Keeping the Faith

When Paul Ellis launched CNL Commercial Real Estate five years ago, he had an unusually short move from the old shop to the new. Glancing out the window at the CNL Center complex on South Orange Avenue in Orlando, he can still see the office from which he once ran Trammell Crow Co.’s North Florida operation.

Paul Ellis Expands Footprint For CNL Commercial Real Estate

By Paul Rosta, Senior Editor

When Paul Ellis launched CNL Commercial Real Estate five years ago, he had an unusually short move from the old shop to the new. Glancing out the window at the CNL Center complex on South Orange Avenue in Orlando, he can still see the office from which he once ran Trammell Crow Co.’s North Florida operation. But though Ellis’ move has had little impact on his commute time, he and CNL Commercial Real Estate have traveled an eventful path since signing it on as an affiliate of CNL Financial Group, the alternative investment management firm and non-traded REIT sponsor.

Five years after its launch by a dozen Trammell Crow alumni, CNL Commercial Real Estate has evolved into one of the service sector’s Great Recession success stories. From its start in Orlando, the firm opened a Dallas office in 2010, expanded to Charlotte, N.C., in 2011, and hung out its shingle in California that same year. During that time, the firm has grown nearly tenfold, to more than 100 people.

Though still small compared to its giant competitors, CNL Commercial has established a foothold in an eclectic group of services, ranging from leasing and investment sales to development and asset management. Current assignments include managing a 123,000-square-foot expansion and consolidation for the Golf Channel’s headquarters in Orlando; leasing an upscale 455,000-square-foot retail center in Charlotte, N.C.; marketing a 2,500-seat performing arts complex in Anaheim, Calif.; and managing four century-old office buildings at the former Parkland Hospital campus in Dallas. It has also established a reputation in the unusual and often overlooked specialty of church-affiliated buildings. It recently sold a church property in Eau Claire, Wis.

Clients and former colleagues cite Ellis’ professionalism, industry knowledge and strategic acumen as cornerstones of CNL Commercial’s success—qualities they say he infuses in the company. “He brings a very calm demeanor into any situation and is able to approach each challenge … with a very thoughtful and a very measured approach that really helps take the emotion out of any decision and makes for much better decisions,” said Pryse Elam, senior vice president & Southeastern regional manager for New Boston Fund, who formerly worked with Ellis as a Trammell Crow principal in Florida.

For Ellis, the launch of CNL Commercial in 2007 marked a rare event: only the second time he had switched companies during his 22 years in the business. In October 2006, he was running Trammell Crow’s Northern Florida operation and overseeing three offices and a 200-member team when news came that CB Richard Ellis Group Inc. planned to acquire Trammell Crow in a blockbuster $2.2 billion transaction.

After weighing their options, Ellis and a core group of his colleagues decided to pass on joining the global giant in favor of taking a riskier path. “Our decision was nothing against CB at all,” he emphasized. Instead, they concluded, the merger presented a rare opportunity to create something new.

Ironically, Trammell Crow’s Orlando office had had no direct ties to CNL Financial Services when the search began for a prospective partner. But through his church, Ellis had struck up an acquaintance with a fellow parishioner named Andy Hyltin, who is now president of CNL’s fund management group. Ellis approached Hyltin about bringing over a team as the nucleus of a new CNL real estate services affiliate.

Hyltin responded enthusiastically to the idea, agreeing that the new unit would offer CNL the opportunity to broaden its real estate service business beyond its customary core market of investors. For their part, Ellis and his team felt a kindship with CNL’s spirit of entrepreneurship and relationship-building, which were also principles of Trammell Crow’s culture. “We saw this as a unique opportunity to get back to building a business and get excited about it and passionate about it,” Ellis recalled.

CNL Commercial Real Estate made its formal debut in February 2007, only a year and a half before the financial meltdown that triggered the recession. Economic conditions ramped up the challenges for a fledgling firm, yet Ellis sticks to the adage that the best time to start a business is either right before or right after a recession. “What we found is that the disruption in the marketplace creates as many opportunities as it creates difficulties,” he noted. While some legacy platforms were hamstrung by overhanging debt, Ellis and his colleagues enjoyed the advantage of starting a new enterprise free of such burdens. Moreover, the troubled time yielded a bumper crop of seasoned professionals in search of a new situation.

In any event, he understood that starting a new real estate service and development business from scratch would be no cinch, even in the best of times. “It wasn’t like we expected to triple the business in the first two years anyway,” he said. Early on, CNL Commercial Real Estate endured a painful personal and professional loss: in December 2010, Chip Lilley, a founding partner who had mentored Ellis at Trammell Crow, died of colon cancer at age 52.

In CNL, Ellis had found a sponsor that had a knack for thriving in hard times. CNL’s executive chairman, James Seneff, and its vice chairman, Robert Bourne, were valuable sources of business wisdom and encouragement who kept faith in their new affiliate through the hard times. Reflecting on the challenges of the Great Recession, Ellis says, “The thing that hit me was, as a leader I am nothing without our partners and associates. A lot of people talk about trust and relationships … but they don’t really mean anything until they get tested.”

While cultivating business through CNL Commercial’s offices in Orlando, Tampa and Jacksonville, Ellis hunted for growth opportunities beyond Florida’s borders. In early 2010, that search resulted in the acquisition of Drexel Realty Partners, a Dallas-based service firm led by Jimmy Grisham. Ellis and Grisham had first crossed paths some 20 years earlier; from 1988 to 1993, Grisham oversaw the successful effort to build Trammell Crow’s service business in Florida. Another Trammell Crow veteran, Jim Wells, was brought on board as a principal in the new office. More recently a CBRE senior managing director specializing in corporate services, he had worked with Ellis at Trammell Crow during the 1990s.
In June 2011, the firm established a beachhead in Charlotte, N.C., when it brought in a 16-member team from Crosland L.L.C. Led by Susan McGuire, CNL Crosland Commercial Real Estate offers transaction and management services for such properties as Blakeney, a 455,000-square-foot retail center in South Charlotte.
Added Values

The value of relationship-building skills and professionalism championed by Ellis has repeatedly emerged in situations like the turnaround of an office portfolio in Orlando. In 2010, New Boston Fund Inc. tasked the company with leasing Maitland Green I and II, a pair of Class A office buildings comprising 194,000 square feet and located near Interstate 4, the city’s main north-south artery. Another service firm was assigned to represent a third Orlando office building acquired that May. All three properties had sustained severe blows in the recession; by the time New Boston Fund stepped in to recapitalize the distressed assets, occupancy at Maitland Green had slipped to 45 percent.

CNL Commercial’s team worked tirelessly to stabilize the properties, and two years later, occupancy is nearing 90 percent. In May, Alex Rosario, a vice president at the firm, secured leases totaling 14,438 square feet with, New York Deli and the American Diabetes Association. Those transactions followed a 12,000-square-foot lease at Maitland Green I in December 2011 to Avectra, which provides business software products to non-profit organizations. “They almost willed it to happen,” said New Boston Fund’s Elam of the CNL Commercial Real Estate team. “They were completely honest with us, even when they were delivering a message we didn’t want to hear.”

Meanwhile, however, leasing lagged at New Boston Fund’s third recent office acquisition. Though CNL Commercial Real Estate did not have that assignment, the team did what they could to help the struggling property. “Most people would have been highly competitive, and they were supportive,” Elam related. The episode offers a reminder of the value of putting the client’s interests first. “It’s a long-term perspective,” he noted. “You may not have the assignment today, but you’ll have the relationship.” In the end, CNL Commercial Real Estate’s effectiveness earned it the assignment to handle the third building, where occupancy has since improved to 55 percent.

Ellis’ journey in the business started during his college years at the University of Florida, where he majored in real estate and urban analysis. Upon graduation, he signed on as an appraiser with Southern Appraisal Network, a boutique real estate firm based in Orlando. The position provided a solid career foundation on several fronts. To begin with, he explained, “I really got my hand into the nuts and bolts of real estate.” Starting out in a smaller shop also exposed Ellis to an entrepreneurial atmosphere that served him well in the years to come, he added.

During his three years as an appraiser, Ellis came to realize that his interests lay elsewhere. He heard through the grapevine that Trammell Crow’s local office was looking for an analyst. Ellis knew that he did not fit the profile of the Orlando office’s new hires at the time: They tended to hold MBAs or had a successful track record in the business.

Undeterred, he started cold-calling Woody Coley and Chip Lilley, the office’s senior principals. After four and a half months, his persistence paid off, and he was finally brought on board. Ellis’ tongue-in-cheek explanation: “They hired me so I’d quit calling them.”

Ellis joined Trammell Crow at an opportune time for an energetic young real estate professional. By the early 1990s, an economic slump was forcing the venerable developer to retool and expand its model. “I got to learn the entire industry,” he recalled. “When you’re growing a platform, you have to have people who are constantly ready to step into leadership roles.” That situation offered him the opportunity to work in a variety of business areas, including brokerage, property management and development.

Lilley continually challenged Ellis to stretch his abilities, even at the risk of the occasional misstep. “I’m going to give you enough rope to make mistakes, but not hang yourself,” his mentor would say. No less educational, Ellis recalls, was the up-close view of how seasoned professionals successfully bounce back from their own errors.

As he navigates the company toward fresh opportunities at a time when improvement in the market is often fitful at best, Ellis brings a perspective that others say informs the company culture. “I’m grateful that we have customers to see,” he said, “grateful for CNL’s support and sponsorship.” It is a perspective that brings humility in success, offers encouragement when the chips are down and fosters fellowship. “If we lose that gratitude, that would be a real loss for us,” he noted. “A team that is inspired by gratefulness is an unstoppable team.”

As Ellis navigates the challenges of a competitive business, that team’s success is looking more and more like a good bet.