market corrected itself. People don’t realize six months into COVID, we became massive net sellers. We sold like 60 percent of our portfolio in two and a half years.

[00:28:22] Kyle Grieve: So Howard Marks is one of my big, big role models here and he has one of the best quotes on cycles that I’ve ever read, which is, We may never know where we’re going, but we’d better have a very good idea of where we are.

[00:28:33] Kyle Grieve: That is, even if we can’t predict the timing and extent of cyclical fluctuations, it’s essential that we strive to ascertain where we stand in cyclical terms and act accordingly. Unquote. So given your experience in the commercial real estate industry, I’m just interested in where you think maybe we are in the cycle and maybe how you are reacting to the observations in terms of capital deployment.

[00:28:55] Larry Connor: So we’re getting ready to have an investor day in six weeks. So I’m not sure this, my delivery will be what people want to hear. But here’s what I honestly think. I think we’ve exited a decade of unprecedented returns, fueled in great part by economic growth, monetary policy, both in terms of liquidity, debt, everything else like that.

[00:29:25] Larry Connor: So for example, we last five years, I think it’s 38%. I’m going to tell our investors to not expect that going forward. I think the next 10 years will be much tougher to extract, not impossible, but much tougher to extract exceptionally high returns. And so what I’m going to say to our investors is the following.

[00:29:49] Larry Connor: Hey look, over 32 years we’ve averaged 30 percent, last 5, 38. Your expectation should be in the low to mid 20s. Over the next 10 years, and I think that’s contrary to what some people think. I think the real estate specifically as apartment space is still going to be a great real estate space to be in, but I don’t think the returns will be as high, but they’ll should be better than almost any other option.

[00:30:17] Kyle Grieve: So I want to take this conversation to another area that you actually referenced earlier, which is failure. So, all investors and entrepreneurs are obviously going to be very, very familiar with the concept of failure. But the thing about success is that you must toe the line between both failure and success in order to ultimately succeed.

[00:30:33] Kyle Grieve: And often, on that road to success, you’re going to fail multiple times before you eventually succeed. Now I know that you think of failure as kind of an exercise of open mindedness, courage, and resolve that creates freedom eventually once you access it. Now, can you just kind of expand a little bit more on your concept of failure and learning processes?

[00:30:53] Larry Connor: So, if you were to say to me, besides people, besides culture, why are you successful? I would say because we had the willingness to fail and the ability to own it and the ability to be able to assess it and the ability to be able to self-correct it. And so, yes, we try to get everybody to think about failure as a learning experience.

[00:31:21] Larry Connor: So, when we fail, we try to think about, okay, first thing, oh, man, I feel bad about it. Oh, God, we really screwed this up. And we do. Like, alright, rule number one, what did we learn? Rule number two, what are we going to change? Rule number three, how do we make sure that we don’t go back to rule, Number one, and repeat that same.

[00:31:43] Larry Connor: We think about two kinds of things. Honest mistakes and avoidable. Everybody makes honest mistakes. What you’ve got to do is eliminate or greatly minimize avoidable mistakes. And we’re really good. We never make excuses. We own everything. And I think that’s, again, that’s people, that’s mindset, that’s culture.

[00:32:03] Larry Connor: It just gives us the liberty, the freedom to not be willing. This is a problem, by the way. You’ve probably seen it, Kyle, in your endeavors. A lot of people, many of them institutional, although the private sector can have the same, it’s like, it’s not about maximizing return. It’s about not failing. Well, just think about that.

[00:32:26] Larry Connor: That’s a negative approach. You’re never going to be exceptional. You’re never going to excel. If you’re always trying not to fail, you got to embrace the failure. But not stay in that place very long.

[00:32:40] Kyle Grieve: So I really enjoyed the video that you made with Forbes cause you were just so transparent about some of your failures.

[00:32:46] Kyle Grieve: So one of my favorite Charlie Munger quotes is I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn. And that just makes me think exactly kind of what you were just saying there. So can you maybe cover some of the failures from your past and maybe discuss some of your significant takeaways that you had from living through them?

[00:33:05] Larry Connor: I’ll give you the one that, I talked about in Forbes that. Certainly people have asked me about so we have owned eight different operating businesses, seven of them have been super successful. One was a colossal failure, and that was in the computer industry in the 80s. So I’ll give you that cliff notes version.

[00:33:25] Larry Connor: We own that business for nine years. We were in hardware and software and system integration. We grew the business. We didn’t really, we were way undercapitalized. We didn’t kind of know what we were doing. The industry, the margins got crushed. We had too convoluted of a strategy. We didn’t understand the concept of simplicity as brilliance.

[00:33:48] Larry Connor: And so we closed the doors and I’m like, well, that’s a problem because at the time I’m age 40, all the money I’d made from other things I had put into the company, I’m broke. I got a wife, two kids in a farm. I have no job. In fact, I’m worse than broke because I had gone out and borrowed, this is 1990. I had borrowed 900 from small banks, like personal loans, things like that.

[00:34:15] Larry Connor: Well, today that’s what, three or 4 million. And I’m like, so I’m broke and I owe all that money and somehow, someway I’m paying every single bank back every single dime with interest, which I was able to do in the next, whatever it was, three, four year period of time. So, it’s a little tough when you’re in that situation and you’re 40 years old.

[00:34:34] Larry Connor: So, the moral of the story is don’t give up. The moral of the story is it’s never too late to start. The moral of the story is learn from your failures. But just so much in business is about grit, determination and perseverance. It’s not about necessarily who’s the most brilliant. I think you got to have people.

[00:34:57] Larry Connor: We talk about the 3 or 4 P’s you got to have to be successful. Number one is you got to have the right people. Number two is you got to have a plan. Number three is you got to have good processes. Number four, you got to have perseverance. Notice, I didn’t see Kaplan on any of those. If you have those four in almost any endeavor, your chances for success are pretty darn good.

[00:35:19] Kyle Grieve: Let’s now discuss an area that I’m passionate about in business, which is an area that probably doesn’t get enough attention. So this is a couple of areas. One is a great company culture, and then the other is creating alignment between management and the shareholders. So in the Conor group’s case, you’ve also made many of your employees shareholders along with you. Now, can you discuss maybe how your views of culture and alignment have been shaped and why you think this is a competitive advantage for the Conor group?

[00:35:47] Larry Connor: It was 900, 000 that I owed in personal loans. So we might have to make that clarification. Anyway, we paid them all in three or four years. And yeah, so we believe that really exceptional people.

[00:36:04] Larry Connor: Work for more than just a paycheck. They work for some kind of purpose and by the way, it can be different for different people. And one of those purposes is that they’re part of assumption, something bigger, better, special, and that they got to share the wealth and act like can be treated like an owner.

[00:36:30] Larry Connor: So about 20 years ago, we had formed core values and there’s five. The first one is always do the right thing. I think virtually anybody knows that. I don’t care what part of an organization. Two, people count. And by the way, it’s very vogue and has been in recent years, but we believe that for a long time.

[00:36:55] Larry Connor: And it’s by actions and deeds, not by words. Three. Relentless pursuit of excellence in everything you do. Four, think long term, not short term. That’s why we’d be a lousy public company. And five, this management thing we call circle of success. And so going back to that, I’m like, I think we’re headed on a good path.

[00:37:15] Larry Connor: We’re being pretty successful. So think about it as a pie. And you’re a business owner. You want a pie that That’s big that you own 100 percent of. Or would you like a pie that’s like that big that you owned 80 percent of? Well, it looks like to me that pie is better, even though you only got 80%. Plus, it’s the right thing to do and people count, so let’s share the wealth.

[00:37:42] Larry Connor: So we start a unique partner program. Anybody in the organization can be a true equity partner. No dilution to shareholders. It all comes from me and today we have 76. We actually have, to give you some example, we have things called groundskeepers. Those are people who basically pick up trash and things like that and our properties.

[00:38:03] Larry Connor: Two of those people are partners. We have people in accounting, recruiting, service, sales, administrative assistance. But once you become a partner, what’s unique is, you’re not a partner for life. You have to recertify every single year. So you got to show up, and we expect you to do three things. Be exceptional at your job, be a role model, and help other people.

[00:38:28] Larry Connor: And as long as you do that, you recertify, and 95 percent of the people recertify every year. And so we literally have people who have been partners 5 10 years. They make more money from their partnership ownership than they do from their base in bonus. And it’s been wildly successful and I’m just surprised that more business owners don’t take a bigger picture view to long term sustainability, people retention, people productivity, all which happens with this partner program.

[00:39:03] Kyle Grieve: So I completely agree with you. It’s kind of boggles my mind why more companies don’t take that view of trying to make partners out of their employees. But. One thing I’m really interested in is learning is how did you actually arrive at this conclusion because so few people do it. I mean, obviously you, you like to think differently, so maybe that’s part of the reason, but I’d be interested in learning more about how you arrived at the conclusion.

[00:39:25] Larry Connor: We are not confined by conventional thinking. Maybe that’s why an English major or a concentration in Shakespearean literature ends up in the investing world. So you have to be willing to step back. Think about unconventional things. Ask yourself why that will work or why it won’t. What really matters, right?

[00:39:49] Larry Connor: Don’t look at your peer group. In most industries, as you and your listeners know, it’s herd mentality. Break out of the herd. Don’t run wild. Don’t run off but pick a different path. Sailing uncharted waters. Maybe if you lose sight of land, maybe you’ll find a new place to go to.

[00:40:09] Larry Connor: So it’s yeah, I’m with you. I’m just to me or to us, it’s kind of utterly amazing. This is never an eye game. This is a team sport building businesses. And I know people talk about team. In my experience, most of the time, it’s more words than it is actions and deeds. And all you had to do with any company go, okay, well, you believe in team, you believe in share the wealth, you believe, show me exactly every single factual, measurable thing you’re doing. And then I can determine myself whether you really do it or not. My experience, 90 percent of them don’t, and the 10 that do turn out to generally be elite.

[00:40:50] Kyle Grieve: So I’d like to touch on a few of your core values because I actually think many of the values that you have are also going to be ones that resonate with a lot of the listeners here.

[00:40:59] Kyle Grieve: So one of the values that resonated with me that you just kind of said was just doing the right thing. So this reminds me of a really good Buffett quote, which is, it takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently, unquote. So I’m just interested in learning a little bit more about this principle, how has this principle maybe added value to your business in a tangible way?

[00:41:20] Larry Connor: It’s a complete non-negotiable. If you said outside of people, outside of, what is the most important thing historically or for your long term success?

[00:41:33] Larry Connor: It’s reputation. We are awarded deals. We’re not the highest bidder. We may be third or fourth, but they know we’re going to do everything. I’ll give you one great real short story. This is during COVID. So we had a property for sale in Atlanta. I forget the name of the property and travel was restricted.

[00:41:54] Larry Connor: I don’t know. It was like, Six months after COVID started, or four months, and something like that. And traveling on airlines was challenging. We have this property, and we were down to a couple of different groups. And so there was a group in California that really was interested in buying it. But they hadn’t been to the property yet.

[00:42:14] Larry Connor: They’d done everything else. I’m like, well, we’re not going to sell you. And they’re like, okay. This wasn’t a big organization. They go, we’re willing to charter an airplane. That’s very expensive. Fly across the country and we’ll get our whole management team. They’re like six people. And I said, well, this is the price.

[00:42:36] Larry Connor: And they go, okay, we’ll pay that. Keep in mind, we had nothing to write and so they said, okay, well, we’re going to get this organized. We’re going to come there tomorrow afternoon. This is like in the morning. The broker calls me the next morning and said, Hey, look, stop everything. We got an offer from this other group that was kind of stalking us.

[00:42:59] Larry Connor: That’s like a million and a half dollars higher and they’re based in Atlanta and they know the property and they’re ready to go. I said, absolutely not. I said, these guys are on an airplane right now. We gave them our word that what we were going to do and they’re going to land here and they come out and do what they say they’re going to do.

[00:43:20] Larry Connor: It’s theirs. He’s like, wait a minute. I don’t think you understand. You’re going to leave a million and a half on the table. And I said to him, no, I don’t think you understand. I know that may be a little unconventional, but that’s how we do things. And so that, I can give you other examples. With us, if we tell you we’re going to do something, even though it’s maybe not in writing, we’re doing it.

[00:43:43] Larry Connor: And if it was a bad decision, then it’s on us. My opinion, there aren’t a lot of companies that will do that. And it’s just a huge difference maker, which plays to our long term advantage. Because word travels. I mean, that’s an interesting story. That broker told everybody, their brother about that. I heard it from people all around the country.

[00:44:03] Kyle Grieve: So another core value that really resonated with me was how you think long term, not short term. This obviously places on a very intentional focus on the long term while hopefully avoiding a lot of short term thinking that seems to plague a lot of other investors. So what are some examples of how you guys use utilize this long term thinking that differs from the standard industry practice?

[00:44:25] Larry Connor: So, yeah, two thoughts. Number one is, I think, I think it was Warren Buffett too, and maybe Charlie Munger talking about this idea of quarter by quarter earnings is a completely flawed idea. That companies, companies shouldn’t do that. They ought to report more like on an annual basis because you end up being enslaved to the street and what perceptions are quarter by quarter.

[00:44:50] Larry Connor: I just don’t think it’s a good benchmark. So here’s a very interesting, another key to our success. So, in the depths of the recession, COVID, why do we have the conviction to go buy an 80 or 100 million dollar property? Because we always think long term. And so, While what’s happening right now is relevant, we’re going to think out into the future and go, what’s going to be the cap rate?

[00:45:26] Larry Connor: What’s going to be the marketplace? What’s going to be the valuation long term? And that’s going to be more like two or three years from now. And so as a result, we can forecast that maybe not perfectly, but within a certain range. And because we think long term, if our thesis doesn’t play out, the plays out earlier, all the better.

[00:45:50] Larry Connor: If it plays out longer, we’re long term and we got permanent capital. So we don’t have to sell. As I said, like 2023, terrible year. So first half of 24 bath, we haven’t sold anything in a year and a half. And that’s the Liberty that long term thinking provides.

[00:46:11] Kyle Grieve: Well, Larry, I just want to say, thank you so much for coming onto the show. Before I hand it off here, just tell the audience maybe where they can learn more about you.

[00:46:19] Larry Connor: So, yeah, you can go to our website at The Conor Group and you can see what we’re doing. By the way, both on the for profit and the not for profit, we didn’t have an opportunity to talk about that, but we’re huge believers in Share the Well.

[00:46:34] Larry Connor: We try to do that. We have 23 in our Kids and Community Partners initiatives. Some of them national in scope, some of them regional, some of them local and we really believe. That it’s an obligation as well as an opportunity for companies that have been successful to play it back. Our focus is under resourced kids. Whether it’s local, regionally or nationally. So you can read about that by going to The Connor Group or kids and community partners.

[00:47:04] Kyle Grieve: Thank you very much.

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