Passing the Torch

Since its inception, George Smith Partners has been focused on building a co-ownership and collaborative leadership model. This thoughtful approach has not only secured the firm’s own success in the finance industry but has also helped to shape the industry as we know it today.

GSP was an early adopter of client-first ideology and in forging partnerships with lenders to underwrite deals that would better fit their internal strategy. Now, a new generation of partners is stepping up to take the firm forward and create a lasting legacy rooted in shared leadership and quality service.

Of course, it all started with the company’s namesake, George Smith. Any of the founding partners—Gary Tenzer, Steve Bram, Gary Mozer and David Rifkin—would tell you that George Smith was a fervent mentor with a pioneering outlook on the finance market.

“When I got into the business, there wasn’t really a sense of professionalism and intellectual rigor,” Tenzer says about his early days working with Smith. “At that time, people in this industry would take operating statements from a client, copy them and send them off to several lenders. They wouldn’t give it thoughtful approach or strategy. Yet that’s what George brought to the process. He would bring deals to lenders that fit their criteria, and he helped them underwrite the deal and present it to a loan committee to support approval. I don’t think anyone at that time was putting that kind of work and rigor into submitting a transaction to a lender.”

Smith and Tenzer met working at Sonnenblick Goldman in the 1970s. When Lehman Brothers purchased Sonnenblick Goldman in 1979, Smith decided to start his own firm, George Smith Financial. He asked Tenzer to join him. This was the first iteration of the entity that would become George Smith Partners, but it took another decade and a merger with Grubb & Ellis before Smith finally launched the company we know today.

In 1992, Smith called the four men that would become the founding partners and described a leadership model he thought would best breed quality. To encourage the new partners to take an active and proprietary role in growing the firm, he divided the stock to give each partner a shared and significant interest in the company. “That was the secret sauce was right there at that phone call. It cemented me in,” says Tenzer. It is a model that still holds up today.

Smith’s company structure included a healthy fee split to encourage brokers to meticulously analyze and underwrite transactions. While incentivizing employees, the compensation model also filled a void in the market for entrepreneurial sponsors that don’t have in-house capital markets teams. “We are really well positioned in the market for entrepreneurial-type sponsorship groups,” says Malcom Davies, principal and managing director. “Because we are a private company and have been since 1992, the firm has a unique character in that we compensate ourselves very differently than some of our competitors, who are really focused on stock price over the representation of the client. We have large dedicated personnel on each one of our teams, and that is something that really bodes well for entrepreneurial-type sponsorship groups. We are, in essence, the entrepreneurial sponsorship group’s off-balance sheet CFO team.”

Davies’ team, for example, has six dedicated members and works only on its own deal flow. As a result, it can run a thorough analysis on each deal. Davies used an example of one deal where his team has looked at 370 sources of capital to find the best fit.

This is the company’s leadership structure at its best. “The reality is that none of our competitors can afford to do that,” says Davies. “And the reason is they’d have to pay a decent amount to the company, because either that company is publically traded or has a single ownership model. The reality is that we have seven owners, and that allows us to take the majority of a fee that comes in and pay that out to the team representing that particular client. That’s incredibly important to an entrepreneur. That really is key.”

This is just one example of the benefits of this structure. Smith’s approach to a deal continues to be propagated by the firm—and it has given them a competitive advantage in the market. “When we bring something to a lender today, they know that we have thought it through so it fits. We don’t try to put a square peg in a round hole,” explains Tenzer. “We’ve targeted the lender for a reason, and that means that they will look at our deal before they look at another because they know that it is going to be a fit. We are, in essence, preselecting, and that’s how we have built a reputation over the years. We are vigilant about quality control because we want to maintain the relationship and reputation not only with our borrowers but with our lenders. We have two constituencies that we have to satisfy.”

The entrepreneurial spirit and co-ownership structure has both helped to attract new talent and retain talent, even at the bottom rung. “I was attracted to the fact that this is an entrepreneurial firm that allowed for new ideas. If you had an idea or something that you wanted to execute, you had support, even at the lower levels, even as an analyst,” Jonathan Lee, principal and managing director at GSP, explains. “Unlike a lot of companies that have a singular head or CEO, our firm is more of a partnership, so there is a collaboration of ideas that go into all of our decisions. As peers, we are able to share those ideas quickly and make decisions.”

The company’s size allows it to move at a rather nimble fashion toward their collective goals. “That is the leadership model presented to me as I was being mentored, and that leadership model has remained true to form.”

Davies is also a part of the new leadership team taking the baton from the founders. He began his career at GSP, but left to peruse other opportunities. He realized when he was gone that the leadership structure was unique in the industry. “I learned a lot when I left the firm,” he adds. “I think it’s great that the founding partners have set up the firm this way, and I’m part of the next generation that really does recognize that. It’s a great avenue for that particular entrepreneurial client to hire a group like ours.”

The leadership structure has been established and proven, but passing on that legacy is, of course, important to the future of the firm. “The training is inter-generational and inter-company,” says Bram. “Just as George trained us, we have trained our younger leaders. All of the leaders train the others in our firm. All of this works to transfer skills, knowledge and strategy throughout the organization.”

GSP’s first step in passing on the torch has been to promote a new generation of partners, which includes Davies and Lee as well as Antonio Hachem, Bryan Shaffer and Shahin Yazdi. Just like Smith, the senior partners have given significant stock in the company to the new partnership. “As we’re getting older, we want to assure our success by having the next generation take an active role in the leadership and ownership of the company,” says Tenzer. “We’ve empowered them by letting them have a significant share of stock in the company and a more significant role, so they have a proprietary interest to move the company forward.”

Lee and Yazdi have taken the reigns as co-leaders of GSP, and have already begun to implement changes that will maintain the firm’s ideology while growing it and moving it forward. “Lee and Yazdi have come up with some good ideas and they have new directions in which they want to take some things,” says Tenzer. “They want to see the company grow, and they want to see it grow in new ways and keep up with the times. It needs fresh blood and new ideas. We don’t want to become dinosaurs. I think it is great.”

According to Lee, those new ideas include expansion to other markets. The firm is looking to open offices in Orange County, Phoenix, Las Vegas and potentially San Francisco in the next few years.

Lee also wants to recruit talent that embodies the firm’s culture. “We’re trying to recruit individuals that come in with the full set of strengths that the millennial generation has in their connectivity, but we want to hire those that show us the character that we are looking for as a company,” he explains. “The older generation gives more weight to relationships, and we want to make sure that the younger generation continues to value interpersonal relationships as much as we do.”

Of course, the new partners are looking to integrate more technology, although Davies insists that no amount of tech will never replace their emphasis on client relationships. “We perform well in an ever-evolving technological because we are some of the best structured finance guys in the market,” he explains. “Structured finance involves all various parts of the capital stack. The reality is that you still need someone to shepherd a deal in which actual humans are making decisions, and where discussions in meetings are still going to be important.”

Then, there is the incoming group of CRE professionals—new talent entering the industry. The company has built intern and mentorship programs to support and nurture rising talent. “Every quarter, we have three or four interns who rotate through different teams to get exposure to diverse deals,” says Tenzer. “They get to come to the lender meetings and presentations, and they get to sit in on negotiations when it is appropriate. They really get down into the trenches at times. It seems like we always end up hiring at least one intern from each rotation.”

The mentor program, similarly, pairs new or young professionals with senior staff members for guidance, which includes everything from strategy to approach to negotiation. “Whatever it takes to get the deal done,” says Tenzer, adding, “George mentored Steve, Gary and me, and in turn, our role is to mentor others. We want to pass it forward.”

As much as training and education has integral to maintaining the firm’s legacy, it isn’t necessarily from the top down. Instead, the company encourages shared knowledge, new ideas and innovation. “We senior leaders are also being trained by our younger partners and junior team on newer technologies and approaches,” says Bram. “All the leaders share the knowledge of 30 and 40 years of hands-on experience, yet we also share ideas on fresh new ways to do business that our younger members have learned more recently.”

In the end, the firm’s leadership rests on four tenets: industry leadership and ethical practices, senior-level attention to each client, an entrepreneurial company serving entrepreneurs, and leadership as an obligation and an honor. The four founding partners have upheld these ideals, and the new generation of leaders has committed to carrying the quality of leadership forward.

“It all comes down from George,” says Tenzer. “I try and keep George alive because most of the people in the company have never met him. George had very high ethics and a very dedicated work ethic. He really always put the client first, and that was something that was very important to him. I saw that at an early stage in my career, and started to model it. It’s important to pass that on to our young people.”