Q&A: Distressed property broker and Deadhead seeks levity in tough deals

After more than 30 years in the commercial real estate industry, Jon Hardy needed a break from working for a large firm. So he has launched his own specialized company focused on helping investors acquire properties in need of care.

Hardy’s firm is called Venture HYDRA—the acronym stands for high-yield distressed real estate assets.

And after years representing both owners who are desperate to sell their commercial properties and those who want to buy them as investments, Hardy is now focused almost solely on those investors.

He helps his clients find properties that could be a profitable buy because the current owners are under water with their lenders or having other financial problems and need to sell quickly.

Hardy told IBJ he recognizes that his work isn’t a lane that most commercial brokers spend time in. He also said that his approach to working with clients isn’t the most conventional, and he’s not afraid to speak his mind when he thinks it’s warranted.

This interview has been edited for length and clarity.

How did you get involved in the real estate industry?

I went to Indiana University, and when I had one semester to go, I came up here to Indianapolis, and I met [longtime Indianapolis-area land broker] John Snell. … He really put me on the path of commercial real estate. It was toward the end of that semester that I saw a poster for CB Richard Ellis Commercial that was advertising positions for interns and researchers, so I applied and got a job there.

You’ve been at multiple firms over your career, but you recently ventured out on your own with a pretty specialized focus: distressed assets. What is a distressed asset and what drew you to that particular part of the commercial real estate world?

In this world, distress is usually financial, but it can be from any number of ways—[the owner] not paying the mortgage, having a whole bunch of [capital] that they can’t get to or they fall out of covenant with their lender. There’s a variety of reasons why, but in the end, it comes down to money.

I was in the right place at the right time, and I’m a quick learner. It was when I was at Coldwell Banker that I got all my experience in distressed assets. From there I’ve just stuck with it.

Indianapolis is doing pretty well. There’s been a couple of assets that have been in distress, and there are other assets that banks have figured out early.

When it comes to handling these kinds of properties, they’re typically complicated deals, right? What goes in to either buying or selling these properties?

The number one thing we do, particularly on disposition, is sit down and have a very in-depth meeting to really get a handle on things. That’s the most important piece, and if people can be honest upfront, the process goes smoothly.

What happens sometimes is borrowers are scared or they don’t understand and they don’t want to work with their lender. And that’s when bad things can happen. Coupled with that is understanding what the lenders want.

On the acquisition side—and that’s what I really enjoy—it’s about sitting down with an individual, a partnership, whoever it may be, and really talk to them about, “What are we trying to accomplish? What are our hurdles?”

I tell my clients to set the bar really high on what you want and how that fits in your portfolio, and let’s go out and jump over that bar. It’s getting really in tune with what the client is trying to achieve.

How would you describe your approach to working with clients? Is it more transactional or personal?

So, it’s going to be fun for certain people that read this, because everybody will have an opinion on my approach to brokerage. But these can be very difficult situations with lots of hard decisions, and my default to get people comfortable is to keep it light—even when we’re talking about a serious subject.

I’m really client focused. … It’s just how I do business with my clients. Not all of them, but a vast majority.

I can delegate some things, but I’m still a control freak when it comes to maintaining the client relationship with what they want and what they’re trying to do. But if I keep it light, I focus on them and I stick to the plan that that works best for them. I think a lot of people look at it as a very relaxed approach.

Sometimes people want a little more, so I can dress it up and put on a tie, but really the hands-on approach has been how I operate.

What happens when one of your clients is interested in making a deal that you think is a mistake?

You tell them, and the reason for that is because it’s the right thing to do. Early in their career, people focus on dollars, but then they’ll figure it out somewhere around year five that it’s all about the clients.

I work on long-term relationships. So, with that comes another level of responsibility, and that responsibility sometimes isn’t received the best initially, but it’s telling them not to do the deal.

I’ve had to do it a couple times in my career, where I write a little letter to the client saying, “Hey, this is not good. This is not good for you. It’s not going to achieve what we talked about. I don’t want any money. I’m just telling you, don’t do this, please.” And every time I’ve done that, they’ve listened, and in the end, whatever the issue was that we were spotting, it did come to pass.

If we’re doing something that doesn’t meet the criteria we set out, I do bring it up. And for me that reinforces those relationships.

What are you using as the benchmark for success with your new company?

A lot of times in brokerage, success is tied to money. There’s always going to be a monetary side.

I look at it as the number of transactions that I can accomplish. I’d say in year one, if I can complete six transactions in my first year out, that will be a success. To have six happy clients in 12 months, I’ll feel pretty successful about Venture HYDRA.

What areas are you paying the most attention to these days when looking for properties that might be facing distress?

Downtown is always an opportunity. There have been a couple down there that have already traded, and there are a couple more that that may trade or get worked out. But there’s also plenty of opportunities throughout the rest of the county and even to the south—that’s where I tend to stay put, Indianapolis and into Greenwood.

But when I talk to investors, I learn what they’re looking for, so I can scan for it but also call into some of my industry sources and say, “Here’s what we’re looking for, here’s our approach.” I’m always keeping an eye on it, and I drive around too because when you do that, you can tell that the lawn isn’t being mowed or the parking lots look bad. You see things deteriorate over time.

I understand you’re a Deadhead?

Yes, I’ve got a really bad concert habit, and I’m a huge fan of the Grateful Dead, in particular. When I was 17—I’m now 54—I went out to San Francisco to see them and had a great time with several of my friends. I love their shows, and concerts in general are a lot of fun for me.•

—Mickey Shuey