In an industry that revolves around the next big deal, the next big fund and the next big exit, it is only natural that private equity real estate firms put a lot of time and effort into the next big hire. Attracting talent is one of the quintessential aspects of running a good firm, and every shop has an individual approach to conducting that process.
Some teambuilding issues transcend a firm’s idiosyncrasies, such as retaining increasingly transitional junior team members or finding senior professionals that will fit the firm’s culture and contribute in a major way from the start of their tenure. However, what firms are looking for varies greatly and depends most upon their individual nature and the stage of their evolution.
Firms such as The Carlyle Group’s Metropolitan Real Estate Equity Management, Heitman and Paladin Realty Partners have had to adjust their hiring styles as they grow while simultaneously remaining competitive in an ever-expanding industry. Each has its own expectations for the ideal candidate, as well as its own ways of finding and keeping them.
Below, PERE presents approaches to bringing in fresh talent from the perspective of three different firms with different stories to tell.
The arm of the big private equity firm
Metropolitan Real Estate underwent the greatest change in the firm’s history this past year when it was acquired by The Carlyle Group in September. The new ownership has influenced some changes to the recruitment process at the real estate multi-manager, but president and co-chief investment officer David Sherman still looks for three basic traits in any candidate: deep experience, a fiduciary mindset and personality fit, both with Metropolitan and with Carlyle.
Sherman notes that the second characteristic often is the hardest to find. “It’s not easy to find people that put investors first but are entrepreneurial enough to create investment flow,” he says. “We’ve been lucky in putting together a team, but that’s a tough skill for which to recruit.”
Metropolitan has found it easy to come across personalities that fit well with both its own hiring approach and with Carlyle’s. “What we found becoming a part of Carlyle is a group of very bright, very hardworking people that are more welcoming than any large firm I’ve ever worked for,” says Sherman. “Finding people who are collaborative, friendly and bright is easy; it’s a combination of high aptitude and low ego. That works well at Carlyle.”
In response to the industrywide issue of recruiting and retaining junior team members, Metropolitan is expanding its methods of finding young talent. “We’ve used headhunters, we’ve used business schools and we’ve taken on people as summer associates during business school to take a first look,” says Sherman. “There are many young people available, and a lot of them are very bright and have good resumes. Some of those people are amazing employees, and some are just built with good resumes and wind up moving on.”
In contrast, over the past 12 years, none of the members of Metropolitan’s investment committee have left the firm. Sherman says the resulting continuity is invaluable for Metropolitan and that the stability is founded on a joy of coming to work – something that he looks for in any senior hire.
“I’m a huge believer that people at a senior experienced level don’t go to work for the incremental dollar,” Sherman says. “They go to work because they find it interesting, challenging, rewarding and they feel good about succeeding and doing a good job. If you have to buy them, they’re the wrong people.”
Metropolitan traditionally has used word of mouth to find veteran additions to the team, as well as small independent headhunters, which Sherman finds do a more thorough job than the bigger recruitment firms.
Sherman believes a personal approach is essential in understanding candidates. “Where I’ve seen turnover in the industry usually hasn’t been when someone misunderstands a track record or a set of deals. It’s when they misunderstand the individual and there’s not a commonality of interests or a desire to be there,” he says.
The regionally-focused fund manager
Since 1995, the team at Paladin Realty Partners has increased from two members in Los Angeles to more than 30 people in six offices today, including four offices in Latin America. As the firm continues to evolve, the real estate fund manager has been adding to its Latin American team.
“When we started, there wasn’t the depth of talent in Latin America that there is today,” notes Fred Gortner, chief operating officer at the firm. “We had to hire and train people in Los Angeles and move staff down to the region.” Now, however, two-thirds of Paladin’s investment staff is based in Latin America and all of them originally come from the region.
Gortner notes that there is no greater skill than direct real estate development and operating experience when working in Latin America, which all of Paladin’s country heads and senior staff currently have. “That has been an important shift in Paladin’s staffing over the years,” he says. “We’re really emphasizing hands-on real estate experience for anyone new who joins our team.”
Furthermore, Paladin looks for people who speak the language and understand the culture and who have local market knowledge and local relationships. “As the talent pool has grown in Brazil, Mexico and the Andean region – the markets we’re now most active in – we’re able to find those kinds of people in these countries,” adds Gortner.
Paladin has not encountered a widespread challenge with retaining junior team members, rather Gortner acknowledges that some young people will phase out of the firm in a natural progression of their careers. For example, the firm typically hires two-year analysts in temporary positions, some of whom leave to go to business school and others depart after they realize they would rather not focus on Latin America in the long run. “For that, we don’t mind,” he says. “It’s inevitable to have some turnover when you have 30-plus employees, and it simply means we weren’t the career fit for one another.”
When sourcing senior talent, Paladin only employs headhunters in rare situations. The firm relies almost exclusively on referrals when it cannot hire from within, finding it easier to judge if a candidate will fit into Paladin’s culture.
In order to retain senior additions, Paladin offers opportunities for employees to advance their career paths from within. The firm encourages and often pays for professional development, whether that is training for a particular job skill or an advanced degree or involvement in the Urban Land Institute or other trade organizations.
“Talent is the single-most important asset for a firm like ours,” says Gortner. “We’re only as good as the individuals that we hire and the judgment and experience that they have.”
The dedicated global real estate firm
Since Heitman began in Chicago in 1966, the firm has grown from a regional mortgage loan originator and servicer to a multinational leader in real estate equity, real estate securities and real estate debt. “Anyone that has tried to grow a business and add resources all over the world understands that talent is one of the most complex and important aspects of success,” comments Maury Tognarelli, chief executive officer of Heitman.
As the firm expanded, Heitman naturally had to evolve its process for selecting new professional talent. In its earlier days, Tognarelli notes that he had the luxury of participating directly in every hire. “It’s much different when you’re a global organization with multiple disciplines and you have multiple roles and functions that are trying to be satisfied at any point to meet your business plan,” he says.
In determining its human resources strategy, Heitman examined what made the firm successful in attracting and retaining talent in its earlier days. It then trained more personnel to have the tools to add new ‘DNA’ to the firm in its 11 offices worldwide.
Heitman employs multiple tactics to find junior members, including visiting universities and looking at a vast group of candidates through traditional recruitment methods. “We’re going through the same basic screening methodologies for lower positions,” says Tognarelli, noting that Heitman recruits for such traits as strong leadership, strategic thinking, problem solving, adaptability and, ultimately, integrity.
Tognarelli believes that one aspect of retaining senior level team members is knowing that other firms might try to pursue them. When that occurs, as it often does in the industry, the strength of a firm’s culture and its connection to its employees is tested.
“You have to recognize that one of the consequences of achieving your business plan is that other firms will view your intellectual capital attractively,” Tognarelli explains. “Your goal as a leader is to have your professionals look at their current role and career path and make the choice to not be interested and to stay. They do that because that’s what they want to do, not because they have to do it. That, to me, is really what you strive for in building an organization.”