The lack of diversity in the real estate management industry is stark. Just 16 percent of executive managers are women and 6 percent are non-white, according to the 2019 Diversity & Inclusion report by industry association NAREIM.
Alisa Mall, managing director of investments at the philanthropic foundation Carnegie Corporation of New York, revealed that one of the organization’s top priorities is to add diversity to their portfolio.
“We have actually gone as far to say we are far less likely to add a new manager to the portfolio unless there is a meaningful diversity component to their firm,” Mall said in NAREIM’s Investor Perspectives in Diversity & Inclusion report published last week.
Although the foundation will continue to support existing managers, Mall stressed that this diversity and inclusion criteria will be included in Carnegie’s underwriting going forward.
“We evaluate all our managers on diversity,” said Mall. “And you definitely get credit if you are demonstrating it’s something the firm values.”
She added that the investor did not have a strict percentage in terms of what constituted a diverse manager. “However, we do like to see a diverse person in the ownership structure. We do care about them having a seat at the table and a voice in decision making,” Mall said. “Beyond ownership, we also want managers to have teams that reflect diversity at all levels of the organization.”
Mall added that the foundation has made diversity a focus because it invests with some managers that are highly valued but are not diverse at all: “We’re trying to act as a sounding board for them.”
To help managers transition to becoming more diverse, Carnegie has spent a lot of time talking with firms about changing hiring practices, including where they are sourcing new talent and whether they should be considering other sources for candidate pools. “It’s about broadening minds to the concept that somebody may not have the exact background you thought you needed, but understanding that somebody with a different background could bring something equally valuable and perhaps unforeseen to the role in a really positive way,” she said.
Out of the comfort zone
To make a commitment to diversity, however, managers must be “willing to step out of their comfort zone, to try to connect with somebody who maybe they wouldn’t naturally, and to adapt their culture so that the person can be successful.”
Mall noted that of the students that participated in a real estate summer internship program organized last year by the PREA Foundation and the non-profit organization Sponsors for Educational Opportunity, 15 percent said they would not return to the place they worked. The reason was because they did not feel welcome or comfortable in the company culture. “They said: ‘There was nobody in senior management that looked like me,’” she added.
Ultimately, promoting diversity involves a “combination of addressing the selection bias and the unconscious biases that we all have, and then also pushing yourself and challenging yourself on the bias front,” said Mall. “Our CIO pushes our team to examine our own biases and think about how we, as an investment team, can actively try to mitigate them in our decision-making processes. We want to encourage our managers to do the same.”