Is the Stand-Alone CFO Obsolete?
The CFO of Resmark Companies explains why the job of the real estate CFO has expanded far beyond its original number-crunching role.
The job of the real estate CFO has expanded far beyond its original number-crunching role—to the point that CFOs could ultimately take over the job of chief operating officers.
With financial chiefs now deeply involved in the strategic vision of investment management firms, operational needs and risk management, as well as internal controls and financial reporting, it’s easy to see a future where separate CFO and COO positions are not needed.
“I continue to see the CFO role taking on some of the traditional COO role,”says Jeffrey Herrmann, CFO of Los Angeles-based Resmark Companies. “The CFO today is about strategic vision, new business, dealing with investors and their expectations upfront, not just reporting to them after the fact. It’s about data and technology. It’s about much more than it was just a decade ago.”
The transformation has been due, in part, to the growing emphasis on financial engineering and balance sheet management among Wall Street firms and among Fortune 500 companies, says Herrmann—a move that has led CFOs to take on greater corporate responsibility. “I see that continuing,” he adds.
At Resmark, Herrmann will see his role as CFO increasingly take on more of the strategic and operational needs of the business as the firm—which, since 1995, is reported to have invested in land, housing, and multifamily across the U.S. on behalf of the California Public Employees Retirement System and the California State Teachers’ Retirement System—expands beyond its two investors.
“Our goal is to…continue to be a successful company through growth and, for that, we need to broaden our investor base,” he says.
Herrmann will be deeply involved in investor meetings, talking to LPs about how Resmark expects to deliver risk-adjusted returns in today’s commercial real estate markets. “Risk adjustment is key to LPs. They don’t want to just go out there and invest in the most risky tranche of real estate debt or equity or stocks. They want to go out there and get a solid return that’s not going to be subject to a big decrease if the market burps.”
And it’s the CFO, Herrmann argues, that can really help deliver that deep-dive explanation into how GPs balance risk and returns. “It’s talking about the way we structure things financially; how we maximize our downside protection; how we’re happy to generate mid-range returns because we invest money for institutional investors that want a consistent return.”
Resmark’s efforts to expand its investor base has already seen the firm hire Caroline Gibson, the former head of real estate at recruiter Alderbrooke, as director of U.S. and international investor relations. Herrmann says the expansion will also have a significant impact on Resmark’s reporting infrastructure as it moves from customized reports for several large institutional investors.
“Our reporting is completely customized for our two investors so as we grow we’ll need to move to a position where it’s Resmark deciding what information to give to investors, rather than the other way around,” he says. “Unfortunately, no GP can customize reports for 100 different investors, so it’s about giving investors what they want without overloading them.”