Leadership & Learning: Even in a Buyer’s Market, Open-Minded Recruitment Can Pay Off
- Nov 08, 2011
The recession has created a buyer’s market in the commercial real estate industry, and that trend seems unlikely to reverse itself anytime soon. A study released last month by consulting firm KPMG L.L.C. indicated that 27 percent of U.S. real estate companies expect that returning the size of their workforces to pre-recession levels will take until 2013. Seventeen percent responded that it will take until 2014 or later, while 11 percent report that the number of employees in their companies will never again reach pre-recession levels.
“With the recession, the industry flooded with people who are incredibly qualified— senior-level people—and there’s so much to choose from,” said Tom Silva, senior vice president of marketing and strategy for The Alter Group. Executive recruiters specializing in real estate confirm that those who are hiring remain firmly in control of calling the shots.
For that reason, few companies are looking outside of real estate for talent. “We have not seen a lot of willingness to take people outside of real estate for positions,” reported Rick Gillham, president of Gillham, Golbeck & Associates Inc. “(Clients’) requirements are very specific, and there’s not a lot of wiggle room. … Now, people expect to find the exact experience that they want.”
Other recruiters agree. “Clients don’t really want to have to think outside the box,” noted Barbara Beck, managing director for Equinox Search L.L.C. “They want you to find the best person who has done this at another place— preferably at a competitor.”
In the midst of the talent glut, the question remains: Would it be productive to cast a wider net? After all, commercial real estate has a long history of individuals making transitions into the industry at all levels of experience and contributing greatly to their companies and the field at large.
The news-making company leaders profiled in CPE during the past two years offer a compelling case in point. Several CEOs came to commercial real estate from the practice of law, whether directly or in stages, among them NorthMarq Capital’s CEO, Eduardo Padilla; Debra Cafaro, chairman & CEO of seniors housing and medical office REIT Ventas Inc.; and Mitch Rudin, president & CEO of Brookfield Office Properties Inc.’s U.S. business, the subject of this month’s executive profile. As the success of these professionals demonstrates, a legal background fosters negotiating skills and the ability to grasp the nuances of transactions.
Other notable real estate executives have emerged from capital markets careers. Before becoming president & CEO of multi-family finance firm Beech Street Capital L.L.C., Grace Huebscher earned her stripes as a banker, then moved to Fannie Mae, where she spent more than a decade in a variety of senior roles. The value of such a background to a commercial real estate firm seems self-explanatory. A strong working knowledge of capital markets is a prerequisite for managerial and leadership positions in almost every sector of the industry.
Among those who enter the business from other professions, a connecting thread is a familiarity with the business through their previous careers. Professionals who have made the leap into real estate at mid-career, especially those dealing with transactions in some form, typically have extensive contact with the industry, if in a different context. For the first 30 years of his career, Scott Galin worked in the retail business, first for a family-owned chain and then for Petrie Stores Corp., a publicly traded retail company that acquired G&G. Galin oversaw G&G’s expansion from 30 locations in the New York City metropolitan area to 600 locations nationwide and in the Caribbean.
In 2009, he was invited to join the Handler Real Estate Organization, a diversified New York City-based real estate company that he had known for years as an end user. As a company principal with a variety of executive responsibilities, Galin maintains that years of making deals from the owner’s perspective proved to be invaluable once he moved to the other side of the table. “When you can put yourself in the head of your customer, it gives you a distinct advantage,” he noted, adding, “Every day, I use the skills from my earlier life.”
Gil Medina traveled an equally uncommon but no less educational path to an executive role. During the early stages of his career as a lawyer and accountant, he came to enjoy working on real estate matters. In time, his combination of business skills and service in New Jersey local government brought him to the attention of Gov. Christie Todd Whitman, who appointed him the state’s secretary of commerce. As a member of the governor’s cabinet, Medina found that his mandate to foster economic development frequently required him to address real estate-related issues. “A lot of the work I was doing was helping companies think through their facilities decisions and working with the facilities directors of the company,” he explained.
After leaving state government, Medina put on his entrepreneur’s hat for a stint as CEO of a high-tech startup. But the potential of real estate to influence business and community life continued to intrigue him, and Medina signed on as a broker with Cushman & Wakefield Inc. By getting his foot in the door on the transaction side, he recalled, “I had a chance to understand the craft.” In 2005, Medina was tapped to lead Cushman & Wakefield’s Northern and Central New Jersey region. To that position, he brought an unusual mix of experience: a high-level understanding of government, an executive background in both the public and private sectors, and a broad perspective on real estate gained during multiple career stops.
Most companies that are hiring in any specialty may feel that they have their pick of talent, but in some cases, skills are transferable. Most search requests that Gillham Golbeck receives from clients these days are for operations specialists, rather than for transactions. A candidate for a CFO position, for example, should have accounting, capital markets and budgeting skills. Commercial real estate industry experience is highly desirable, but secondary.
One client recently tasked Gillham Golbeck to fi ll a senior position requiring merger-and- acquisition experience. Though the client would prefer to see candidates who have real estate experience, the primary qualification is a background with M&A. As a result, Gillham Golbeck’s client is open to candidates with backgrounds in law, investment banking or consulting, whether or not they have worked in the real estate industry itself.
Though bringing in professionals from other industries can greatly enrich the company, the route from one industry to commercial real estate has its potential pitfalls: On the transaction side, not everyone who is accustomed to drawing a regular paycheck will find it easy to adjust quickly to the commission-based compensation structure of brokerage. And Beck contends that another difficulty for a high-profile elected or appointed public officer can be the pace: Someone used to government bureaucracy may be in for a shock to the system. “The decision-making process is just so much faster,” she pointed out.
Still, she contends that a background in government service can be the single most effective direct route to a high-level executive commercial real estate position. Notable examples of those who have successfully made the leap include John Zuccotti, a former deputy mayor of New York City and chairman of the city planning commission in the 1970s who later served as president & CEO of the development firm Olympia & York and is now chairman of Brookfield Office Properties Inc. Cousins Properties vice chairman Dary Stone had a varied political career before moving to real estate, serving as counsel and campaign manager to former Texas Gov. Bill Clements and as chairman of the state finance commission.
In the search for talent, art as well as science may often tip the balance. All things being equal, an eclectic background, a nimble mind and first-rate people skills may reward companies who prize those qualities no less than specific points on a resume. Citing lessons from 20 years as a manager, Silva said: “In my experience … the people that work best on my team have the most interesting, varied backgrounds and are enjoyable to be around.”