David Marks, CEO & Co-Founder of Brockton Everlast

I want to do something different in this memo. I’m going to take an idea from a conversation with David, expand on it, and in the process refresh my own understanding while hopefully giving you something useful.

David is clear, if you want to be a real estate investor, start with the Modigliani-Miller Theorem (M&M). M&M starts in a clean room: no taxes, no frictions, no insider edge, and investors borrowing on the same terms as all other companies. In that world, an asset is worth only the cash it generates. Slice the pie however you want, more debt, less equity, the pie stays the same size.

The theorem rests on two linked ideas:

What does this mean for real estate? In essence, the value of an asset is the value of an asset, independent of capital structure. It doesn’t matter how much debt you put on it or don’t put on it. The purest fundamental is that the value comes from the discounted cash flows the asset produces. That’s it. Ignore debt.

But only up to a point, as David states, “Obviously, in extreme situations, the availability of debt does impact real values.” Real estate is one of the most capital-intensive industries in the world. If debt disappears, values fall. When debt is overly abundant, distortions arise. He reminded me of 2007–2008: “The heroin debt being pushed into the market inflated asset values to absurd levels.” He described the agency problems of the time. A building might trade at $100 million. Days later, a valuer stamped it at $107 million. Banks then lent 97% against the inflated number including mezz, junior mezz and JV equity. That meant $104 million in proceeds, $4 million in your pocket, and half a $100 million building still in your name, on day one. The distortions were real. Which brings us back to M&M: at the extremes, when no debt is available or when too much is flooding the system, the theorem breaks down. Debt does affect real asset values under those conditions. But that is a temporary scenario where asset values are dislocated, a good investor still focuses on cashflow produced by the asset.

From there, David pushed the discussion toward fundamentals. “Walk into every building you’re considering. Don’t for a second think you can buy a building just off Google Earth. Walk into it. Doesn’t matter if it’s a mall, an office building, a hotel, a logistics warehouse, just imagine it’s vacant.”

The test applies no matter how strong the tenancy looks. A Tesco logistics warehouse with 17 years left, a London HQ with a 20-year sale-leaseback, or Claridge’s on a Friday night, it doesn’t matter. “Imagine the building is empty. Are you excited about filling it? Filling it with logistics operators, with companies putting offices there, with hotel guests? That’s what matters.”

Because while many aspects of an asset can change, its physical attributes, its income profile, even the timing of its exit, the one thing you can’t change is what you paid. “That number is fixed. So pay attention.”

Sometimes the fundamentals sound trivial, but the details matter. Even down to the width of the pavement. David referenced Jane Jacobs (worth studying) and her idea of “eyes on the street.” Her point was that eyes on the street make neighbourhoods. In commercial terms, they make submarkets. They create safety and vibrancy. “A street with a grocery store, a bar, a kiosk, and a busy restaurant open till midnight is far safer than one policed by a patrol car.”

And Jacobs’ attention to detail still resonates. The width of the pavement changes how a building feels. A narrow, mean approach is viscerally different from a wide, generous one. These details shape how people experience real estate.

In the end, whether credit is scarce or overflowing, the only constant are the assets themselves. Strip away the financing and the market cycles, and what remains are the fundamentals: the building, the cash flows it can produce, and the price you pay.

David told me about his first lecture at MIT in 2000. The professor began with a question: why is real estate always the bad boy of the U.S. economy?

One student answered that unlike bonds or operating companies, real estate can’t go to zero. It can halve in value, but the land and the building remain, so banks lend against it more aggressively. Technically true. But then another voice came from the back of the room, a son of a Boston contractor: “because work boots and wingtips don’t mix.”

That was the correct answer.

When Brockton was founded, the philosophy was simple: work boots and wingtips must mix. A firm succeeds only when people can think both ways, about the shape of the yield curve and the shape of the floor plate. If people lean too far one way, consequences follow. He remembered his old boss at Blackstone, who would hang up on brokers within thirty seconds if they framed a deal the wrong way. “If someone starts with ‘you can buy this below replacement cost,’ I put the phone down,” he would say. Because often, the reason it’s below replacement cost is that it never should have been built. Likewise, if a deal is pitched as a 14% initial levered return but the unlevered is 4.5%, with cheap debt expiring in two years, then the return isn’t real. That’s too much wingtips.

The point is that real estate isn’t either-or. Work boots without wingtips is blind optimism; wingtips without work boots is empty finance. Together, they create the balance that makes the business work.

David put it bluntly: “You need to learn from your mistakes. You’ve got to recognize

Wherever you are in the cycle, you’ve got to learn, and you’ve got to avoid believing the hype.”

His warning was against complacency. Early success can make you think you can do anything. That’s when people get caught. “You’ve got to be relentlessly curious,” he said. He pointed to the music industry, which saw streaming coming and simply refused to acknowledge it. Many of the big labels didn’t survive. Real estate is no different. If you only consume real estate news, you’ll miss the bigger forces shaping the next market, AI’s impact on offices, the rise of data centers, shifts in infrastructure, generational expectations about work.

David likes to test for this in interviews. One of his first questions is: “What do you read?” The answers are revealing. Some say Property Week, CoStar, the Times, a brokerage research report or two, and that’s it. Others describe a more disciplined “diet” of information: technology newsletters, political coverage, broader industry sources, and then real estate. “That’s the curious person,” he said, “the one who knows real estate is a lagging indicator.”

By the time you’re reading about a big lease in Green Street, the decision behind it was made a year earlier. Big transactions take months to close. What you’re really reading is history. “If all you’ve got is the rearview mirror, you’re not seeing what’s coming.” Instead, you need to be asking: what’s government saying about unfunded infrastructure? What are tariffs doing to supply chains? What are Millennials and Gen Z saying about how and where they’ll work, and what they’ll tolerate? That’s how you see forward.

This is also why David values operations over projections. He quoted Sam Zell: “The HP jockeys of the scientific real estate community will be replaced by those who learned their trade in operation and not projection.” The spreadsheet is only as good as the assumptions that go into it. If you’ve never leased dozens of buildings, if you don’t understand what tenants actually need and how long it takes to fill space, then the DCF is meaningless. “Garbage in, garbage out,” he said.

To keep people grounded, Brockton runs an annual exercise on operations. They review case studies of firms doing it well, and those getting it wrong. Leasing and asset management, David likes to say, is like fishing. If you’re chasing a half-million square foot pre-let, you’re going after a thousand-pound tuna. You’ve got to study it, anticipate it, know how it will behave. In FORA, their flex platform, you’re trawling: 2,000 companies, most small, each needing the right conditions to thrive.

And once you’ve landed them, the job isn’t over. “You’re not killing the fish,” he told me. “You’re putting them in a tropical fish tank and looking after them as if they were the rarest, most beautiful fish you’ve ever seen. Asset management is not a fish market. It’s stewardship of the aquarium.” The firms that treat occupiers this way, like a hotelier proud of their guests, are the ones that sustain value over time.

Excellence shows in small things. “You see it physically in the office,” he told me. In Brockton’s Soho space, there are well over a thousand books scattered across floors and meeting areas. Most are about architecture, cities, and design; some are on finance. Models and maquettes line the shelves. Visitors expecting a private equity office fit-out often stop mid-tour. “They realize we’re into the buildings as well as the finance,” David said. “It changes how they see us, whether they’re a JV partner or a seller, they know we get that it’s all ultimately about the quality of the space.”

The books aren’t decoration. “It’s not wallpaper. Take them home, flick through them. Use them,” he tells both the team and their key advisers. And those interns aren’t given make-work. They spend part of their time on modeling, and part on the operation of real estate. One exercise sends them to Westfield, with forty questions to answer. Half can be solved by walking the mall, the other half by digging through URW’s investor reports. It’s a way of teaching that real estate is both physical and financial.

The same spirit carries into investment committee. Detail matters, and there’s a “no bust” culture: mistakes are admitted, corrected, and learned from. “If you send out a model and realize it’s wrong, just say so. We’ll redo it tomorrow. Don’t bury it.”

Excellence is a culture: an office where books are read, models are studied, interns are challenged, mistakes are owned, and decisiveness is prized.

David ended on a simple reminder: you have to enjoy it. “You’ve got to have an enthusiasm for it. You’ve got to get a buzz out of it.” When you walk through a city, whether for work or on holiday, you should be looking up. Real estate people need that curiosity.

At Brockton, they sponsored the London Architecture Guide, a digital version of a cult book cataloging London’s buildings from St. James’s Palace (1530s) to the Gherkin. The point, David said, is that too many people move through the city with their heads down. “No one looks up anymore. Real estate people have to look up.”

He recommended Thomas Heatherwick’s book Humanize, which argues that monotonous buildings make cities dull, even harmful to health, while thoughtful design inspires. For David, that’s a big part of the “work boots” side of the business: you have to love buildings enough to see them, to notice the details, to let them matter.

But the “wingtips” side requires balance too. Here he drew on Howard Marks (Oaktree, no relation) himself. On a panel, Howard Marks was asked whether he was “risk on or risk off.” His answer: investing isn’t like American football, switching between offense and defense. It’s like football/soccer. The ball is constantly moving in midfield. Sometimes you have possession and can drive forward; other times you’re defending value. In a portfolio, both happen at once. Some assets are stable, some are fragile, and others are opportunities to take risk and create something new.

That, David said, is the reality of real estate. At any moment, one building might demand defense, another offense, and a third a complete rethink. The trick is to stay curious, to keep looking up, and to recognize that - enthusiasm and discipline - work boots and wingtips - are never separate. They’re the two halves of the same game.