November 25, 2013
Interviewed by: Privcap
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Careers in Private Real Estate: The Reality

Reality: You don’t necessarily need an MBA to succeed in private equity real estate, but you do need to be realistic about a career path to the top firms. Our expert panel discusses the opportunities available to industry entrants today abd detail their own career progressions.

Reality: You don’t necessarily need an MBA to succeed in private equity real estate, but you do need to be realistic about a career path to the top firms. Our expert panel discusses the opportunities available to industry entrants today abd detail their own career progressions.

How Realistic Are You? Getting A Foot On The Ladder

With Sonny Kalsi of GreenOak Real Estate, Jennifer Novack of Sousou Partners and Susan Swanezy of Hodes Weill & Associates

Zoe Hughes, PrivcapRE:

I’m joined here today by Susan Swanezy from Hodes Weill & Associates, Jennifer Novack from Sousou Partners, and Sonny Kalsi from Green Oak Real Estate. Thank you all for joining me.

In covering private real state for the past six years, I think there is one thing that I’ve been constantly reminded of in that this is very much a people business. First and foremost, beyond the bricks and mortar, it’s about the people and the team that you back. You look at the jobs landscape and the career progression of people in the industry and there are actually a lot of challenges facing people currently today, particularly those trying to get on to the first steps of the ladder.

Susan, you’re the director and past president of WX, a women’s executive networking group in New York. You’ve spearheaded a lot of mentoring and scholarship programs for younger women in the industry. Bearing in mind the consolidation that we’re seeing and that perhaps this is a shrinking market, what’s the most important skill that you call for people to have?

Susan Swanezy, Hodes Weill & Associates:

The skills have to speak to their interest and their strengths, but when you’re looking at developing skills, you want the skills to be identified as critical elements to the success of an organization. It’s either going to be asset skills, expertise in a specific property type or sector, or it’s going to be relationships and the ability to develop the relationships.

As you said, it’s a people business and it’s also a capital-intensive business and so if a person is interested in developing on the marketing side and their relationships have access to capital, that’s a critical differentiator. However, I often say to women that want to start out in marketing that the critical differentiator to a successful capital raiser, which is my background, is that you have real estate expertise first and foremost.

I don’t like to see people coming right out of college or business school that want to get into the marketing side unless they’ve got demonstrated real estate skills. I always say, get the real estate skills and that will give you the flexibility to take your career whether you want to go into investing, asset management, capital raising or any of the other core competencies.

Hughes: Sonny, you teach at Columbia University. What advice are you giving to students? You often talk about that it’s about creating NOI.

Sonny Kalsi, GreenOak Real Estate:

First of all, the first thing I tell them to do is be realistic. I teach in the graduate program, masters of real estate development and half of my class are architects, or people who come from architectural backgrounds. They show up and they say, “Hey, professor Sonny! I’ve been doing architecture for ten years and now I want to go work for Blackstone, the private equity group.” I’m like, “You know, that could happen, but it’s probably not going to happen. There is probably not a linear, straight path there. You’re going to have to take a couple of steps along the way to get there.”

Being realistic is one of the first things I tell them. If I think about real estate investing, it’s about three broad buckets and raising money right is one and managing money, but really one of the biggest things is really how to add value to the underlying real estate level, as you say, to create an NOI. That skillset is actually the hardest skillset out there and it’s one where there are a lot of people and I think it’s because of what’s happened with the industry. So many people are so enamored with the financial side of things, financial engineering. A lot of people have moved away from that. What I try to encourage my students that actually have experience in that area is to keep pushing on that and look for opportunities career-wise where they want to start morphing their career but focus on that strength, their ability to do that.

Hughes: Jen, at Sousou Partners, your recruitment, and your specialists focus on VPs and above but you do build out teams for clients. What is the opportunity for those people trying to get onto the ladder? Are there any opportunities and how many opportunities are there for them?

Jennifer Novack, Sousou Partners:  

It’s funny, real estate is a little bit cliquey and real estate firms like to see real estate talent. Getting the first job is the hardest, so people are interested in transitioning into real estate. I think it’s actually quite difficult. If you want to do that, I would suggest getting an internship in real estate somehow. I don’t see a lot of demand for transferrable skills unless there is a personal connection and somebody is interested in taking a leap on somebody. I believe people can make the transition. It’s not about what I think is fair or should happen, but it’s what we do see. Where somebody is looking to make a switch, MBAs can be helpful. As far as people who are very junior and just starting out, frankly, we see a lot of demand for strong quantitative skills, modeling and emphasizing course work that you’ve done. Because realistically that’s what you will be used for when you join.

Hughes: It raises a very good point. Is an MBA critical for a career in this industry Susan?

Swanezy: I don’t think. I see people that need an MBA if they’re transferring from one, if they need to develop a skillset and they’re at a dead end in their career. But if they’re somebody who has been able to get the requisite skills at the asset level and been able to gain the experience, then I don’t think you need an MBA. I don’t think it’s critical.

Kalsi: I agree. I don’t have an MBA. I think that what’s much more important is practical experience.

Swanezy: Jonathan Gray doesn’t either, so you’re in good company.

Kalsi: Exactly, exactly.

Hughes: Talk about your own careers. How did you progress in this industry? Susan, I’ll start with you. What was your route into where you are?

Swanezy: I started right in, out of a credit-training program at a Chase Manhattan Bank and ended up in real estate in the mid 80s. I started from the debt side, and I spent most of my career at Banker’s Trust, which morphed in to Deutsche Bank. At Banker’s Trust, I was able to do debt, advisory work for REITs, some mezzanine investing, some principle investing. There was a global dimension, so I was very fortunate that I could have my hands in a lot of different aspects of the capital structure, lots of different lots of different opportunities.

As an aside, when I’m mentoring people that are coming into real estate, and they’ve got different career opportunities, I always say, “Try to get as much access to as much different deal flow as possible. You want to be in a job so that you can see different property types, different structures.” I came with that debt orientation that morphed into more private equity over time.

Novack: I actually fell into real estate, so that was a bit of an accident, although I am the third person in my family to be in it. Both my mother and my brother were already. I was looking to join an executive search firm, and it just so happened that the firm that I was most excited about focused on real estate.

What would be helpful to people is don’t be rigid about what you think you might enjoy. I really fought the concept of getting into executive search. It was one of my best friends who was listening to me go on and on about what I was looking for conceptually, and she said, “You should really look at recruiting.” I said, “Yeah, no way. Those people don’t know what they’re talking about.” I had plenty of good reasons not to do it, and as you can see, I’ve been doing it for eight years. I didn’t really dig my heels in that far, but I think it’s good to think about what you actually enjoy doing. How do you think you’d like to spend your day? At the junior level, you don’t really have that luxury, but what are you working towards?

Don’t follow the pack. I started my career at Goldman Sachs, which is certainly a well-worn path for a lot of people. But I was dead-set on doing investment banking, and thank goodness that a woman recognized I wasn’t built for it at all. I was much better suited to sales and trading. Again, I resisted that, but I went on some interviews and I realized this is a much better fit.

Hughes: Sonny, obviously you went the investment banking route.

Kalsi: Yeah, I think it’s actually gotten harder and I’ll tell you why I think it’s gotten harder. When I came out of university, the investment banks were the dominant players in the real estate industry in 1990. There were obviously a lot of other insurance companies and other people that had big platforms but Morgan Stanley, Goldman Sachs etc. had big programs and would hire a number of people out of university every year. The good thing is, it had a lot of people like me that came in. I worked in M&A for a year and I hated it. I thought everyone was a bunch of jerks and so I went back to the people that ran the analyst program and I said, “Well, what else do you have?” They said, “What about real estate?”

I fell into it that way, but it was that the programs were hiring a bunch of people and putting you through a training program. It was very different than I think it is today. When I look at the industry today, there aren’t as many big players that are doing that. I think it’s made it harder for people who are at the very junior level to find a spot.

Hughes: You raise a very interesting point in terms of do you try and go for the bigger players that are in the industry, the Blackstone’s? Everybody wants a job at Blackstone. Is it good to actually go with the smaller niche player? What gives you the best opportunities?

Swanezy: In our firm, while it’s a small firm with 25 people, 14 in New York and the rest in London and Hong Kong, we feel that it’s important. We actually just started instituting a two-year analysts program right out of college. We didn’t think that we would be emulating an investment-banking track so quickly, but we found that where else are these folks going to get the skills? We’d rather have the associates, the guys and women that have two or three, four years or experience training them. It’s good skill, it’s a good skillset for them to reinforce some of the skills that they have, so it’s really worked out very well.

Hughes: Sonny, GreenOak is a startup as well. What are you looking for in your junior staff when you go out and get prospective employees?

Kalsi: I give Susan a lot of credit because I’m not going to venture into hiring anyone out of undergrad. We’re very good at poaching. Every one of our junior people came from somewhere else, and a lot of them came from my former shop when I first started. We’ve got about 40 people now, but everyone else we’ve hired, we want to get them after they’ve been trained by somebody else for a few years and then we offer them something different, which is a more entrepreneurial environment where they can have more career advancement opportunities and an ability to grow. Maybe they feel it’s a more dynamic environment as well, but honestly, I’m in the category of “life is too short.”

There are plenty of other people out there, plenty of people out there. I still think there is a bit of over capacity in the industry, and I think there are a lot of talented people out there that are available and already trained.

Hughes: Junior people coming into the industry, what are they looking for from prospective employers? Susan, I don’t know what you’re hearing through your work at WX?

Swanezy: They’re looking for the skillsets and exposure, whether if they want to be a developer and we’re seeing a lot of people that are interested in development again. They want to have the ability to get in the flow for that, for those kinds of opportunities. Those are few and far between, so they really want to have the appreciation for the asset skills. Sonny and I were talking about that earlier. You need to have the operating skills at the asset level. It’s more important today to have that than the financial engineering skills that were so common place and a way to create value five or ten years ago.

Hughes: How do you get that operating spirit? What advice would you give in terms of a seeing a younger person coming in and saying, “What really should you be doing?”

Swanezy: It’s really to get closer to the deal. You are either going be an acquisitions analyst or asset management or portfolio management. So you’re working, understanding the dynamics of the portfolio or the assets that you’re working on. The releasing, re-tenanting, merchandising, whatever the opportunity is through the asset. I think it’s really getting as much experience, getting as close to the asset as possible.

Hughes: Sonny?

Kalsi: I actually encourage a lot of them to think about going into leasing, especially when they’re at the very young part of their career. You think about one of the few industries that still hires a lot of people, and there is a lot of turnover and a lot of throughput, but if you go actually work at CBRE or you work at Cushman you actually, you’re really close to the real estate. Now you’re an agent and you’re not the principle but you get a lot of hands-on experience. You develop a lot of contacts and you see a lot of stuff happen. I think it’s actually a great place for someone to go when they’re 22, 23 years old, right out of school. It’s a tough environment, you grind it out, but you learn a lot about real estate itself.

Hughes: What about the transition? Jen, you were talking about transitioning more on that financial side. Would it be harder to go from leasing the brokerage side to more of the financial side?

Novack: Truthfully, yes, I agree. It is the building block of real estate and once you have time in leasing, I think you understand real estate in a way that–

Kalsi: If Jen could get you a job at Blackstone right out of college, do that. All right, do that or go to West Brook or go to one of the bigger, more established places if you can get that. I’m just saying, in an environment where it’s harder to get that, it’s more of what do you do?

Let me ask you this question Jen. Would you think it would be easier to place someone who has been doing M&A as an analyst into a real estate job?

Novack: Without real estate experience?

Kalsi: No real estate experience into a real estate private equity firm or someone that’s been working at Cushman that’s been doing leasing and maybe some financial analysis and other stuff from a real estate perspective.

Novack: The second, and except for certain firms.

Kalsi: Right, right.

Hughes: Talk about the capacity. Are there too many people coming into the industry? Are there too few jobs? Susan?

Swanezy: There are people coming back to real estate. Real estate is so cyclical that after any significant downturn, and I’ve been around long enough so it’s, so in the early 90s, there were a lot of people that were coming, that were not going into real estate and I saw that from the recruiting back then I was doing. The real estate industry has come off a bit but it’s coming back. The commitment to real estate from at least institutions has not waned, which is terrific. I still see good opportunity, but I don’t think that it’s substantially off.

Hughes: It seems to be a game of patience more than anything.

Swanezy: I think people have to understand it takes a long time to become an expert. It’s not just a matter of taking a course or two, or working a year or two.

Kalsi: I’m still working on it.

Swanezy: Exactly, exactly. For me, personally, having all those years of real estate experience and then I switch from investment banking to investment management without a rolodex of institutional investors as relationships. I worked on real estate deals, I worked with developers and owners and investors, but I had the underlying real estate underwriting skills and the confidence that I could switch to go into investment management.

I did that when I was 40, and I’m well over that now. When I was on the banking side, I thought when I was 40 maybe I could do this for five more years. I think that if you have bedrock of real estate skills, there are so many different opportunities in the industry. As Jen said, you can start in one area and then go into another. You can start in finance and then go into strategy, or you could start on the private side and go to the public side and become a REIT analyst. The industry is so diverse. It’s real estate finance, it’s corporate finance, it’s public markets, it’s private markets, it’s the build environment, and it’s macro economic inputs. Doing whatever it takes to have a very sound foundation in real estate skills will position somebody well.

Hughes: Jen, your key advice?

Novack: I would say two things. One is to stay positive, and I know that that’s really difficult for a lot of people looking for jobs. Just believe that it will happen, absolutely. Finding a job is a full time job. People say that all the time, and it’s at least a job, maybe one and a half. Never lose sight of the fact that relationships are really important, and so even if you don’t get your dream job but Sonny was your teacher, keep in touch with Sonny and let him know what you’re doing every year. Don’t be shortsighted about it and get down too quickly. You never know, in three years, as Sonny said, he’s not really interested in you until you’re trained up. So perhaps he’ll be interested then.

Real estate and how deals happen, yes, people talk a lot about financial engineering etc. but it is very relationship oriented. It’s not just about location, location, location. It is very much about who do you want to do a deal with? Who do you want to sit in the office with when you’re working 12-hour days? Who seems like a good kid or someone that they want? I would definitely make sure that besides the skills portion, make sure you’re constantly networking throughout your career.

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