Leading Voices in Real Estate

In today’s episode, Ron Terwilliger, a great influencer in the apartment sector and dedicated philanthropist, shares part one of his story: his leadership at Trammell Crow Residential and how he literally spawned the next generation of the business.A Strong FoundationRon TerwilligerRon Terwilliger grew up in Arlington, Virginia in the late forties and fifties. He played baseball and basketball at Wakefield High School, and despite a back defect which was thought to be the end of his playing career, he went on to play for the Naval Academy. There, he was named an Academic All American in basketball.Post-graduation, he spent five years in the Navy before getting his MBA at Harvard.“I had one real estate class and I really liked it. I have a fairly good feel for numbers and how they relate and how to think about the quantitative side of the business.”His first real estate job was at Sea Pines Company at Hilton Head Island, where he met colleagues who would go on to work with him closely over the years. When the economy shut down and Sea Pines went bankrupt, he was almost frightened out of real estate. However, he also credits the intensity of the experience at Sea Pines, the recession, and their youth for creating such strong relationships between him and his co-workers.After Sea Pines, he joined the Henry C. Beck Company in Dallas as CFO where he helped grow the business. While in Dallas he was invited to join Trammell Crow Residential by Terry Golden (a business school classmate).Trammell CrowTrammell Crow’s offer required him to take a significant pay cut, but he would have a 40% share in the company. He remembered how his father never took a risk and realized that if he didn’t take this shot, he would never become an entrepreneur. Dick Michaux, a former Sea Pines associate, was his first partner. When Ron completed his first apartment project he made his first million.He credits Charlie Fraser of Sea Pines and Trammell Crow as his two mentors and emphasizes the importance of leaning on people who have a lot of experience in the business to teach you the ropes.He spent most of his time cultivating relationships with investors and lenders, managing core partner relationships, and hiring. Individuals who stood out to him were often MBA’s, smart, had a good feel for numbers, an engaging personality, a healthy balance of work and pay, with a strong commitment to support their families.At Trammell Crow, Ron shares that his vision was to get rich slowly by avoiding over-leveraging and to think of your partnership as lasting for a career.Overcoming the Savings & Loan Crisis and a Tanked EconomyIt was a desperate time for a lot of people in real estate. At Trammell Crow, they didn’t have any recurring income or assets other than a property management business that was cash flowing, so they had to make salary cuts and let people go which he says was incredibly difficult. These people didn’t deserve to lose their job, but it was just a fact of life and necessary to save the company.This challenging time however brought about growth in a new way.As the market got back on its feet, they began developing again. Ron attended a conference with his colleague Chuck Berman, where they met with Fred Cavan about doing a REIT in the Northeast.This series of events led to the creation of AvalonBay with Dick Michaux, Bryce Blair, and Tim Naughton serving as CEOs. Gables with Marc Bromley was formed six months later. Four years later Leonard Wood left to form Wood Partners and about that same time Bruce Ward started Alliance.As these tree branches from the family tree of Trammell Crow grew, Ron continued to build it back and strengthen the roots. After the recession in 2008, Ron retired and set his sights on philanthropy, which we will dive into on next week’s episode!

Chip Conley started one of the country’s first boutique hotel chains, Joie de Vivre, when he was just 26 years old. After selling the company, he joined the startup Airbnb at age 52, despite the fact that the young founders were primed to disrupt his industry.Read more about Chip’s leadershipRead more about Chip’s role at AirbnbPre-order Chip’s newest book, Wisdom @ Work: The Making of a Modern ElderLearn more about Chip’s other books*This is a rebroadcast of our previous interview with Chip Conley.

Clara Brenner is the Co-founder and Managing Partner of the Urban Innovation Fund, a venture capital firm that provides seed capital and regulatory support to the tech startups addressing the challenges facing urban dwellers. Clara and I had a wide-ranging discussion about her career, business, and the startups and technologies in which her firm has invested.Real Estate and GovernmentGrowing up in Washington, D.C., Clara was surrounded by real estate and government, and found herself drawn to both. Her undergrad thesis explored the historic relationship between real estate developers and local government in Lower Manhattan.“Ultimately, I decided to go down the real estate development path because it seemed like you were equally influential and you got to have more fun, be more creative, and make more money.”After four years of working in real estate, Clara realized she wanted to be her own boss. She returned to school at MIT Sloan with a vision to start her own real estate development firm.Shaping the Future of CitiesClara and her friend Julie Lein crossed paths at MIT Sloan and realized they both had a fascination with companies that were tackling meaningful challenges in cities. After some in-depth research, they discovered that these companies were facing a lot of similar challenges, around issues such as fundraising challenges, physical space, and regulatory and political hurdles.This sparked the creation of their investment vehicle and accelerator Tumml.“I think real estate is a great career if you want to have an impact on the physical environment around you, which is I think is something so many people want now, they want to feel like and see the influence of their work every day.”Tumml paved the way for Clara and Julie to found the Urban Innovation Fund, a more sustainable, long-term investment vehicle that writes larger checks, is involved in multiple rounds of investing and takes board seats. This $24.5 million dollar fund has a diverse portfolio that Clara says aligns with their vision for creating scalable solutions that shape the future of cities. This looks like everything from Milk Stork, a breast milk shipping service for the traveling businesswoman, to Udelv, a driverless delivery service.Their set of investors are more traditional, financially motivated entities who they refer to as “impact curious.”Clara highlights the fact that today, people often look to technology as the changemaker; however, she points to politics and policy as the place where real, slow, painful change happens. Identifying transformative technology is very important, but you still need to vote and be politically engaged to create real change.

Karl Polen did not start out with his sights on real estate. He left his Midwest roots for Nashville at 19, eventually playing with the likes of Charlie Daniels and Johnny Cash.“One of the highlights of my life is that I actually met and chatted with Johnny Cash. He was an incredibly gracious guy.”Karl credits music for shaping his professional career by teaching him the type of discipline and focused effort it takes to become successful.Opening New DoorsWhen he needed a steadier paycheck, Karl went on to work in accounting and received his MBA at Vanderbilt. He was drawn to an entrepreneurial culture, worked with Ed Robson of Robson Communities in the 1980’s, and then joined Francis Najafi, Founder of Pivotal Group, as a partner in real estate investment. Working with these driven entrepreneurs was incredibly fulfilling, and Karl thrived in his role as he helped focus and implement the larger vision.Arizona State Retirement SystemKarl had long intended to work in public service after being inspired by his work on various boards over the years, and during the global financial crisis in 2010, he left Pivotal Group and transitioned from the board to staff with AZASRS.Here, he has transformed their approach to real estate by focusing on demand-driven investing.“We eliminated a middleman, we were able to have more control over our destiny in terms of selecting the type of deals we wanted to do, and then we also have more control to be able to exit an investment or increase an investment, depending on how things are going.”Because they are a small staff of nine, they work closely with their consultant RCLCO to identify the right markets and partners for success.Karl’s Advice:Follow your bliss. Experiment. Find out what means something to you, then dig as deep as possible, become the best you can be, and find a market for it.Don’t be afraid to take risk.Be prepared to reinvent yourself and be ready to adapt.Links from the EpisodeArizona State Retirement Systems InvestmentsArizona State Retirement Systems Strategic Asset Allocation (2018)Karl Polen’s GitHub page

Note from the host- In this episode, you will actually hear me being interviewed, rather than me doing the interview. Jeff Large is the editor of Season 2 of Leading Voices. He interviewed me on his podcast, The Jeff Large Podcast, where he talks about tech, podcasting, and running a business. I get to discuss how this relates to real estate from both a recruiting and leadership standpoint. Enjoy!Terra Search PartnersI founded Terra Search Partners in 2006, a highly consultative executive search firm specializing in the real estate industry. Clients hire Terra as an advisor and consultant to help them understand and hire leaders for their firm.True LeadersCuriosity, humility, a deep understanding of others and their industry, and people who talk about mentors and teams are traits that I consistently see in true leaders. All of them come from some depth of knowledge in the industry that they grew up in.“They don’t just land on the moon and become a leader. They grow up in the industry and they grow up by being exceptional through the pathways that they grow.”People have built amazing companies in the real estate industry. In Leading Voices, I have had the opportunity to interview some amazing folks who have built great businesses. Indeed, I have gained inspiration and insights from most of the interviews. A few to call out are Fred Tuomi, Gadi Kaufman, Keith Oden, Mary Ann Tighe, Sam Zell, Jonathan Rose, John Rahaim, Jane Graf, Steve Wilson and many others.I’ve found that my own leadership strength lies in being a thought leader within the industry and an advisor who listens well and tries to continually add value for clients, candidates, and colleagues.Why Podcasting“My success and my happiness becomes not just about my own contribution, but actually about having a company around me that I can teach and work and mentor and have those that love it as much as I do… Teaching that is something that inspires me a lot.”When ULI asked if I wanted to be their “Terry Gross”, I didn’t realize the level of passion and desire I would have for hosting a podcast series. I find that the breadth of knowledge that I’ve gained over the 20 years I’ve spent in the industry is very useful as I interview the leading minds in real estate.For me, podcasting is a great way to grow a business through thought-leadership and credibility, but most importantly, I am passionate about showing the diverse value that real estate companies and leaders add to their cities. It’s inspiring both for leaders already in the business as well as young people thinking about careers in the industry.My AdviceFind a meaning and a purpose in the work you do. Come to your job with a passion and interest day in and day out, and you will bring things to the next level.

Joe Fraiman and Andrew Kitchell, the Co-Founders of Lyric, While it is tempting to compare their startup business to Airbnb, it is actually quite different. Lyric is a highly curated, highly designed, professionally-operated version of rentals where they have total control over the supply, design, and experience of their guests.The Connection:With a background in software and finance, Joe moved West and started Tastemaker, a company created to help people find the right interior designer. At this time, Andrew was managing Beyond Stays and reached out to Joe at Tastemaker to remodel their properties.They had lunch and quickly realized they shared a passion for the possibilities at the intersection of technology, data, and real estate. They saw that people want to live and travel in a more flexible, experience-driven way and they decided to learn: what does this transition look like, what are the challenges, and how can they solve them?Building Trust:Bridging the trust gap with apartments and short-term rentals was an immediate challenge. However, by identifying the underlying reasons for mistrust between apartments and short-term renters, Lyric was able to implement strategies that built trust, like background checks.As the relationships blossomed, Lyric secured the high-quality product they wanted while providing apartments with new revenue streams for their portfolios, valuable amenities for their residents, and an additional conversion funnel.“The most interesting thing is that we have the ability to serve all kinds of different types of customers and use cases… Everything from the two-day leisure trip, the five-day business trip, the 30-90 day relocation or home displacement, all the way to the much longer pattern,” said Andrew.Growing the Company:From the beginning, Joe and Andrew knew the importance of securing investors – which include NEA, Fifth Wall Ventures, Barry Sternlicht, and Signal Fire – who would help them scale, build up their real estate expertise, grow their brand, double down on data, and accelerate growth.“It’s about having the passion and the curiosity to say ‘Hey, I believe there is something behind that mountain and we’re going to hike in that direction, and we’re going to learn things along the way, and course correct,’ and I think that’s what investors are looking for,” said Joe.Andrew and Joe are quick to admit that it would be challenging to run a company of Lyric’s scope by themselves. They credit their complementary skill sets and ability to discuss things with the other as vehicles for helping them move quickly, test things, and solve problems.

Ken grew up in Northern California’s Bay Area, eventually receiving his M.B.A. and Ph.D. from Stanford in Business. Simultaneously, he obtained a California Brokers License because he was drawn to real estate. He was aware of the self-storage industry in California, but when he moved out to Boston after college he saw that there was a gap in the market on the East Coast. This piqued his interest in the industry.After opening up the first Extra Space Storage in Billings, MT in 1977 in a partnership with his boss at the time, Ken went on to teach at Brigham Young University (BYU) in Utah. There, he continued growing Extra Space, until sky-high interest rates slowed down development in the early 1980s and again in the early 1990’s.“I didn’t think it through very well… but you know, sometimes when you’re an entrepreneur you don’t have a good long-term strategy. You’re just trying to survive.”The Modern Extra SpaceInspired by the corporate strategy class he was teaching, Ken realized in 1998 he was serious about growing Extra Space. He needed money, a good management team, and a partner to help him. Diane Olmstead of Arthur Anderson Real Estate Capital Markets Group helped Extra Space bring a financial partnership with Prudential Real Estate Investors. Spencer Kirk joined as a partner in order to put the team together, while Ken as CEO focused on acquisitions, development, and financing.“We spent a lot of time working with employees, employee benefits, and employee motivation, and I think that that has paid huge dividends for us. Second of all, we always had a philosophy of being fair in any business transaction… we really internalized the idea that when you have a contract or business relationship, you’re always fair to the other guy.”In the same way that you trust a Marriott Hotel, Ken recognizes that the secret sauce for success lies in the reputation of their business name.Because its tenants don’t talk to one another, Extra Space can leverage technology to offer different prices and promotions based off of certain customer’s characteristics and the self-storage product they want to purchase. He credits this sophistication and tailored-pricing to why they are outperforming others in their industry.Advice:Woolley is a serial entrepreneur and has a plethora of experience in industries including airlines, technology, mining, fast food, and more. But storage is the one thing he knows best and to be successful in real estate, he puts a lot of emphasis on having a good education and a lot of experience.“If you want to be in real estate, there are two ways to approach it. Number one is start from the ground up. And that means you start developing small things with small partners. The other way is to get a job with a real estate company, learn the ropes, and then go off on your own.”LinksExtra Space StorageEntrepreneur Leadership Video 01Entrepreneur Leadership Video 02Entrepreneur Leadership Video 03

Jane Graf is the President and CEO of Mercy Housing based in Denver and operating nationally, one of the country’s largest nonprofit affordable housing organizations.Jane’s work in affordable housing began early, as she founded the nonprofit Specialized Housing that built affordable housing for those with disabilities before she was 30. When her husband was relocated to San Francisco for his job, she began working for Catholic Charities, which eventually led to her joining Mercy Housing during a merger.Jane credits Mercy Housing’s resilient structure to the Sisters of Mercy’s entrepreneurial approach and understanding that to do good work, you need to put money behind it and take risks.25:40 “They built these institutional responses to need… They know how to not only start something but then really create an institution that can carry on the work way beyond their capability. And they’re really good at it… they’re completely fearless.”She likens Mercy Housing to NPR, a national organization with local branches that are integral to the community. The real change and transformation happens on the local level because every community has different needs and resources.Some of Jane’s important beliefs surrounding affordable housing include:Property management should be about people, not compliance.There is no single, one-size-fits-all model for delivering affordable housing.Stabilizing and supporting people and communities in need will help them get access to foundational necessities like education, healthcare, and good jobs.Jane’s career and life advice are:Celebrate your mistakes because you learn way more from your mistakes than from what you did right.Spend your time allowing yourself to be pulled towards your strengths.

John Rahaim grew up in Detroit. His high school day of community service inspired him to understand the city more, and he went on to receive his B.S. in Architecture from the University of Michigan and a Masters in Architecture with an emphasis on Urban Design from the University of Wisconsin-Milwaukee.The Urban Design program focused on man-environment systems which especially fascinated John."It’s all about the interaction of human behavior and the environment and how each one affects the other."Pittsburgh’s Second Renaissance:After graduating from Wisconsin, he headed to Pittsburgh in the early 80’s, at which point it had the third largest number of corporate headquarters in the country. However, over the 15 years that he was there, most of them left, along with the 27 steel mills.Despite this traumatic change to the city’s makeup, John credits Pittsburgh’s strong ethnic neighborhoods for maintaining their stability, low crime rates, and cohesion in a way that Detroit did not.As a young planner, working with instrumental mentors and a talented, interdisciplinary team in Pittsburgh, John learned what a broad realm of topics planning encompasses."We have to know a little about a lot of things. It’s not just about buildings and design and whatever. It’s about the economy of the city, it’s about public spaces, and it’s about transportation, and it’s about the price of housing, and all of those things. That is really the kind of mix of things we have to deal with. And that was an enormous lesson for me."From Urban Designer to Associate Director, he created strong relationships and rewrote Pittsburgh’s zoning review process. When he decided to move on, he spent some time in Rome to discern the new direction or his career, at which point a position for City Designer opened up in Seattle.Seattle:Halfway through his tenure at the Office of City Design during the late 90’s, the city started seeing significant growth. The Urban Growth boundary that the state had required of all counties since the 1990s had forced cities to think creatively on how to expand up rather than out.San Francisco:After Seattle, he was tapped to take the Planning Director position in San Francisco. He was honored to join the rich planning legacy that exists there, however, he knew it would be no simple task.He laughs that the most common greeting he received when he took the job was “Congratulations and my condolences.”Government Service:John notes that on the West coast, local government is bigger and more is expected from it, certainly when it comes to environmental sustainability.He adds that the population is very knowledgeable which gives leaders both support and push back, as seen with the NIMBY (Not In My Back Yard), anti-development movement.I’ll be honest, I think part of the aversion to change here is because this place is extraordinarily charming… It’s a beautiful city in a beautiful setting. And people are averse to change in a way that is stronger than the other settings I’ve been in.Challenges in San Francisco:John shares how the housing crisis in San Francisco is due to several factors, including:A consistent decrease in development and residential building.The extraordinary pace of change and turnaround after the recession.The Millennial and Baby Boomer interest in city living.The explosion of tech jobs.The good news is that now they are building more housing than they have in years, and are on pace to meet their six-year goal of building 30,000 housing units.In addition, he has begun diversifying the Planning Office’s responsibilities. This transformation spans duties from co-leading the city’s efforts on sea level rise to building a community development team focused on stabilizing vulnerable neighborhoods, to leading the city’s efforts on transportation planning.Planning Directors:John believes the profession has really matured over the last 30 years. While San Francisco certainly faces unique challenges, many cities are struggling with the same issues and concerns. For example, housing for the middle class is a huge issue everywhere, and transportation is a close second.Advice:John’s advice to those interested in entering the field is to get a broad range of experience in both the public and the private sector. Particularly, he says you need to try to understand the financial motivation in the real estate industry, and why developers and builders do what they do.Link:San Francisco Planning Department

A Technology FoundationFred Tuomi was born in Minnesota, and went on to attend high school and college in Georgia, receiving a B.A. in Business Information Systems and a Masters in Business Administration from Georgia State University. While working for the Computer Sciences Corporation doing consulting, Fred connected with John Lie-Nelsen of Consolidated Capital and Johnstown Properties. This opportunity led to Fred creating the very first automated, apartment management system.“The idea was, let’s use these things called computers that make everything more efficient and increase productivity… Let’s put it where we have most of our people. To really get the benefits of productivity enhancement, you have to make as many employees as possible productive, not just a few back at the home office.”When the Tax Reform Act of 1986 killed the real estate limited partnership business, Fred connected with John Williams and John Glover of Post Properties, and then eventually was invited to join Equity Residential by Doug Crocker.Equity ResidentialFred and his family moved from Atlanta to Chicago, where he became President of Property Management at Equity Residential.“We were trying to build two things. One was a uniform platform that was highly efficient… Second thing was to build a company culture.”Fred shares how Sam Zell, Founder, and Chairman of Equity Residential (see our interview with Zell in Season One of Leading Voices), influenced and shaped its culture. Under Zell’s vision for acquiring irreplaceable assets, the company’s goal evolved from a gross asset accumulation model to a highly refined portfolio and operational platform. Technology also played a critical role throughout the business, including in revenue management, allowing them to study the relationship of supply and demand in a way that hadn’t been possible before.Entering and Exiting RetirementIt wasn’t long after Tuomi retired to spend more time with his grandkids and family, that he was approached by Tom Barrack and Justin Chang of Colony Capital. They wanted his advice on translating his apartment management strategy to the single-family rental business. While many doubted that a long-term ownership and management platform for the single-family market was possible, Fred was able to bring his experience from rolling up assets in the multifamily business and over time saw the business coming together with efficiencies and metrics comparable to the apartment industry. Each asset was bought with an eye on the long-term growth of stabilized income streams which meant that with the various mergers of the Waypoint, Starwood, Colony and Blackstone Invitation Homes portfolios, the footprint didn’t just get wider, it got more deep and dense, improving efficiency. Technology in the hands of the consumer and the front line employee also made these efficiencies possible.“We are now running 2,200+ homes from one centralized property management team similar to an apartment property office. In terms of headcount to assets, we are much more efficient than the apartment business. But we have to employ a lot more technology to bridge that gap.”The Future of the MarketFred sees Millennials entering the housing market society’s increased longevity as signposts for long-term market growth, and emphasizes the importance of developers stimulating the housing supply if we don’t want pricing to increase.