As the dust begins to settle in real estate markets all over the world, firms are once again devoting resources to finding the best talent available to rebuild their brands.
While many are still nurturing wounds left over from the economic crisis, ushering in skilled individuals to lead the recovery process remains a top priority. For this reason, headhunters play a critical role in helping private equity real estate firms revitalise their businesses. Indeed, one could argue that placing the right candidates at the right companies is the first step towards the industry making a comeback as a whole.
As always, knowledge and experience in the private equity real estate space are the foundation of any potential candidate’s value to an employer. But now more than ever, highly-specialised expertise and more nuanced skills are playing a significant role in whether prospective employees are ultimately offered a position. Executive search firms are witnessing new trends in what their clients are looking for from candidates, and as a result, a new set of criteria has emerged for what it takes to be a private equity real estate superstar.
Perhaps the most basic, fundamental change to have taken place in the way firms recruit new employees is the increased amount of time and energy a company will commit to finding the right candidate.
“Two years ago clients were hiring simply to staff up,” says partner of London-based real estate search firm Redset, Andrew Wilson. “Now they will usually walk away rather than employ someone who may not fit in with the culture or work out in the long-term.” This willingness to hold out for the right individual means firms can be more selective in their search, requiring candidates to have more of a specific real estate background as opposed to just the requisite fundamental investment skills.
“There is less interest today in financial engineering and there is more interest in hands-on, real estate operational expertise, from underwriting to asset management, property management and development,” says partner at Pittsburgh-based real estate search firm Crown Advisors, John Cigna. “The potential customers that we’re talking to today, they’re looking for folks that are much closer to the real estate than ever before.”
An individual who’s got the financial skills complemented by the underlying knowledge of real estate, those guys are very, very sought after
James Mulholland, Redset
To be a private equity real estate superstar, both investment expertise and real estate expertise are needed. “An individual who’s got the financial skills complemented by the underlying knowledge of real estate, those guys are very, very sought after,” says Redset director James Mulholland.
With the sheer volume of troubled loans hanging over GPs today, search firms agree skilled credit analysts and restructuring specialists are in much greater demand. “We’re going to be talking about people who have skills in restructuring loans and debt, who know something about the debt side,” says head of global real estate at executive search firm CTPartners, Martin Nass. “And there’s been a big demand for technology people. Chief information officers seem to be more in demand.” Additionally, with an increasing number of firms having to deal with CMBS workouts – and eyeing the space for deals – knowledge of commercial mortgage-backed securities is also becoming an increasingly valuable skill set.
Follow the leader
The single biggest trend observed by search firms today is a rise in the demand for individuals with strong leadership qualities. “Candidates need to understand the financial and analytical side of the business, but as important to an employer are their leadership skills and whether they have the ability to help build the business and take it forward,” says Redset’s Wilson. “That’s exactly what clients are looking for.”
You want to hire the door-opener, the person who has key relationships in the market and who can lend their name to the business
Emily Bohill, Bohill Partners
As firms look to re-establish themselves in the wake of the credit crisis, senior-level executives – now more than ever – must have the ability to lead with confidence as they steer their companies back towards growth. “Beyond whether you can originate or underwrite a deal or whether you can be an effective asset manager, which are all very critical, there’s also the ‘Can you not only survive but thrive and add to the growth of our platform because of your interpersonal skill set and leadership capabilities?’” says Debra Barbanel, co-head of real estate for the Americas at search firm Russell Reynolds Associates.
“You want to hire the door-opener, the person who has key relationships in the market and who can lend their name to the business,” says founder of London-based search firm Bohill Partners, Emily Bohill. “Individuals such as this really pay for themselves through the opportunities they create and the value that their experience adds to the business. Where I’ve seen more attention paid is towards leadership, and the value and strength of people’s relationships.”
Another reason leadership and relationships are emphasised today more than ever has to do with the necessity to inspire confidence in investors, even during periods of economic upheaval. “It’s gone from, ‘Yes, you can raise equity in a good market, but can you do it in a bad market? Can you still originate deals when things are tough?’” says Wilson. “If they can still do that in the bad times, those are the guys that have been recognised and rewarded over the last couple years.”
Distinguishing between a successful candidate and a superstar candidate requires analysing an individual’s track record during previous cycles. When hiring someone to start a new chapter in a firm’s history, companies will look for candidates that have maintained relationships through past downturns.
Key questions to ask, according to Bohill, include: If an individual is joining a GP, will the LPs know of them? Can the individual demonstrate a solid track record? Has the person invested wisely over the years? What returns has he/she delivered? When the going got tough, did they communicate well?
Because establishing trust requires demonstrably strong communicative skills, complete transparency is a quality that headhunters emphasise as being essential for successful candidates. “The placements occur because of strong communication,” says Cigna. “When someone is not being candid up front or you just feel they have another agenda or they’re hiding something, you get to wonder, what else aren’t you telling me? We like to deal cards face up, so transparency is key.”
Culture and references
Another trend observed by search firms today is an added emphasis on the personal characteristics that make candidates good matches with companies’ cultures.
“Through the bull years, people were hiring to bulk up their teams in order to meet the demands of the market, and not enough attention was paid to getting both technical and also cultural fits right,” says Bohill. “More than ever, companies now realise that one out of these two factors is not enough and that great hires must tick both boxes.”
You may be the best deal person in the world, but if you have sharp elbows, you won't last long in an average or poor market
John Cigna, Crown Advisors
Being a good cultural fit, according to one executive search marketing and brand director, means truly understanding a firm’s brand vision, so that new hires can represent a company in the most accurate way.
In today’s environment, firms have to be concerned about how well candidates work with others, rather than just how many deals they can generate. This is part of a wider shift seen by executive search firms of companies focusing both on personal skills as well as transactional skills. “You may be the best deal person in the world, but if you have sharp elbows, you won't last long in an average or poor market,” says Cigna. “We all spend so much time in the office that getting along and enjoying the people around you means more today than five years ago.”
Personal references, always a critical component of the search and assessment process, are relied on now more than ever to solidify assessments of candidates, and often times can act as the deciding factor that influence final decisions.
“We reference very, very tightly, more so today than ever before” says Nass. “[Candidates] will get beat if they don’t have strong references.”
Indeed, without a rock solid reference from a trusted source, it is becoming increasingly more difficult to secure high profile positions. “If I were to look back on my search work and say, ‘What is often one of the most compelling reasons a candidate secures that first place position, it’s because that candidate has a reference that we at Russell Reynolds know and respect and with whom the candidate has worked with closely, preferably in the same organisation,” says Barbanel.
Still, Redset's Wilson reinforces the idea that the search process comes down to more than just someone vouching for a candidate. “Comprehensive referencing is a critical part of recruiting,” he says. “But the reality is that all the parts of the process very much work together to filter out unsuitable candidates.”
In the end, the thread that ties together all the components of what makes someone a private equity real estate superstar is simply success working with other people. Redset’s Wilson sums it up nicely: “It all comes back to relationships.”