Exclusive Q&A With NFL Legend And Real Estate MVP Emmitt Smith, Part 1: I'm Not Just A Figurehead!
NFL Hall of Famer and Super Bowl MVP Emmitt Smith has been making a name in real estate for a while now. Since getting in the game in '04, he's put together a strong presence, including his own brokerage, a lending firm, a construction company, and a portfolio that includes office assets and multifamily developments.
For today's Black History Month profile, Bisnow sat down with Emmitt for an exclusive chat on scoring touchdowns off the gridiron.
Bisnow: It's (sadly) becoming a rule, rather than an exception, that athletes lose their money after their playing days are over. As an athlete, how did you avoid falling into that trap?
Emmitt Smith: I’ve made some financial mistakes myself, but what I’ve come to learn is that like anything else in my sport we learn from our mistakes and we pick up and keep moving on. Over the years I've come to learn to try and evaluate risk, reduce risk as much as possible, and then try to increase my ability to get the returns that I’m looking for.
From an athlete’s standpoint, we’re quick to utilize our own capital, but what I’ve learned is the power of “OPM”: other people’s money. But you have to have some kind of credibility and you've got to have some kind of track record to go along with that. For athletes, it’s kind of difficult to develop that track record if you’re focusing on your sport or your craft and not really spending a lot of time in the business world.
Bisnow: How did you go about developing your own credibility and know-how?
Emmitt Smith: I started to probe at what other companies were doing, how they were leveraging my money that I was investing in their funds to acquire dirt, develop dirt, give me my returns. Understanding the value chain and where the dollars are actually being made and how they're made was extremely important.
But I think one of the best things I did for myself was to invest in myself by getting my CCIM Institute education, that taught me how to not only evaluate investment opportunities, but to understand how real estate actually works from an investment perspective as well as from a user perspective—and understanding the intricacies between the two.
Bisnow: Why did you choose real estate as a post-career profession?
Emmitt Smith: Three people, who actually transitioned from the sports arena, were influential in my decision-making to go into real estate. One played basketball and two played football—Magic Johnson, Roger Staubach and Steve Johnson. Steve left the game in the early '90s, but we reconnected years later through my wife, Pat and his wife (they were connected through the Miss Virginia pageant). Steve started helping me break down the industry and develop an overall understanding. As time evolved, my interest increased and turned into a career ambition.
Bisnow: In real estate they often say your first deal is your most important. What was your first deal?
Emmitt Smith: I bought about four Walgreens at about a 7.5% to 8% cap rate, and I sold them at a 6.8% cap right before the market turned. It wasn't a huge spread, but at the end of the day there was enough spread there to where I made a little bit of money and saw how the process worked.
Bisnow: And you got out before the market collapse, that’s a win.
Emmitt Smith: Oh, most definitely.
Bisnow: Your best deal?
Emmitt Smith: The best deal I ever made was through my partnership with ESmith Legacy—we built and sold about a thousand multifamily units up in the Baltimore area.
Bisnow: Best deal you never made?
Emmitt Smith: Oh my gosh. I feel like one that we missed out on was one up in Harlem on 125th and Lennox. It was a pretty sizable deal, and when I say sizable I mean where the land itself was being valued north of $50M, and the property itself had the potential to be a $250M deal or more.
Bisnow: What stopped you from seeing it through?
Emmitt Smith: What stopped us was having the equity. We didn’t have a fund. The asking price was not what we wanted it to be—the cap rate was extremely low. It was one of those situations where they wanted us to buy the dirt almost at a 6% cap rate, and that was during the down market. We had to walk away from it because it wasn’t worth it with that price with the amount of risk involved. We were in a tight corridor already and the construction risk was too great. At some point you have to do exactly what Kenny Rogers says: Know when to hold ’em and know when to fold ’em.
Bisnow: Your football career is legendary, but what can you share with our audience about Emmitt Smith—the real estate investor—that people may not know?
Emmitt Smith: I think people make an assumption that I am just a figurehead. I had a guy come in earlier this week. He complimented me on my book, but he was like, 'Is this the real deal?' Yes, I am the real deal! I do come into the office! I do go on meetings! I do understand what’s going on within our platform, or what we’re developing and what we have developed. Yes, I do have multiple companies, but I spend a ton of time with every last one of my companies. I’m more than just a former athlete or a 'Dancing With The Stars' guy. The sky is not the limit for any athlete or any person, so why would I put any limits on myself?
People want to put you in this box, and they want you to stay in this box. But even when I was playing football, you couldn’t contain me in space. I had to get my space, to take advantage of my space! In business, it’s the same way, I’m not someone you can just put in a box and say, "Hey, this is the only way we want to know you."