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110 percent Swedish.

110 PERCENT SWEDISH

Jim Nelson is proud of his roots. As MBA's new president, his solid Midwestern character will shape the association's direction as it has the company his father built.

The roots are all around. For starters, take 81 South Ninth Street, Minneapolis. The building itself is a landmark--a fixture in the city that has been lovingly restored to its earlier panache. The retail creme de la creme of Minneapolis--the former Young & Quinlan department store--has now made way for Ralph Lauren and some very attractive office space.

As you walk through the lobby you see the black and white photo of Elizabeth Quinlan--a distinguished, upper-crust matron of Minneapolis--encased in a glass display case. Roots are important to these proud residents of Minneapolis.

The elevator operators date back a ways as well--white gloved, friendly, skilled technicians embued with history and delighted to share it. Lois, as her name badge says, takes us to the fourth floor with total command of the somewhat unwieldy looking, metal doors that help define this great old building's personality. She shares a little history about the building before she deposits us at the entry to the headquarters of Eberhardt Company.

Just as we are stepping out of her domain, this captain of the Young and Quinlan transportation corp cups her hand and makes a feigned attempt to share what is most likely not one of the better kept secrets in the building. She says, "I've been here 33 years and I'm part of the building." These wonderful, green-smocked ladies, manipulating metal accordion-door elevators and calling out floor numbers, while at the same time weaving friendly chatter, are a part of the singular friendliness that is Minnesota.

We are told that the fountain that now occupies a prominent spot inside the Eberhardt corporate headquarters used to be a fixture in the tea room on the fourth floor of the old department store. No tea in sight now, but it does lend an old world civility to the offices headed by Eberhardt Chief Executive Officer James W. Nelson, CMB.

The gentility and sociability of the former setting for the carved stone fountain seem preserved in this attractive modern office with lots of glass walls and open space. The welcome you feel in this office is a reflection of the style of the chief executive who ushers this visitor in his office while still in mid-phone conversation. No ante room here. This is modest, utilitarian, people-to-people office design.

Jim Nelson doesn't really have a desk. He has a round wood-topped, modern table with five chairs on wheels grouped familiarly around. There is nothing about the size of the space, the desk, the art, or the doorway that would even whisper to you that here resides the boss.

In fact, another Eberhardt executive says, soon after they moved in to the new office from a suburban location, the openness of the boss's office to any visitor's sight proved a bit of a problem. Before they installed mini-blinds on the interior glass wall of Jim Nelson's office, people were just walking right in to do business with the friendly, top officer of the company, just as though there was no such thing as appointments or schedules or the other familiar barriers to the hallways of the executive suite.

There is very little sign of pretense in this office. The equality of the working relationships is clearly telegraphed by this pretty modern office with a mural of building photographs behind the receptionist's area. The black and white photographs proudly display the products that Eberhardt has been helping produce in the Twin Cities for better than 50 years. Those products are office buildings, apartment buildings, residential subdivisions and many other properties that form the very physical fabric of the Twin Cities that we see today.

Small wonder, then, that Jim Nelson provides a visitor a tour of the city in the same way that a curator of a museum would conduct a tour of his fabulous collection. All of Minneapolis is partly his in some unique way. But this understated man would never put it that way. He just is pleased that you are impressed with this city of lovely natural lakes and residential gems in the hills overlooking the water, such as Kenwood with its Tudor, Georgian and Victorian homes.

Another photograph catches your eye as you review the few personal honors and artwork that are displayed low on the wall near the credenza that holds Jim Nelson's phone--one of the key tools of his trade. It is a black and white shot of a man who looks the very picture of dignity--like a Supreme Court justice, perhaps. This is Walter C. Nelson, CMB--Jim Nelson's father.

The elder Nelson, now 80, was offered a partnership interest in Eberhardt Company back in 1939. At that time, Walter Nelson was working for The Equitable, also the place where he met the future Mrs. Nelson. Eberhardt Company was founded in 1935 by a Mr. Eberhardt, Jim Nelson says. The company's namesake had been a banker in North Dakota, but his bank failed in the Depression. He then came to Minneapolis and opened a property management firm. Eberhardt's company worked for banks and insurance companies, such as Equitable, which is how he came to know Walter Nelson. After Mr. Eberhardt's death in 1951, Walter Nelson purchased the firm from the Eberhardt family.

If you talk to some of the people who know Walter Nelson professionally, or otherwise, the praise comes in fast and unsolicited. His son, probably sensing that you have already heard a lot of the superlatives, says, "Forgive me for bragging about my dad." But then he goes on to do so quickly and easily, as though it is completely second nature to him by now. "My dad wrote the book on the word leader," says his son.

The senior Nelson was very active in Minneapolis community affairs and generally regarded as a pillar of the community. But it was the mortgage finance business--both residential and commercial--that became the focus of much of his energy. As his son recalls, "The industry was his life." So, it is only natural that this person of dynamism, leadership and natural ability, would become very active in the Chicago-based trade group that represented his industry--the Mortgage Bankers Association of America. Nelson ultimately became president of that organization in 1959.

His son Jim, will follow in his father's footsteps and become MBA's president this month when the group holds its annual convention in Chicago. Jim is steeped in the knowledge of the industry's trade group and could just as easily be its historian as its president. Because he is Walter Nelson's son, Jim Nelson has known every MBA president since 1955 on a personal basis. He recalls how his father's era was a unique one in the history of the mortgage banking business. He also recalls how his father's special leadership qualities got things done in an era when one man alone could make the wheels and levers in Washington's bureaucracy turn just enough to make an impact.

"My dad was one of the classic entrepreneurs of the mortgage banking business. There was a whole generation of them. And most of them had their turn as president of MBA in the 1950s and 1960s," or even more recently, Nelson says. Walter Nelson was a "very strong person and a terrific salesman--very persuasive," according to his son.

Jim recalls an example of his father's approach to solving a problem created by government restrictions. Either during World War II, or shortly after, the elder Nelson was trying to finance a subdivision for a builder, but there was a severe shortage of copper pipe because of the war. So Walter Nelson got on a train to Washington, D.C. and called on office after office to trace the source of the logjam of materials. He eventually tracked down a person with influence and got the copper pipe so that Eberhardt could start making mortgages on the new subdivision.

Jim Nelson cares about preserving the legacy that his dad left, in terms of both the company that he now manages and the trade group that Walter Nelson helped bring to maturity. Walter was among a group of mortgage bankers that started working with the government to create what is now the Government National Mortgage Association, (GNMA), Jim Nelson says. The senior Nelson, together with a California mortgage banker by the name of Willis Bryant, also became one of the prime movers behind developing a college-campus based educational program sponsored by the MBA for up-and-coming mortgage bankers. The School of Mortgage Banking, as it is known today, "is as good a thing as anything MBA does," says Jim Nelson.

The younger Nelson has some goals of his own for MBA as its new president. "I feel very strongly about MBA living up to its mission of being the pre-eminent trade association for real estate finance." The trade group is contemplating a name change to reflect a broadened sense of the industries it could represent in the evolving financial sector devoted to real estate finance. Nelson says he is open-minded about altering the trade group's moniker. He sees that as only a superficial aspect of some deeper changes that require serious attention. "The larger issue is membership and the ability to retain the members that we ought to have, and attract the members that we ought to have," he says.

Nelson adds that mortgage banking is more than originating, underwriting, closing, selling and servicing "loans on houses." This sensitivity on Nelson's part directly addresses concerns among commercial real estate finance members of MBA that their non-residential issues have not had equal consideration. A reorganization of the MBA department serving commercial real estate finance members is underway with Nelson's long-time friend and ally, John Ferber, MBA senior staff vice president, installed at the helm. The creation of a new council to better serve the commercial members promises to give these issues greater visibility.

Nelson also exhibits sensitivity to other groups on the residential side of the business that represent promising membership prospects for MBA. He sees mortgage brokers as a critical group for such outreach efforts. Nelson said he does not think MBA can get mortgage brokers to become members of MBA without repackaging the focus of the trade group to include their specific interests and without acknowledging the change that has occurred in the industry. He added, "It may be too late to get them even with a repackaging [of the trade group's focus]." Nelson concludes that MBA needs "to do a lot of outreach under the guise of mortgage lending, not mortgage banking." He quips that if "a stodgy old traditionalist like me can recognize that," then it must be time to change.

Jim Nelson has been instrumental in reshaping his own company to meet the changing business times faced by everyone in mortgage banking. He also understands how MBA must be responsive to the changing needs of its members--and indeed reach out to new members with new needs. Nelson says the era when MBA's president and its members all work directly in the same sector of the business is over. He says, "There will be nobody who really understands all of it well," amongst those serving as future presidents. He says this is a result of recent changes in the mortgage banking business that have left an industry of niches for a variety of professional specialists. Because of this, he is intent on fostering a new era for MBA--one of tolerance, goodwill and mutual respect among those in commercial and residential mortgage banking for the separate, as well as similar issues that concern them.

Jim Nelson now represents a company that is no longer in the residential side of the mortgage banking business. He made a strategic decision to pull Eberhart out of the residential business five years ago to focus on being a "commercial real estate services company," as he defines it. That was a key departure.

But Jim Nelson knows a lot about the ins and outs of the residential mortgage banking business. As he says, "Our company was in residential for 50 of its 55 years." As executive vice president of Eberhardt, beginning in 1973, he managed the mortgage banking and residential real estate sales divisions. Eberhardt was "predicated on the one-stop shopping approach," Nelson recalls. Harkening back to his days as a history major at the University of Minnesota, Jim Nelson's tendency is to trace things back to its roots. When his father ran the business, he remembers, it was typical for a house Eberhardt was selling to have an open house on Saturday, and then on Sunday at the Nelson kitchen table the buyer would be filling out a loan application. He says it seemed to work just fine then, but it probably would be illegal today. He recalls how his dad might even sell the buyers a homeowner's insurance policy. "That's how we ate in those days," he says.

In more recent times, the connection between the residential brokerage operation and the home mortgage business has proved more difficult to manage. From 1980 to 1983, Eberhardt bought three of the other top six real estate brokerage companies in the Twin Cities market. That meant Eberhardt grew from 80 real estate sales people to 450. Instead of boosting the mortgage business and profits, Nelson says, "We didn't make any money at it all." The result, he adds, was that "I ended up with 450 gray hairs versus 80."

Jim Nelson believes he saw first-hand that the so-called synergy approach--that one company can capture both the real estate sales transaction and the home loan business-- simply doesn't work. This strategy, however, has yet to be buried in the larger universe of mortgage banking. Very sophisticated competitors, including Sears Mortgage Corporation, Prudential Home Mortgage and Citicorp Mortgage, Inc. have pursued building strategic alliances with real estate brokerage operations that represent large marketshare.

Nelson is very straightforward about the way Eberhardt pursued the strategy. He says that the Eberhardt real estate sales staff "got a speech twice a year" stressing that their first obligation was serving the customer with the best mortgage product available on the market. In pursuing their version of one-step shopping, Eberhardt was very straight-laced. "We [told] our brokerage staff that you have an obligation to bring your mortgage customer to anybody who will give them the best deal." The real estate sales staff was specifically told that they did not have to bring their customers to Eberhardt Mortgage, Nelson recalls.

Jim Nelson believes a lender cannot succeed with a strategy that attempts to require affiliated Realtors to use a particular mortgage company. "It's like legislating morals, it doesn't work. People will respond to service." Nelson believes that Realtors and mortgage bankers think differently. "To my dying day, I believe a Realtor will never understand the mentality of a mortgage banker and mortgage bankers won't understand the mentality of a Realtor." He says some of his sales associates used to tell him he was thinking just like a businessman and would mean it as a negative thing, whereas he would be taking it as a compliment.

The new Eberhardt is a full-service commercial real estate service company and it functions neatly in four distinct areas that all complement each other. The residential headaches are behind the company, but there still hangs a very lovely painting on Jim Nelson's office wall of a small house with a bike leaning on a picket fence that he says serves as a remembrance of the residential roots in the company's past.

As we are invited in to interrupt the start of Jim Nelson's business day, we watch as he handles first-hand one aspect of the multifacted operation he has helped fashion. He is in the middle of a conversation with a friend in the furniture business who is trying to negotiate a lease on some new space with a shopping center owner. Jim Nelson is representing the husband and wife owners who are trying to budge a better deal out of the interests that represent the shopping center. We watch as Jim Nelson skillfully negotiates a deal that has some hitches at the moment. He interprets for his client the position of the opposition, pinpoints the areas where his clients should stand firm and where they might consider giving ground to get more desired concessions from the owners. All this is done with hardly a glance at a note. It is the art of deal-making. Nelson clearly is at home doing it. It calls on his people skills, which are considerable, colleagues note.

Nelson counsels his client that what he is looking for, in terms of the issues that are holding up agreement over a lease, is the precise spot for his side to dig in its heels. "I think what I'm trying to decide is where do we go to the mat with them," he tells his friend. At odds are the couple's demand for parking spots and two other outstanding issues. Nelson cuts right through to his key strategy, counseling one of the owners that "we've got to save our arguments for making this center look like a destination store for you. What we really need is $100,000 in capital improvements." Nelson advises the wife that "we will save our horsepower for getting the [store] design you want."

The wife agrees to convey the terms of the bargaining position fashioned by Nelson back to her husband and they will call back later in the day, so Nelson can get back to the shopping center representative with the terms of an acceptable lease. When the husband calls back later with a whole new set of concerns and not entirely happy with the proposed deal, Nelson isn't even phased. He smoothly fields the newly redefined set of concerns and shifts the game plan to address the husband's major sore points. This is all done with such total aplomb that he appears almost amused by how much fun he is having plying his trade.

This is only one very small aspect of Nelson's business. The largest source of the Eberhardt Company's revenues is its commercial real estate finance department, Nelson explains. This is the mortgage banking operation run by John Davis, president of Eberhardt. Davis has worked for Eberhardt for 17 years. Nelson says, "I have absolutely a 100 percent trust relationship with him. It isn't a boss-employee relationship, it's very much a partnership."

The commercial real estate finance business has brought in, on average during the past, roughly 45 percent of the company's revenues in a typical year, Nelson says. This department is set up like a traditional commercial mortgage banking company that originates and services commercial mortgages for institutional investors. The company also does property management as an adjunct to its real estate finance business. The property management division is fee-paid work that accounts for about 25 percent of Eberhardt's revenues, Nelson says.

Davis says his area passed the $500 million in commercial loans serviced mark this past August. The portfolio has the highest dollar amount total in office and retail mortgages, but if you go by the unit total the portfolio has more industrial property loans than anything else. Davis says the Twin Cities market is a very competitive one for commercial mortgage banking.

Typical volume for Eberhardt's mortgage banking operation is between $150 to $200 million in originations per year. That accounts for originations out of both the Minneapolis office and an operation based in Phoenix called Morken-Eberhardt of Phoenix, Inc. Davis said that in 1989, the mortgage banking operation did approximately $190 million in transactions, including both debt and equity deals. That included 47 transactions. The real "banner year" was 1986, when the mortgage banking operation handled 71 transactions. But Davis adds, "This year, of course, volume is down. It is a difficult year for most people."

Davis said there are several longterm employees, like himself, at Eberhardt. The employees of the company are generally "very loyal" and that is a testimonial to the way that Jim and Walter Nelson have run the company, he said. He said the hallmark of their style is integrity. Davis said the Nelsons have operated the business conservatively from a financial standpoint, but aggressively in terms of soliciting relationships and business.

The third area of the company's business is sales and leasing of commercial real estate. Typically, 20 percent of the revenues stem from this brokerage work. The fourth focus of business for the company is real estate consulting work. Jim Nelson says his company has been doing consulting work on a formal basis for about 10 years. This aspect of the business owes its origins to Walter Nelson, Jim says. "One of the good pieces of advice I got from my dad was when he told me that: `Most of my career I was giving away everything I knew and not getting paid for it. Because I liked it, I spent hours and hours talking to people. Don't make the same mistake.'"

Now Eberhardt is in the business of giving trained commercial real estate counsel, much like an attorney or an accountant would in their fields. Nelson says this is not necessarily a service provided to help facilitate a transaction. But he says the intention is that overall the consulting business will eventually lead to some transaction business.

Nelson says that management would like each of the four functional areas to stand on its own. "Sometimes they do. Sometimes they don't." But he says that they fit nicely in providing a complete line of commercial real estate services to a full range of clients. Those clients include developers, investors in buildings and investors in real estate equities and mortgages. The client list also includes non-profit entities such as the city of Minneapolis.

In fact, as Jim Nelson finishes the lease negotiation phone calls, the next item on the day's calendar is mapping out advice to give the city on a developer's request for Minneapolis to chip in to help make the numbers work on a big renovation project in the city. The project is "very important to the city and unfinanceable in the current credit crunch," Nelson says. He adds that his firm is "sort of the bad guys in this. We're trying to inject some reality about this market."

Jim Nelson sits down with a young member of his firm, Mike Lewis, whom he refers to as "my number cruncher" to try to pick apart the somewhat rosy assumptions submitted by the developer about the project's prospects. The city has an interest in the renovation of an older property because a local business says it will anchor a large number of jobs in the renovated office tower that is part of the planned redevelopment. The project is in a "pretty tough location" that the city is hoping to revitalize with this project.

Nelson calls in his office building's landlord to get some ballpark numbers on average retail building renovation costs. The trio quickly challenges most of the developer's assumptions. Mike says the assumptions show "they are virtually leased-up on retail space out of the block." He adds that they could even concede on the rosy retail assumptions, but the office space assumptions are even more unrealistic. Nelson agrees, "That's where they really lose it." Rehearsing for a meeting with the city set for the next day, Nelson goes through what he and his team will say. Eberhardt's landlord chimes in the fact that the city has got "a depression in the rental market, and it would be different if that were a good location. But who in the world is that a good location for?"

Nelson closes out this segment of his business day by saying, "We've got the blinding light of the obvious on our side. Davis notes that one of the things that is amazing about Jim Nelson is "how many balls he can keep in the air." He also has "an extraordinary memory." Davis adds that "this business is done with a lot of stress. He ostensibly seems to manage stress very well. He doesn't exhibit much stress at all."

All of this is apparent before lunch time in this working day in the life of Jim Nelson.

There are two things he says he would do instead of what he does if he could manage to make a living at it. One of them is coaching kids at sports. The other is helping manage some young adults he has set up in the apartment management business. These young adults are managing a four-building apartment complex owned by his family called the Joppa Lane Apartments. They have no prior apartment management experience, but Jim Nelson simply believed they could do it--with a little coaching. Mark, Susan ("Sooze") and Kathie are doing a great job as it turns out and Jim Nelson offers support like any proud coach--not like a boss or an owner. He stops by to rehearse them for a visit the next day from the banker who holds the mortgage. With a glint of humor in his eye, he suggests that Mark wear some socks with his topsiders. Mark quips back that he'll just wear his high tops.

Jim Nelson loves sports. Couple that with the fact he believes that all kids are coachable and you see why he has the attributes of a natural coach. His own three kids have proved very capable athletes. Libby, the youngest, is now on a full tennis scholarship at the University of Minnesota. Tom played college hockey as a goal tender for the University of Vermont. Lucy, the oldest and just married, played college tennis at Amherst. Robin, his wife, is also a very able tennis player to round out the bunch. The Nelsons hold season tickets to just about every sports event conceivable in the Twin Cities metro area.

Jim Nelson is the essence of a positive thinker, says his long-time golfing buddy and friend. Mike Dougherty is also the founder of a regional investment banking firm in Minneapolis called Voyageur Asset Management and has known Jim Nelson for 22 years. That positive attitude, plus the fact that he is very unselfish, define this man who is comfortable with carrying on tradition and bringing along a new crop of young people in the industry that has treated his family well. Dougherty quips that the fact that Nelson has let his golf handicap slip into double digits because his MBA obligations pull him off the links so much, is solid proof of his unselfishness.

Nelson describes himself as 110 percent Swedish--both sets of his grandparents were Swedish immigrants. Dougherty, a 100 percent Irishman, explains that what Nelson probably means by that is that he's not overly demonstrative or emotional. But, Dougherty adds, Nelson has a great sense of humor and laughs easily. "And from living in the land of Swedes, that's not typical--that's not 110 percent Swedish." That other 10 percent must be pure Jim Nelson--a man who mixes his proud midwest stock and deal-making savvy with a sense of fun in the mortgage business.

Janet Reilley Hewitt is editor in chief of Mortgage Banking magazine and Real Estate Finance Today.
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Title Annotation:profile of Mortgage Bankers Association of America's president, Jim Nelson
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Date:Oct 1, 1990
Words:4555
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