New Beginnings: Industry Leaders Discuss Major Career Moves
It’s an exciting time in New York City commercial real estate: New companies are forming, veteran firms are expanding service lines, and merger and acquisition activity is creating even larger real estate powerhouses.
It’s no secret that integrating with another firm or starting a new company has its opportunities and challenges. We convened Heritage Partners founder and CEO Toby Moskovits, Lend Lease executive general manager of New York Melissa Burch, and Cushman & Wakefield president of New York Investment Sales Paul Massey at our Real Estate Dealmakers Forum for a panel entitled “New Beginnings,” where EisnerAmper partner Lisa Knee discussed what prompted these leaders’ career changes.
Moskovits had roots in family office advisory services and got involved in real estate toward then end of 2008, when some of her firm’s private investment clients found themselves with money stuck in real estate development, much of it in North Williamsburg. Over the last couple of years, Heritage has shifted its business solely to really estate, then ultimately into development focused on residential, hospitality, and office (including the first spec office building in that part of Brooklyn since 1920).
What got Moskovits into real estate while others were running away? Many people around her had a legacy of problems, like capital shortfalls, but she had the benefit of coming in with a fresh perspective. While fundamentals were still the same, she says, there was no liquidity in the market, and the traditional 70% to 80% leverage did not exist. But having come from private equity and venture capital— where everything was built from scratch—she had no trouble looking at a blank canvas and understanding that traditional structures of financing weren’t going to work.
She says the in the first couple of deals she took over, she was working with 50% leverage, which was unheard of. Most of the developers around her “couldn’t wrap their heads around the price I was paying for my debt, but the land was so cheap that ultimately it didn’t matter…. If you trust yourself and you trust your gut, it allows you to do things that other people aren't going to do because it's against conventional wisdom.”
Burch had previously spent 12 years at Forest City Ratner, bringing life to Atlantic Yards and other projects in the company’s Brooklyn portfolio. At Lend Lease, she’s not only transitioning herself, but the company as well by building its development business both in NYC and the U.S. "I like to say my mandate at Lend Lease is really to create a start-up business that's attached to a big corporate engine," she says.
What many people don’t know about Australia-based Lend Lease is that it’s a large, global company with 16,000 employees. While recognized in the U.S. as a builder, that’s a much condensed identifier for who Lend Lease is elsewhere, she says. It actually has four business lines: development, construction, investment management, and infrastructure, with a $40 billion development pipeline and a $20 billion construction pipeline. The company recently announced its first development project in NYC; a 140-unit condo tower at Fifth and 30th in a JV with The Victor Group.
What attracted Burch overall was the opportunity to work on large, urban regeneration-style projects like Atlantic Yards, creating master-planned, multi-phased developments and developing across all asset classes. Working in a co-development relationship with Shanghai-based The Greenland Group at Atlantic Yards had opened her eyes to a whole world of real estate, “and that the universe was in fact much larger than I realized.” The challenge, she says, will be finding the sites needed for such projects.
Massey was previously CEO of Massey Knakal, a 26-year-old brokerage firm that represented owners of investment properties in sales, debt placement, and retail leasing. He and chairman Bob Knakal were unified in wanting to have a liquidity event, whether someone came in as a 49% partner or an outright 100% acquisition of the company. They went to market with the company the first week of October 2014, and Cushman & Wakefield closed on the full acquisition December 31.
The 250 employees who came from Massey Knakal and the 16,000-strong C&W are now “happily integrating away,” he says. The sale of the business was about the culture and fit, he says, and C&W definitely had a hole in the donut as far as capital markets went. There’s been a lot of cultural feedback, he says, “and what they can teach us and what we can teach them is powerful.”
The acquisition also “opened up a big world for us,” Massey says, recalling a trip he took to Shanghai with C&W investment experts two days after the deal closed—and he had never been to the East before. “The capital flows from East to West are going to be big and going to affect everyone here in a good way,” he says. Moving forward, C&W has identified 25 foundation cities globally, and a big part of its strategic plan is to grow the capital markets business in those foundation markets. “It will be really fun for us to have a hand in that,” he adds.
Massey believes this trend of mergers and consolidations will continue because, at some point, big firms can no longer move the needle through team, individual, or business line acquisitions. It’s an exciting trend that EisnerAmper continues to explore.