Friday, January 19, 2018

A friend who has made a difference in the commercial real estate industry: Roy Schneiderman

Roy Schneiderman founded Bard Consulting in 2001.  Bard provides real estate consulting services to institutional investors including pension funds and sovereign wealth funds. His particular areas of expertise include real estate investment analysis, quantitative analysis, asset and manager workouts, manager due diligence, investment management fees, real estate investment strategy formation, and land-oriented investment strategies.

Professional Affiliations
•             Fellow of the Royal Institute of Chartered Surveyors (FRICS)  
•             Member, Counselors of Real Estate (CRE) 
•             Member, Pension Real Estate Association (PREA) 
•             Member, National Council of Real Estate Investment Fiduciaries (NCREIF) 
•             Editorial Board of Real Estate Issues magazine  
•             Member, NASD Dispute Resolution Board of Arbitrators

University of California: Berkeley, California
MBA (Real Estate and Finance), 1984

Yale University: New Haven, Connecticut
MA (Philosophy), 1980

Beloit College: Beloit, Wisconsin
BA (Philosophy and Religious Studies), 1977
Phi Beta Kappa

Roy and I met during the time I was based in the San Francisco Bay Area, working for Institutional Real Estate (IREI). I trust my intuition and I felt immediately that Roy was a good guy – and I was right.  As I had done a lot of real estate consulting in my career, it was so interesting to learn what Roy, Faye and their colleagues at Bard Consulting were doing as it differed greatly from my consulting experiences.  We used to see each other regularly at IREI’s Editorial Advisory Board meetings – still considered one of the most valuable in the industry. Roy knows his stuff. He is considered a trusted advisor by some of the largest public pension funds in the U.S. Roy is also very generous with his time and counsel. I personally experienced those two attributes when I left IREI and was planning my next commercial real estate adventure.

Q.  How did you get your start in commercial real estate?

A.  It was not particularly a thoughtful start.  I got my MBA from The University of California – Berkeley in 1984. There were basically two things you could do with a Berkeley MBA at that time: get a job in real estate in San Francisco or get a job in high tech on the Peninsula. I wanted to live in San Francisco, so, I ended up in real estate.  My start was with a consulting firm called Keyser / Marston Associates.  They specialized in working with redevelopment agencies – which still existed back then. I did a lot of financial and market analysis.  One of my first assignments, back in 1985, was a pro forma for the build-out of Mission Bay. It was a 20-year model that had everything completed by 2005. There’s San Francisco for you!

Q.  What advice would you give to someone has been in the commercial real estate industry for a short time or a student looking to get his or her start?

A.  There are two things. The first more introspective and the second is more career oriented.  First, know who you are. Know what you’re good at and figure out what you like to do, remembering that what you like and what you are good at is not always the same thing. At all stages in your career it’s important good to play to your strengths.  Every once in a while, in terms of professional development and growth, it’s good do something at which you may be weak. Ultimately from a career perspective it’s always good to be playing to your strengths and doing what you enjoy. 

From a content standpoint, the best background that anybody could have is working out troubles and working out problems. Find yourself someplace - whether it’s an asset management position or a workout group at a bank or a consulting firm - where you are fixing things that have gone wrong.  You will get two or three years’ worth of experience for every one year on the job, and it will set you up well for the rest of your career. 

Q.  As you look back on your career is there anything you wish you had done differently and if so, what?

A.  I’ve been a consultant my entire career. I’ve always felt that the best consultants were people who were not consultants their entire career, but also had spent some time in the industry. For a variety of reasons it never worked out for me to do that.  I did have a couple of occasions but I remember being told, in no uncertain terms, particularly by the co-founder of a commercial real estate brokerage firm, who was kind enough to give me time for an informational interview: “Roy, you’re much more valuable as a consultant than you are to me.” I appreciated him taking the time to talk with me and give me his insight, even if I did not like it.

Apropos about playing to your strengths and doing what you’re good at, I probably bring a better skill set to consulting than I would have to asset management or portfolio management or marketing and the like.  Maybe I took the easy way out - the path of least resistance.  It was always easier for me to find the next consulting gig.  However, I do regret not having spent time outside of the consulting environment.  Also, I really wish I had lived and worked overseas for a while.

Q.  Who have been the major influences on your career and how?

A.   You learn something from everyone, although sometimes what you learn is what not to do!  The single biggest influence has been Lynn Sedway, who isn’t an institutional person but who is a very well known in the San Francisco Bay area market.  I worked with her for 7-8 years and learned a lot about how to think about real estate and even more about how to think about a real estate consulting business and client relationships.  All of which has been extraordinarily valuable to me. 

Two people who I have had the opportunity to work with later in my career also come to mind, the late John Koza, and the still-current Ted Leary – a couple of Bostonians cum Californians who both illustrate my point that you do not need to be a career consultant to be an excellent consultant.

Faye Beverett is my partner in Bard Consulting.  She and I share important common values, but we tend to attack problems and organize ourselves very differently.  There is a lot to learn from talented people who are different from oneself. 

Thanks for all the emails supporting this project which was created to people, especially younger people, in the commercial real estate industry, insight that may be helpful to them in their careers.

I encourage you to forward this on. 

Wednesday, January 17, 2018

A friend who has made a difference in the commercial real estate industry: Blake Eagle:

Blake Eagle is Founder of the National Council of Real Estate Investment Fiduciaries (NCREIF). NCREIF is a Chicago based non-profit commercial real estate industry association focused solely on the collection, processing, validation and publication of investment performance return information on commercial real estate assets owned in the private market by pension funds, endowment funds and other categories of institutional investors. NCREIF membership is comprised of real estate investment managers, pension funds, endowments, consultants, certified public accountants, appraisers, and academics.

From 1994 through 2000, Mr. Eagle was the Thomas G. Eastman Chairman, Center for Real Estate, Massachusetts Institute of Technology. The Center offers a Master of Science in Real Estate and engages in a wide variety of research and educational programs.

From 1971 through 1993, Mr. Eagle headed up the real estate consulting group of Frank Russell Company, a global pension fund asset strategy consultant and investment advisor headquartered in Tacoma, Washington. Mr. Eagle had senior management responsibilities for domestic and international real estate consulting for Russell's pension consulting clients. During his 23-year career at Russell, pension fund consulting clients invested more than $18.0 billion in real estate. Mr. Eagle also played the leadership role in the establishment of NCREIF.

In 1992, he was honored with Lifetime Achievement Awards from the NCREIF, The Wharton Real Estate Center, University of Pennsylvania, and the Homer Hoyt Advanced Studies Institute for his contributions to the field of real estate research. Mr. Eagle received the 1993 Dr. James Graaskamp Award from the Pension Real Estate Association (PREA) for his contributions to the body of knowledge about institutional investment in real estate.

Mr. Eagle has served as a member of the American Society of Real Estate Counselors, the Pension Real Estate Association, National Real Estate Roundtable and National Association of Real Estate Investment Trusts (NAREIT). He has served on the Boards of Directors of three publicly listed real estate investment trusts, two privately owned real estate operating companies and one real estate securities mutual fund. 

He is a member of the Real Estate Advisory Committee of the New York State Teacher's Retirement Fund and has served as a real estate oversight consultant to the New York State Nurse's Pension Fund and 1199 Health Care Workers Pension Fund. He formerly served as a Director of the Institute for Real Estate Research; Member, Board of Advisors, Fannie Mae; Faculty Member, Mortgage Bankers School, Northwestern University. He has provided testimony to the President's Commission on Housing, Department of Labor and the U.S. Senate Banking Committee on U. S. pension fund real estate investment practices.

He earned his undergraduate degree in business at the University of Washington. He pursued postgraduate studies in real estate at the University of California, Berkeley. Prior to joining Russell, Mr. Eagle was a real estate developer.

Blake and I met at NCREIF events.  As the founder of NCREIF, Blake opened most of the conferences with a few words – although Blake isn’t generally a man of just a few words!  His passion for the contribution NCREIF has made to the institutional real estate industry was evident and still is. Few people have had the impact that Blake has had on this industry. Blake is the real deal.  He has a great sense of humor and is one of the most humble people I’ve ever met. One last thing: Blake Eagle is truly a legend!

Q.  How did you get your start in commercial real estate?

A.  I graduated from the University of Washington in 1956 with a degree in Business Administration.  I was a depression era baby. From the get-go our parents drove into those of my generation the need to earn a college degree. It wasn’t particularly important as to the field in which you earned your degree, as long as you had one.  Once you completed your education, it was expected you would go to work for corporate America, work your tail off and stay there for your entire professional career. Then, when you reached 65, you would have earned a pension, which along with your social security, would allow you to live comfortably for the rest of your life.

My college curriculum included general courses in economics, accounting, business law, business management and business administration. No courses in real estate. Never thought of real estate as a professional field, nor do I recall any fellow students who did. To most of us, “real estate” was the residential housing business.

Upon graduation from college, my “first job” was as a Second Lieutenant in the U.S. Army. Able bodied young men of my generation were required, under the Uniform Military Act of that era, to serve in the military. One entered the military as an officer through ROTC (Reserve Officers’ Training Corps). Upon discharge from the military, I then did what I was supposed to do: pursued a job in corporate America.

I went to work for The Ford Motor Company, in their district sales office in Seattle, which served the dealerships in the Pacific Northwest states of Washington, Oregon and Idaho. I enjoyed the work, saw plenty of opportunity for advancement, and the prospects of long term job security looked promising - just what the parents of depression babies wanted for their offsprings.

After having worked for Ford for about a year and a half, I was contacted by a shirt-tailed relative of mine, a cousin in-law by marriage, who was starting a real estate business and wanted me to join his firm. He had been a successful home builder, but saw an opportunity to leverage his knowledge and experience into a more profitable real estate business—land and community development.

His business model was based on the economic facts of life in the home
building business in those days, i.e. the great majority of home builders were “ Mom and Pop” operations with little resources, limited credit and therefore unable to inventory enough land at any point in time to sustain their businesses through all the ups and downs of residential housing cycles.

The new business model called for raising capital from investors, buying land in the “path of progress”, preparing the land for home development through the land planning and entitlement processes, arranging land development financing, managing the development process, then offering finished developed lots to home builders. One might say I entered the real estate business at the ground level.

I spent ten years working for the community development company; 7 of those years as part of a project management team overseeing the development of a 2500 acre Planned Unit Development in the North San Francisco Bay Area community of Benicia, California. The development plan called for mixed-uses of single family housing; some multi-family residential; neighborhood retail; some commercial to accommodate suburban office and industrial warehousing; plus, land set asides for schools, churches, parks and other community needs.

At one time or another, I was involved in just about every phase of the project development plan—from working with local authorities in land use and zoning approvals, to procuring land development financing from third-party financial intermediaries, to finding prospective buyers for finished product. I also attended school at night taking real estate courses at the University of California at Berkeley. Courses included Real Estate Fundamentals; Real Estate Financing; Real Estate Law; Real Estate Investment. Some taught by faculty; some taught be practitioners. All good courses; all contributed to furthering my knowledge and helping to fill in some of the blanks.

Returning to Seattle in 1969, I joined up with a couple of UW classmates, with the intent of starting our own commercial property investment development business. No sooner had we lined up capital sources for our first project, when Seattle’s largest employer, The Boeing Company, announced huge layoffs – more than 40,000 employees. Overnight Seattle went from a boom to bust economy.

Unemployment quickly reached levels in excess of 25%. A real estate broker, rented a major highway billboard with a sign that said “Will The Last Person Leaving Seattle Turn Out The Lights”.

A photograph of that billboard made the cover of Time Magazine.

Among the many businesses to fall by the wayside were start-up real estate development companies. Just like that, I was unemployed.

It took a few months, but I was most fortunate to land a job with Tacoma, Washington - based, pension fund consultant, Frank Russell Company. They were looking for someone with a real estate investment background that could work with their pension fund clients in adding real estate to their mixed-asset portfolios.

As a pension fund asset strategy consultant, we built a case for Why Real Estate? as a portfolio investment. Then, when given the go-ahead, hired their real estate investment managers. We did not underwrite the real estate investments; we underwrote the underwriters.

It wasn’t long before our clients raised the following question, “Now that we are invested in real estate to what do we compare our investment performance?” “How will we know how our real estate is performing compared to stocks and bonds. How will we know how our real estate managers are performing compared to their peers? In other words, “Where is the real estate equivalent of the S&P 500?”

This was the beginning of what we know today as the NCREIF Property Index (NPI). We at Russell led the effort. The institutional investor wanted a standard measure of private market real estate investment performance and it was within Russell’s purview to make that happen.

Q.  What advice would you give someone early in his or her commercial real estate career or a student looking to get his or her start?

A.  I thought about that question for a long time.

When asked, I would advise my MIT students, all things being equal, to start out in a role in property management - managing a large apartment complex. I told them they will learn the operating side of real estate from A to Z.

Big apartment complexes are particularly management intensive. First, you manage the operations—collect the rents each month; chase down the delinquencies; pay the operating expenses; pay the debt service if there is a mortgage; budget for capital improvements; and deal with the various outside service providers; janitorial, elevator maintenance, insurance agents, etc.

The property manager also “represents” the asset in the local community in which it is situated. You have to constantly deal with managing move-ins and move-outs; as well as respond to tenant requests, complaints. Further, you must recognize that the owner of the property, ‘your boss’, is looking to optimize his investment return, so you are functioning as an investment manager as well as a property manager.

That’s the advice I would give today, along with getting an education in real estate from any one of the top-flight universities that offers a degree program in real estate. There were no such programs around when I was in college. Real estate was not “a field of study”.

Q.  As you look back on your career, is there anything you wished you had done differently and if so, what?

A.  Nothing that I can think of. Prior to joining Russell, I had my fair share of ups and downs. Once settled in at Russell, all went pretty much according to plan. Bumps along the way, but nothing that could not be managed.

Working with those in corporate America who were responsible for their respective company’s pension fund, was for me, pure joy. And real estate as an asset class, performed pretty much as expected over a market cycle. In looking back over my 23 years at Russell, I cannot think of anything I would have done much differently.

The biggest challenge I faced, interestingly enough, was internally—trying to sell the Russell Quantitative Research Group - which included three PhD’s in Finance - that Russell take on the responsibility of developing a standard measure of real estate investment performance - which eventually would become the NPI.

All the ‘academics’ at Russell were students of Modern Portfolio Theory (MPT), which meant all recognized mean variance analysis as the standard measure of investment risk. They could not buy into a private market performance index that would report investment results on a quarterly basis and which would report market values based on third party appraisals. According to MPT, risk would be significantly understated and therefore returns overstated. Further, in their view, the return data could not be used in asset allocation modeling.

I had to convince the “quants” that we working with the best data we could extract from the private real estate market and that we were converting that data into the best performance measure we could construct-MPT notwithstanding. The biggest battle I had in getting the NPI off the ground was with my own organization. But that was fair-challenging data is among the many things consultants are supposed to do.

Q.  Who have been the major influences on your career? Why?

A.  By far, the most influential person in my career, the gentleman for whom I worked for 23 years, George Russell, Jr.

George founded the pension consulting business in the mid 1960’s, way ahead of the rest of the pack. Under his leadership, Frank Russell Company became the world’s leading pension investment and advisory consultant. Among the many Russell Company contributions to the global investment community: a pioneer in asset class diversification beyond just stocks and bonds; a leader in both quantitative and qualitative investment research; developer of the Russell 1000 and 2000 stock indexes to better track comparative investment performance; fully committed to providing the necessary resources to develop the first ever private market real estate index

A truly great leader and investment visionary. In 1993 Pension and Investments named George Russell and Warren Buffet among the four most influential people in the world of institutional investment.

Other folks that influenced my career? Meyer Melnikoff, Chief Actuary at Prudential Insurance and the architect of PRISA, was a very early supporter of the real estate index project and took an active role in making it happen. Another, Russell’s Peter Dietz, PhD. and head of Russell’s quantitative research helped your friendly non-quant to better understand what MPT was all about. Not an easy task, to say the least. Professors Jeff Fisher and Mike Miles have also been great influences in my career. Both Mike and Jeff are real estate scholars and were great contributors in bringing the NPI to realization. We needed scholarly input and both brought that perspective to the effort.

Russell colleagues Madelyn Smith, head of equity research and Gene Hoffman head of fixed income research were Russell professionals I could go to whenever I needed professional guidance outside my realm. I had great support and mentoring from some of the very best in the business. For which I am eternally grateful.

Monday, January 15, 2018

Martin Luther King Jr.

Some time back, a friend suggested I read the autobiography of Dr. Martin Luther King, Jr.  I finally started it about a month ago - I'm a slow reader.  I didn't plan it but I'm just about finishing it up - right as we celebrate the Nobel Peace Prize winners' birthday today.

Coincidently, this Thursday, there's a lecture at the University of North Carolina - Asheville (UNCA) by Michelle Alexander. Michelle, the author of the best-seller, The New Jim Crow: Mass Incarceration in the Age of Colorblindness, will deliver the keynote address for the UNC Asheville’s annual Martin Luther King Jr. Week. Now, reading the book, I'm really looking forward to it.

When I was growing up in Forest Hills, NY (not far from LaGuardia Airport and the home of the original U.S. Open Tennis Tournament) I attended Forest Hills High School (FHHS) for 1 1/2 years before my parents moved our family to Northern New Jersey - about 22 miles west of Manhattan.

In Forest Hills, while there was (and still is) a good-sized Jewish population, the high school was diverse.  This was partly due to a number of kids from a Hispanic neighborhood called Corona attending FHHS.( Corona was made famous by Paul Simon in his song, Me and Julio Down By The Schoolyard - btw, both Paul and Artie Garfunkel graduated from FHHS along with: Bob Keeshan (aka Clarabell on the Howdy Doody Show who later found greater fame as Captain Kangaroo), actor Michael Landon, Ernie Grunfeld, a star for the New York Knicks, and Gary Kurfirst, a friend who went on to a very successful career as a rock music impresario and manager of Talking Heads).  

Growing up in Forest Hills, I never heard any slur terms used to describe other nationalities, races, genders or religions. Everyone got along; there were no gangs - at least that I knew of - and we lived in peace and harmony and with mutual respect.

I moved to a suburban NJ town in the middle of 11th grade.  While it was only 22 miles from New York City it could have been, let's say, up to 1,000 miles away - in a certain compass direction.  The high school was all white middle-class and I started seeing and hearing bigotry for the first time in my life.  I heard slur terms used by various groups referring to ‘other groups’.  It was shocking as my parents, Lorna and Manney, taught me and my brothers, by example, that we were all people, no matter where we came from, etc. and that everyone should be treated equally and respected as fellow human beings.  

I consider myself very fortunate to have spent the first 15 years of my life in New York City.  We had no fear growing up.  We used to ride our bicycles to LaGuardia Airport to watch the planes take off and land - there was an observation deck in those days and we found a hole in a fence that allowed us to sit with nothing between the runway and us. On rainy days we used to 'play' in the subway.  The game:  we'd all (6 or 7 of us) get on one car. At each station we had to go weave our way, in and out of the doors. Whoever got caught on the platform had to go home by themselves.

We used to have bike races on a painted bike track in a parking lot which became the location of the original home of the New York Mets baseball team, Shea Stadium. We used to ride our bike everywhere.  

Having just read the chapter in Martin Luther King's book I'll mention this past experience as Dr. King grew to have a of respect for JFK and his administration and their stand on segregation and the horrible related violence.  It was during the presidential campaign for the election in November 1960.  Someone told us, "Kennedy is going to speak at The Boulevard." The Boulevard was a nightclub that was on Queens Boulevard in Rego Park, NY - just about a 10 minute (we rode pretty fast!) bike ride from P.S. 175 where we were hanging out.

We got there to see a huge crowd in the parking lot.  We dumped our bikes (no fear of someone stealing them in those days) and worked our way through the crowed to stand right in front of the stage - right in front of the lectern. JFK was running a little late but no one complained.

Finally, a black limo pulled up and JFK walked up the half dozen steps to the stage.  As soon as he was visible, the crowd went crazy.  He stood there, right in front of us, waving to the crowd with that magnetic smile, as we looked almost straight up at the blazing sun. He could not get the people to quiet down - keep in mind that that area was very Democratic in make-up.  King and Kennedy had the same type of charisma. And, unless my memory has failed me - which it definitely does sometimes - when he finished, JFK started reaching down to shake people's hands and I believe he shook mine - or at least I touched his hand.  Similarly, one of the favorite stories that my grandmother (Ruth Silverman) told, was when she was at Yankee Stadium and touched Babe Ruth - I totally believe she did.

Martin Luther King, Jr., who was assassinated at age 39 in 1968, adopted Mahatma Gandhi's belief in non-violence as the path to effecting change.  While there was violence perpetrated against demonstrators and activists, both black and white, seeing the end to segregation and the equality in America guaranteed to all Americans, King and the other leaders were able to continue to reinforce the power in nonviolent protests.  How sad that he was murdered in the epitome of violent acts.

Included in King's autobiography is the text of a number of speeches he made as well as some of the letters he wrote.  And, while I was only familiar with his famous "I Have A Dream" speech delivered during the March on Washington on August 28, 1963, I'm realizing what a truly brilliant writer and orator he was. 

In closing this modest celebration of Dr. King's birthday, here is a portion of one of his speeches:

World peace through non-violent means is neither absurd nor unattainable.  All other methods have failed.  Thus we must begin anew.  Nonviolence is a good starting point.  Those of us who believe in this method can be voices of reason, sanity and understanding amid the voices of violence, hatred and emotion.  We can very well set a mood of peace out of which a system of peace can be built. 

Racial injustice around the world.  Poverty. War. When man solves these three great problems he will have squared his moral progress with his scientific process.  And, more importantly, he will have learned the practical art of living in harmony.

Sadly, could these words of the great Dr. Martin Luther King, Jr. be more poignant today?

Where is the Dr. King now, when we need him?  What kind of world are we living in?  How far backwards can we go after making some fairly good progress over the past 50 years, on so many fronts?  How can we explain, to our children and grandchildren, nay, how can we rationalize to ourselves, that the bigotry, displayed by some in our nation’s leadership, seems to be acceptable?  Doesn't anyone in Washington have any guts?

I'm sure, this past week, Dr. King was trying to dig his way out of his grave (possibly Gandhi as well), seeing that they're desperately needed again, to preach sanity in a world gone made with hatred and violence - and way too many guns.  

Is there a voice of reason in our world to speak out and then act on what is right, what is important to the survival of humanity?  Surely, someone will have the courage to do something; and it better be fast before somebody pushes their button.

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