The Boss: Bill McGugin, Iroquois Capital Group
Nashville Business Journal, October 24, 2014, Scott Harrison –
If Bill McGugin, who is set to step in as Iroquois Capital Group’s president and CEO in January, asks you to play a game of tennis, make sure you work on your game beforehand. McGugin played tennis at Vanderbilt University and continues to play in doubles tournaments across the country, placing second and third in a few national competitions. When he’s not running two of Iroquois’ businesses — REIT Investment Group and Captive Services — McGugin is usually nose deep in a book. His first job parking cars didn’t end so well, but he landed one with Vanderbilt’s football team as a graduate student.
How did you end up in your position, running the REIT Group and Captive Services, and now all of Iroquois? It’s really through my relationship with Jack Jacques, the chairman of the company. We’ve worked together almost eight years since starting REIT investment group. Even prior to that, I’d come to his office on a monthly basis to have coffee or on the way home from work. He took an interest in what I was doing … He became that professional and personal mentor for me. Our first relationship officially was through REIT Investment Group, where I was going to run the company, and he was going to provide some oversight and financial support. That was the genesis of the relationship. … Everything can be pinpointed back to my relationship with Jack.
So REIT was founded then before Iroquois Capital Group? We started REIT in January 2007. It was independent of Iroquois, which was a shell for Jack and Mike for some of their other business interest. In 2008 we rolled our interest in REIT up into Iroquois.
What were you doing before launching that company? Before REIT Investment Group, I was working at a real estate private equity firm here in National called Covenant Capital Group. … I was struggling deciding whether to leave because I enjoyed my work so much there. It had a real estate component; it had finance component and fund structuring. I was there for little over three years, and I worked for two really terrific people. … Prior to that I was in graduate school at Vanderbilt and part of Bobby Johnson’s football staff in the early 2000s.
How’d you get involved with the Vandy football staff? Growing up I played all sports, and in high school I gravitated to football and tennis. I was just a better tennis player than I was a football player. So I played tennis in college. But because of my interest in football, and also some family connections with football — my father and grandfather played football at Vandy and my great grandfather coached there — I always felt like I wanted to do something with football. … Right out of college I went to work for SunTrust in their investment banking group for about 13 months. … There was an opportunity to go back to Vandy to get my graduate degree and work on Bobby Johnson’s staff. Bobby Johnson is not only a great football coach, but he was such a pleasure to work for.
What type of job were you doing with Vandy football? Graduate assistant. In the college football world, it’s the lowest of the low. But you get compensated; they pay for your school. You’re also exposed to everything the coaches are exposed to. You’re exposed to recruiting, to the film study, to the preparation and game plan. I was involved in breaking the film down of opponents for next week. I was involved in running the scout team, setting up the scout team. But you’re also picking up recruits from the airport and giving campus tours. You’re the grunt, but it’s a privileged position. At the time, NCAA limited teams to two per staff. It’s a lot of hours, a lot of late nights and early mornings. But there was never a time when I wasn’t thinking this was the coolest thing I could be doing at my age.
You said you played in high school, what position? Quarterback.
Tell me about playing tennis at Vandy. I spent my freshman year at Tennessee, transferred to Vandy. I played three years at Vandy. Playing SEC tennis, while it doesn’t receive the fanfare that SEC football, basketball or even baseball, it still is the best college tennis in the country. Getting to play at places like LSU and Georgia and Florida was so much fun.
What was the best match from your college days? I played doubles with my brother, and there were a couple tight SEC matches we were able to win. It would be tough to decide one. A recent tennis memory: my wife, she played tennis at Princeton, and we decided to play a few national husband-and-wife competitions. So I’ve played three of those with her. My fondest memory to date, we finished three, and we finished second. My favorite tennis memories are playing with my wife, more so than my college days.
What’s you go-to shot? The forehand or backhand? This may be considered a strength or a weakness. Everything is just about the same. Forehand and backhand. My strength would probably be consistency and conditioning. Nobody’s going to look at me and say I have overwhelming firepower. But I’d say it’s the ability to hang into a point a little bit longer than the opponent.
Who are some of your favorite players to watch on the pro tour? I’m actually heading up to the U.S. Open. So if I get the opportunity to watch [Roger] Federer or [Novak] Djokovic, those would be the two guys that hands down, if there’s a Federer match on TV, I stop what I’m doing. Same thing with Novak Djokovic. He’s just supremely talented and condition. The ways those guys carry themselves…Rafael Nadal, I love him. But at the end of the day I’m a Federer guy. I just got home from the national 30s up in Philadelphia. I played doubles with a childhood friend from Atlanta, and we finished second. We felt we could have won it but we came home with the silver ball.
Where did this idea come from with the REIT Group? There are parallel paths in getting the company started. When I was at Covenant, we were in the process of getting a REIT structure in one of our funds. I was not a principal at Covenant, but I was able to sit in on some of the meetings. In implementing the REIT structure in one of our funds, one of the requirements that needed to be met was this minimum of 100 shareholders test. In Covenant we decide to bring in 100 shareholders ourselves instead of outsourcing them. That introduced me to the idea of a real estate private equity fund using a private REIT structure and needing to meet the 100 shareholder test. At the same time, Jack was introduced to the concept of providing shareholders for private REITs. … We got together in Jack’s office one day and put the puzzle pieces together and a road map.
How does the REIT business work? A private equity fund of significant size, north of $50 million in size. They’re raising money from institutional investors. When a fund raises institutional capital, more specifically tax-exempt institutional capital like university endowments and foundations and pension plans … there needs to be a structure within that private equity fund that when the dividends go back to those investors, it needs to be cleansed of unrelated business tax. For a private equity fund to attract big institutional dollars, they have to find a way to invest in real estate while remaining tax exempt, and that happens through a REIT structure.
Looking at Iroquois as a whole, what do you have in the works going in 2015? Short term, we’re really focusing on operating the businesses we have right now. That’s continuing to focus on REIT Investment Group. That’s putting a big emphasis on Iroquois Captive Services. We’ve attracted a great deal of interest from the community on the use of the captive insurance company. And we’re continuing to provide resources and grow our investment banking practice. As we look into 2015, we want to look at new opportunities that are not overly capital intensive that provide recurring or regular cash flow. That would primarily be in the financial services or health care space.
You are opening up a new location in Cleveland. How is that going along? We have a number of tremendous relationships in Cleveland. We have a number of people who are invested in our companies. … How we grow our physical presence and other parts of our businesses in Cleveland is continuing to evolve. The northeast Ohio market is one that is very important to us.
How would you describe your own leadership style? I like to think of myself as an operator, or as a doer. I really don’t want to ask somebody to do something that I’m currently not doing or haven’t already done. I think it’s important for me to demonstrate, even as CEO and president of the business, that I’m still be engaged in operating certain parts of the business. Conversely, I also want to empower our talented team to execute what they were brought in to do. I’m not going to ever hesitate to get into the weeds, but at the same time we have such a talented group of people that the best thing I can do is continue to provide resources, give some broad parameters and stay out of their way.
What is the best advice you’ve been given over the years? A saying Jack [Jacques] often uses is your rewards and your penalties are often deferred. To me, that is being patient at times. It’s helpful to hear that. There are a lot of things that given our desire of pace and executing and moving on and on, it can be appropriate to hear that. That’s counsel Jack has given in the past that resonates. Things won’t happen overnight. While we’d like to be largest captive management company in the next twelve months, the foundation we’re building now our rewards for that will be realized much further down the road than in the next twelve months.
What’s the biggest turning point in your career? The biggest turning point would be deciding to leave Covenant and start REIT Investment Group. That was a hard decision.
Outside of tennis, any other hobbies? I really like to read. I read the newspaper cover to cover every day, and I try to get through about a book a week. On my nightstand I think I have about 13 books. I’ve almost put on myself that I can’t order any more books unless I’ve put a dent in the ones on my nightstand.
What types of books are you generally reading? Right now it’s business books. … I just finished Ben Horowitz’s “Hard Things about Hard Things.” But it’s also biographies. Teddy Roosevelt, J.P. Morgan, Rockefeller…The [Warren] Buffett biography would be the most recent one. And the third category would be modern-day thriller. It’s one of those three buckets.
Do you have a favorite author? I just read [Jon] Meacham’s book on Jefferson. I thought that was great. [Ron] Chernow wrote the ones on J.P. Morgan and Rockefeller. On pure pleasure it’s Vince Flynn, Brad Thor and Daniel Silva. From the nonfiction side it’s David McCullough.
Sounds like you’re not a Kindle or iPad guy? I tried to read one book on the iPad. I can’t even read the newspaper on the iPad. … I’m definitely a turn-the-page guy and a newspaper guy.
What sports teams do you pull for? I’m more of a [sports] generalist. Vanderbilt, of course. I pull for the Titans, but I don’t change my Sunday when they play. I’m more of a college football and pro tennis fan. … Those are my two. When the Ryder Cup is on I’ll watch that, so pro golf as well.
Favorite music or artists? Growing up in Nashville, I love country music. I love to go to the Pop Series at the Symphony. I wouldn’t say I’m well-versed in classical, but I do like to go to the symphony. For contemporary music, it would be all your big bands of the ’70s and ’80s and country music. I think my ipad may have 150 different artists but only two or three songs each.
Are you a morning person or evening person? Without question, a morning person. … If I’m scheduling a meeting, I’m doing it in the morning as opposed to late afternoon or night. I don’t typically set an alarm clock, I just wake.
Are you a coffee drinker? Yes. I’d say on average, I’ll probably have two in the morning and a third in the afternoon.
What are your go-to restaurants in Nashville? The best cook in Nashville is my wife. Growing up — she’s from Raleigh — she took every cooking class in the city. She can make a gourmet meal out of stuff I didn’t even know we had in the house. So I’m spoiled there. But we’ve done Husk, Rolf and Daughters. Giovanni’s. If I had a business dinner to go to, Giovanni’s would be hard not be in the top two. I love Italian. Right now it would be Giovanni’s, other than my wife’s cooking.
Where did your first paycheck come from? When I just turned 16, my twin brother and I were parking cars for a Thanksgiving party. We just got our licenses so we were going to start making some money doing that. … I had been driving for just two weeks, and I jumped into this high-end stick shift car. And I revved the RPMs up and maxed them out. And the owner of the car looked somebody else and basically said, “Get this guy out of here.” So my one day of car parking, and I never parked cars again, I made 35 bucks from that.
The temptation of revving a powerful car. I just didn’t know what I was doing. It wasn’t so much that I wanted to see how loud I could get the engine. It was the whole clutch and stick.
What was your first car? It was a ’94, black, two-door Chevy Blazer. We knew we wanted an SUV. I shared it with my brother. … Back in the ’90s everybody in high-school had a Jeep, a Blazer or a Bronco.
Title: President and CEO
Company: Iroquois Capital Group
Address: 401 Commerce St., Suite 740, Nashville 37219
Education: Vanderbilt University, Owen Graduate School of Management
Scott Harrison covers government and economic development, banking and law.