Chicago - survived the fire

For those who attended the NMHC Student Housing Conference in Chicago a couple of weeks back welcome home. At one point I wasn’t sure I’d make it back to Pittsburgh with major delays from the air-traffic control fire – but I made it!
Pursuant to my outreach prior the conference and as the leading executive recruiter in our space, I’m sharing a brief summary of my conversations with your peers while in Chicago. Hopefully, you’ll find these interesting personally or perhaps able to guide any corporate planning efforts heading into 2015.

• Development Diversification – in 2014 this meant moving from garden-style to podium/wrap or highrise development. In 2015, I am hearing of adding Seniors Housing into companies’ product mix due to inherent demand and commonalities of the marketing/leasing and operations
• Signs of Long Term Industry Growth – Perhaps more confidently projecting economic growth beyond any pending “economic doom,” companies are still adding to their development teams, both on the sourcing and execution sides
• Portfolio expansion headaches – as the number of properties in portfolios (owned and fee management) are growing – particularly as smaller companies “nationalize,” – regional operations experts and more experienced/broad-based asset managers are in high demand.
• Layers of Management – for developers using 3 party management firms, many are hiring internal operations personnel (aka quasi-asset management) to work with their 3 party management firm to ensure success, not only for troubled properties, but ground up development as well
• Fresh Talent – with the growth in the student housing sector everyone is scrambling for the best talent – what are new pools to pull from? Hospitality? Higher-Ed? More and better training? Stronger internship/recruitment/internal development programs?

If there is something here that strikes a chord and necessitates further conversation let me know, we can talk further.

- Melanie

Private Equity Real Estate: New Economy Version 2.0

Sometimes you read or hear a statistic, but don’t quite understand it until you feel it by “the seat of your pants” as they used to say. For instance, I read a great statistic in the news yesterday that Pittsburgh had a 30% population increase in college graduates under the age of 29 years old during the past 10 years. –it doesn’t really resonate, even for me as a local - right? However, I’ve been making the same exact commute for nearly seven years and what used to be a reliable 15 minute commute to downtown now has crept to a regular 20-22 minute drive with at least twice-per-week traffic congestion related back-ups (i.e. – no accident or other mitigating factor). It’s real – this city is changing through growth! But, I digress…
I wanted to talk about the well-publicized statistics and very observable presence of private equity investors (both individual, 1:1 private equity as well as organized fund managers) in the investment real estate space. I won’t use this piece to rehash the figures, headlines and names you already know or can easily look-up. Rather, I want to discuss what the present market “feels like” in the seat of the pants as a player in commercial real estate. More specifically, how the private equity influence is affecting how companies are run and who is running them in the top two tiers of leadership.
In the early phase of the private equity boon (mid-2000’s give or take and certainly ending in 2008/09) and mostly lead by Blackstone’s aggressive push, the influence felt mostly like traditional fund-base LP investing. Real estate companies had higher returns to achieve and expectations, but culturally and talent-wise, not much changed. My efforts as an executive recruiter during this time were merely to find more bodies and in some cases more experienced talent to help manage the aggressive acquisitions load and project growth on the development side.
As the current economy came about in 2011 and then really picked up steam over the past 24 months, a new wave of private equity investor emerged. More highly regulated and scrutinized “big” private equity now needed to place executive leadership on the boards and in the C-Suite (particularly) of their portfolio companies and/or GP’s of whom they sponsored projects with or co-invested in funds. This is in addition to the project-level and deal-level middle-managers we’d been recruiting all along. The ability of a private equity firm to steer and guide the course of their investments has become more apparent – particularly in real estate where the assets themselves have grown well into the $100 million to nearly billion dollar per asset range in the case of some large mixed-use deals. Competent real estate executive leadership that understands investor transparency, regulatory compliance, human resources/EEOC and social awareness are real factors of consideration and hold merit when global PE is involved. I mention these executive skills in addition to all of the traditional (and still required) real estate competencies of driving return, managing project schedules and budgets and the decisive, aggressive leadership that made commercial real estate appealing to the PE firms in the first place.
During this current cycle we’ve also seen a significant advent of small to mid-cap regional private equity firms, many of which have wide and varying offshore investors. Whereas in the past, high net worth investors participated in real estate either through direct investment deals or through a deal-by-deal “country club” fund structure, we are now currently recruiting for and communicating with organized, business-plan driven PE firms exclusively dedicated to commercial real estate investment, development and asset management. Many of these firms have captive internal divisions or subsidiary companies that perform site-acquisition, development, construction, asset management and even property management.
They look a lot like traditional, vertically integrated real estate firms! Close to 40% of our recruiting activity this past year has come from these emerging PE platforms that need to bring highly skilled “functional vice president” leadership to their companies to lead the key disciplines noted above which in many cases were being previously “boot strapped” by the founders or with a skeleton-crew/staff.
The real take-away from these observations is not necessarily the strong resurgence of private equity in commercial real estate investing (statistically-speaking), rather the less apparent and very real assimilation of these firms as bona fide real estate companies. This is going to have a long term affect, for the positive, I might add, of the employment landscape. This will come in the form of diversity of position requirements, enrichment of skills of leading professionals (on the long term) and an overall more competitive employment market.
I am happy to discuss at any point. Sincerely, Wes

Post-NIC (virtual) seniors housing ramblings

In retrospect, I wish that I attended NIC (http://www.nic.org/events/) two weeks ago in Chicago.  Unfortunately, a personal scheduling conflict and an amazing recruiting workload made it very difficult for me to get there for the event and more importantly prepare so that I’d be productive while in town.

However, I do feel like I virtually attended the event.  You see, in my world as a headhunter, ahem – executive recruiter, I am on the phone each and every day.  In today’s work environment of email and social media – we now have two other communication modes working simultaneously and around the clock.  Between the three channels, I am directly exposed to at least one hundred, if not more, opinions, trends, comments and “other” daily.  Lately, more days than not, the conversation in our office has been on seniors housing…and the conversation has been driven by you, the masses of real estate professionals that we connect with daily, both “in” seniors housing and those wanting to get in or are about to be.

The principal reason for this exposure-level has been the sheer amount of executive recruiting activity we are conducting in the space.  During the past 12 months, we have conducted no fewer than four lead development officer searches for emerging seniors platforms.  We are presently in discussion to launch a fifth.  And the uncanny thing (in this relatively plug & play investment environment) – all five have their own “twist” that made each one unique and different.  One was focused on delivering a specialty residential product to a very tiny sliver of underserved demographic, the other was exclusively limited to a particular geographic market and requisite demographic, whereas another spun-off a commercial/MOB/health system infrastructure and yet another was leveraging the national infrastructure of an industry residential giant.

When I am talking to incumbent industry players, the talk-track is much the same as was echoed in the halls during NIC (or so I’m told); demographics, capital, partnering, consciousness toward regulatory matters.  However, the excitement is really from who is on the outside looking in.  There is so much investment capital that not yet participating in the space.  Add to that, eager, established and confident real estate companies that believe they can compete with the seniors housing icons or even find untapped market share relative to geographic, product differentiation or sheer scale that was previously unattainable.

It’s an exciting time to be certain.  I have cleared my calendar and I look forward to attending the ASHA Conference (https://www.seniorshousing.org/) this coming January in Southern California.

Until then, Brian

AFFORDABLE HOUSING REAL ESTATE HIRING: Q4 ’14 & Beyond…

Oct 15 2014

 

It’s no secret that we’ve seen an explosion in affordable housing development & investment, nearly directly tracking, if not perhaps, exceeding that of the rest of the commercial real estate investment space. However, the relatively niche space of affordable housing presents its own industry dynamics that present a ripple effect as we move into the latter stages of this current economic cycle and the advent of the next cycle.

Most notably, that due to government involvement – particularly its desire to increase affordable housing stock across the board in addition to improving existing inventory – there will be a strong push for increased development well after the demand curve and underlying economic basis for conventional multifamily housing tails-off (i.e. – due to an economic downturn of some sort).

My professional focus is on corporate infrastructure and people that drive these companies. For that matter, we have an inverse curve. Increasing demand for housing and fewer qualified professionals to perform the work. In the near term, compression due to talent being lured-away by the possible dream of more lucrative partnership in market-rate housing development and in the longer-term, particularly as we enter the next cycle – due to mass retirement of many of the iconic leaders in the affordable space in addition to their prime lieutenants who may have been fortunate enough to capitalize themselves personally during the current boon.

My colleagues have waxed at length in other posts about smart hiring practices in the wake of the current market realities and can be found here (https://www.linkedin.com/pulse/article/20140918205243-42451423-recruitment-202-for-the-tightest-employment-market-in-a-decade?trk=prof-post).

I’d like to be more specific to the realities and particulars of affordable housing and what options are available. I feel even more compelled because several of my clients, whom are rather solid, slow growth “middle America” affordable developers that amongst all three of them have hired no fewer than 25 development, investment and construction professionals just in the past 16 months!


What’s left then, in the traditional hiring bin, are essentially the “dregs.” And to-boot, you are a growing affordable housing company that won’t settle for seconds or thirds. What are you to do?
First, I strongly recommend white listing what the key traits required from any professional who has succeeded in your organization in the past. My guess is that “industry expertise” falls lower on the list, if at all. Core characteristics such as, integrity, ethics, commitment, relationship/network(s), geographic relevance/knowledge, communication, success orientation and so on probably fall in various rankings higher on your list. Pick what suits you – and there may be more. Once you’ve developed the core characteristics then you can move-on to the technical tool kit required.

In a classic “kid in the candy store” scenario, we’ll always been inclined to hire the best of the best regardless of price or availability. At this present time, that is just not the case. If you are guided by and are willing to adhere to your core characteristics as above – you can then be (slightly) more generic in your consideration of technical skills. Granted, we must assume that you or other tenured execs at your company are willing to (gasp!) mentor and train were there may be deficiencies. In the interest of time, I cannot list all the development and investment disciplines and technical skillsets, so I’ll offer some real world examples for illustration. So, what about; real property brokers as acquisitions managers, debt-side professionals as in-house finance, GC guys as in-house CM’s, civil engineers and/or architects as development associate/managers, and the list might go on.

At the end of the day, it’s about relationships and personal capacity to accept/manage work load. The above scenarios are not perfect. However, we all know the real world is not perfect either. If not myself, one of my colleagues has been involved in the health debate of the pros/cons of this way of thinking – do not hesitate to call and discuss.

- Butch Edlinger