Versatile Veteran: Longtime CBRE Hand Mitch Rudin Takes Reins at Brookfield’s Office REIT
- Nov 08, 2011
On a typical weekday, it takes about half an hour by subway and shoe leather to travel from the MetLife Building in Midtown Manhattan four miles south to the World Financial Center near the island’s southern tip. For Mitch Rudin, that routine trip recently took on added significance. In June, after 21 years as a top executive at CBRE Group Inc. and its predecessors, Rudin packed up his office at the MetLife Building and exchanged fond farewells with his longtime colleagues. His next stop was the 7.7 million-square-foot World Financial Center complex, where he took up new duties as president & CEO of Brookfield Office Properties Inc.’s U.S. operations. In that new capacity, Rudin is charged with strategic oversight of a 50 million-square-foot national portfolio of trophy towers as Brookfield looks ahead to significant development and acquisitions.
Rudin is well aware of what he left behind in making the move from service firm to REIT: “I was coming up on my 22nd year with a company that meant a lot to me,” he said. Nevertheless, he explained, he saw an opportunity to take on fresh challenges for “another industry leader with a very strong culture, populated by outstanding people.” Despite the ostensible differences between the two industry giants, that similarity quickly gave Rudin a sense of both belonging and ownership. As he sees it, the move to Brookfield also represents the best of two worlds. On one hand, returning to a national role for the first time since 2004 offers an invigorating change of pace. At the same time, given Brookfield’s 19 million-square-foot Manhattan holdings and big development pipeline, Rudin will also be devoting plenty of attention to his favorite city.
In a sense, Rudin’s move brings him full circle, marking a return to the owner’s side of the table; he began his real estate career in 1985 with Tishman Speyer. “I actually think this pulls together the strands of his full career,” said Mary Ann Tighe, CEO of CBRE’s tri-state region.
Rudin’s two decades at CBRE and its predecessors, Insignia/ESG Inc. and the Edward S. Gordon Co., represent uncommon continuity. Nevertheless, he points out that his work has also been repeatedly refreshed by variety and change, an assertion borne out by a quick career overview. Since joining the Edward S. Gordon Co. in 1989, Rudin has arranged countless complex transactions, overseen a national brokerage practice, managed the day-to-day operations of CBRE’s biggest office, launched a successful owner service business, worked on post-merger transitions, recruited professionals around the United States and helped craft a coast-to-coast expansion strategy.
Rudin’s appointment coincided with several other executive promotions and strategic moves at Brookfield. His predecessor, Dennis Friedrich, was named the company’s global chief investment offi cer and will advise the company’s CEO, Ric Clark. At the same time, Tom Farley was promoted to president & global COO, taking on asset management, leasing and operations responsibility for Brookfield’s holdings in Canada, Australia and the United Kingdom. And Jan Sucharda was promoted to president & CEO of Canadian commercial operations at Brookfield Office Properties and Brookfield Office Properties Canada.
No less significant, Rudin’s arrival at Brookfield coincided with the completion of a major reorganization. A complex series of transactions completed last spring transformed Brookfield Office into a pure-play office developer and owner. The linchpin was the spinoff of Brookfield Office Properties’ residential business, which was then merged with Brookfield Homes Corp. to form a new affiliate, Brookfield Residential. Besides achieving greater efficiencies, the reorganization is intended to send the market a message. In proportion to its stature as a multinational investor and developer, Rudin observed, Brookfield Office tends to maintain a relatively low profile. “Our identity might not be as apparent as some of the other companies in our sector,” he said. Turning the relatively low-key REIT into a pure-play office specialist, he said, allows Brookfield “to be identified as what we are.”
If some telling 2011 transactions are any barometer, the newly streamlined company is in for a vigorous few years under Rudin’s leadership. In September, the company added its 30th property in the Greater Washington, D.C., market: Three Bethesda Metro Center, a 368,000-square-foot, Class A office tower in Bethesda, Md. Brookfield paid The Meridian Group $150 million for the property, which is located across the street from another Brookfield asset, the three-building, 336,000-square-foot Bethesda Center complex. Rudin also expects Brookfield to continue selective dispositions. One recent deal, already in the pipeline by the time Rudin arrived, was the $340 million sale of 1400 Smith St. in Houston to Chevron, which has been the building’s sole tenant since 2007. Brookfield paid $120 million in 2006 for the then-vacant, 1.3 million-square-foot, 50-story tower and former headquarters of Enron and leased it to Chevron.
Over the next several years, Brookfield will focus its attention on selectively expanding its footprint in its current markets through acquisition and expansion, as well as working to maintain robust occupancy levels. Its top three markets by square footage today are New York City (20.2 million square feet in 12 properties), Houston (9.7 million in nine properties) and Washington, D.C. (7.6 million in 30 properties). The firm also owns smaller portfolios ranging in size from 543,000 to 4.5 million square feet in Los Angeles/Long Beach, Minneapolis, Boston, Denver and San Francisco.
Even where its total holdings are relatively small, Brookfield is typically represented by high-profile assets. In Denver, for example, the firm owns Republic Plaza, a 1.2 million-square-foot office tower that is also the city’s tallest building at 56 stories and 714 feet. Although Brookfield’s current markets will draw most of the activity, the company is open to establishing beachheads in attractive new markets like Seattle. As a result of carefully managing its resources, Brookfield has come through the recession with a strong balance sheet and deep resources in the real estate capital markets. Those tools will offer a leg up on the competition, Rudin contends: “Not everyone has the fi nancial or deal structure expertise to capture that type of product.”
Besides pursuing acquisition opportunities, Brookfield is seeking to grow through development. This winter, it will start work on a two-year, $250 million makeover of the retail portion of the World Financial Center. That effort will revitalize the two-decade-old retail section with a lineup of stores as well as a fresh look. Westfield Group and the Port Authority of New York and New Jersey are collaborating on the development of the retail component next door at the World Trade Center, but Rudin regards the two retail spaces as more complementary than competitive: “What’s good for us is good for them. What’s good for them is what’s good for us.”
Even the World Financial Center renovation is modest in scale compared to another Manhattan project. Early next year, it intends to break ground on Manhattan West, a 5.5 million-square-foot mixed-use project located between Ninth and Tenth Avenues and 31st and 33rd Streets in Midtown Manhattan. At full build-out, Manhattan West will encompass three trophy towers separated by a public plaza. For Rudin, the prospect of working on the complex, high-profile project from the ground up was one of the principal attractions of joining Brookfield. “To be part of shaping the city that you love is really terrific,” Rudin explained.
Rudin has arrived at his latest milestone as part of a career marked by both continuity and change. He took an indirect route to the real estate business, beginning his career as a real estate lawyer with the Manhattan office of Davis & Gilbert. During a seven-year tour of duty there, Rudin developed a practice that involved representing tenants in leasing situations. An early turning point in Rudin’s career occurred while he was representing a tenant in a building owned by Tishman Speyer. Impressed, the company invited him to join its development team. What followed was “a five-month period of soul-searching,” Rudin said, as he weighed whether to step away from a satisfying law practice. “Ultimately, I decided to do it, feeling that if it didn’t work out, learning the financial, operational and physical parts of real estate would only make me that much better as a lawyer.”
As a partner at Tishman Speyer, Rudin was responsible for leasing some 2 million square feet of office space. While there, he came to the attention of Edward Gordon, founder of the namesake firm, and Martin Turchin, then executive vice president. The two invited Rudin to join the company, then a leading commercial real estate services firm in the New York City metropolitan area. Rudin started out in the company’s consulting group, where he brought his understanding of finance and deal structure to transactions. But his entrepreneurial skills soon came to the fore. Among other accomplishments, he successfully lobbied to establish an owners’ representation group at the company. He led the practice, dubbed Gordon Property Group, from 1992 to 1996.
Other highlights of his tenure at ESG included overseeing the turnaround of One New York Plaza, a 2.6 million-square-foot office tower in Downtown Manhattan. Now a part of the Brookfield portfolio, the property was then owned by Chase Manhattan Bank. To counteract falling occupancy and declining physical condition, Rudin oversaw a four-year, $100 million makeover of the building. As a result of the improvement, Rudin and his team were able to land blue-chip tenants: Prudential Securities, which took 1 million square feet in 1992, and Goldman, Sachs & Co., which leased 420,000 square feet two years later.
By 1996, Rudin and his colleagues had built Gordon Property Group’s portfolio to 23 million square feet. The next watershed in Rudin’s career came in 1996, when Insignia Financial Group acquired the Edward S. Gordon Co.—by then, the nation’s fourth-largest commercial real estate services firm—in a $74 million deal. The merger brought Rudin together with Insignia/ESG’s then-CEO, Steve Siegel, a family friend who has known Rudin for some 40 years. In 1997, he was promoted to executive vice president of U.S. brokerage services, working closely with Siegel in leading the national expansion of Insignia/ESG’s footprint. One of Rudin’s first major assignments was to collaborate with Siegel on developing a five-year global expansion plan. “As much as I liked doing real estate transactions, I liked building things (even) better,” Rudin recalled. Rudin would typically identify a handful of top brokers in a market Insignia/ESG was eyeing, and Siegel would join him to seal the deal. Using lingo from the golf course, Siegel explained, “He would set tee for me to come in and swing at the ball.”
In 1999, Rudin was promoted to president of Insignia/ESG’s national brokerage services. He stayed on in that role for five years, a period that included one of the decade’s blockbuster mergers. In 2003, CB Richard Ellis Inc. acquired Insignia/ ESG for $415 million, a merger that vaulted CB Richard Ellis to the top ranks of the crucial New York City metropolitan market. Rudin was instrumental in shaping the newly merged entity as a member of the transition team. He traveled the country with Brett White, then the firm’s president (now CEO), to visit the offices of the newly combined firms. Where both firms were represented in a market, Rudin was charged with making the difficult recommendation of which professionals to keep on board.
Rudin enjoyed his work on strategy and recruiting, but the constant travel came to be grueling at times. He ran the national brokerage practice for 18 months after CB Richard Ellis completed the Insignia/ESG deal, then accepted an opportunity to stay closer to home, in 2004 being named president of the New York tri-state regional office, reporting directly to the region’s CEO, Mary Ann Tighe. Rudin took on day-to-day operating responsibility for a wide geographic area that encompassed New York City, Northern and Central New Jersey, Long Island, Westchester County, N.Y., and Fairfield County, Conn. Later, he was promoted to the office’s co-CEO.
The move proved to be a winner all around: Rudin was able to take on a new executive role close to home. Tighe and the region’s co-chairmen, John Powers and Robert Alexander, who had been stretched thin, were able to spend more of their time on transactions and business development. Not surprisingly, the region’s operating margin improved. Tighe, who led the team that represented Conde Nast in the media giant’s landmark 1 million-square-foot, 25-year lease at One World Trade Center, readily acknowledges Rudin’s contributions. “I never could have done the Conde Nast deal if Mitch hadn’t assumed half my job,” she observed. When it was disclosed last June, the deal was hailed as proof that the World Trade Center’s new office towers were commercially viable.
Rudin and Tighe also demonstrated the value of their teamwork during the negotiations for the firm’s regional headquarters offi ce. In early 2009, more than two years before expiration of the firm’s lease at 200 Park Ave., Tighe approached Rudin with a detailed plan that covered the benefits of relocating within the building and the structure of the lease terms. Rudin quickly bought into the strategy, although both executives realized that the plan would likely encounter challenges. In an office packed with accomplished, opinionated brokers, any strategy involving the firm’s plans for its own space would inevitably ruffle feathers. Rudin’s response, according to Tighe: “I’ll take care of that.” In late 2009, the firm signed a 15-year lease for 125,000 square feet. When the transition is complete next year, CBRE will leave its current digs on the 17th and 18th floors, keep its space on the 19th floor and expand to the 20th, 21st and 22nd floors. A redesign is in the works that will add double-height ceilings and outdoor terraces on the 21st floor.
During his long career, Rudin has earned a reputation not only for business acumen but also integrity. A few years ago, a major real estate company and the fee owner of a Manhattan property initiated a discussion about a rent recalibration. Negotiations had continued for some time without an agreement, explained Jonathan Mechanic, a longtime Rudin friend and chairman of the real estate department at Fried Frank Harris Jacobson & Shriver L.L.P., the law firm representing the tenant in the negotiations. In a bid to avoid arbitration, the parties agreed to bring in a mediator. Whoever came in to guide the delicate discussions, both sides knew, would have to be not only an experienced hand but also a person of unquestioned integrity. “Both sides mentioned Mitchell as someone they could trust,” Mechanic explained. “I don’t think there’s anybody who has a bad word to say about Mitchell. His word is his bond.”
Besides his reputation for probity, Rudin is known as a leader who keeps a steady hand on the wheel in good times and bad. That trademark unflappability, in fact, has been the subject of some affectionate teasing. Siegel recalled that on one occasion, when Rudin was receiving an award, his sons stepped to the podium to offer a few words in tribute and promised in mock earnest to give the audience a guide to discerning their father’s various moods. As they ticked off each state of mind—happy, sad, angry, worried and so on—the boys displayed the identical calm expression.
Unflappable he may be, but Rudin is a keen competitor on and off the job. Colleagues invariably describe him as a formidable athlete who enjoys golf, water sports and most of all, basketball. Rudin is a three-time member of the U.S. masters’ basketball team at the Maccabiah Games in Israel. On one occasion, he even played in the games at the same time as his son Ben was representing the United States on a junior squad. Tighe suggests that Rudin’s approach on the basketball court mirrors his best qualities as an executive—the adaptability to either lead the team or contribute as a strong role player. “As a leader and as a member of the team, you get the ball in the hands of the person most likely to achieve the basket,” Tighe noted.
Maybe that is why Rudin’s new leadership role at Brookfield comes as naturally as one of his patented jump shots.