Where are the female founders in private real estate?

Lanhee Yung has worn many hats during her long career in private equity real estate: co-founder of New York-based manager Sagehall, which she launched in 2020 with former Westbrook Partners executive and fellow Cornell University alumnus Sush Torgalkar; managing director and global head of fundraising and investor relations at Miami Beach’s Starwood Capital, where she worked for 10 years; and “the Women’s Tea Lady,” referring to a networking event she established and has hosted for female industry professionals since 2005.

At the most recent Women’s Tea, held in Seattle in March, the theme of the panel was female founders. “At the end of the talk, somebody on the panel asked the question: how many people in this room would like to start their own firm? Only one hand went up, out of around 250 women,” recalls Yung. “I was shocked. We had just finished our chat, so that should have been the moment where people felt inspired to do it. But instead, it was the opposite.”

The scene Yung depicts is a stark reflection of the wider private real estate industry. Indeed, PERE data shows female-founded or co-founded real estate firms are responsible for just 2 percent of the $3.12 trillion in capital raised for private real estate funds since PERE began tracking the industry. In addition, of the managers in PERE’s 2023 ranking of the 200 biggest capital raisers in the industry, only six were founded by women. 

In an established industry with a tried-and-tested blueprint for success, why are so few women forming their own investment firms? And why are so few women-owned firms reaching the top tiers of success? After all, women represent approximately 37 percent of the workforce in commercial real estate, as per the 2020 Benchmark Study from the CREW Network – a percentage that has changed little in 15 years – and the superior performance of funds with diverse leadership has been widely proven. To peel back the layers behind this deep-seated and complex dynamic, PERE spoke with female founders across the globe. 

Controlling the balance

All the founders took great confidence and inspiration from the women who had laid the path before them. But one name, in particular, was cited more than most. 

Deborah Harmon co-founded Artemis Real Estate Partners in 2009 with Penny Pritzker, the former US secretary of commerce. As co-CEO of the Washington, DC-based firm, she has since overseen more than $9 billion of capital raised, including $2.2 billion for the most recent flagship Fund IV, which closed in June this year.

When Pritzker first called her in 2007 with the idea of starting a firm together, Harmon had just retired from a fruitful career after 17 years at JE Robert Companies, most recently as president for the last decade. It was not the right time given the market, she recalls. Her retirement turned out to be a sabbatical, however, when during the global financial crisis in 2008, Harmon gave Pritzer a call back. 

“I felt like when you saw me coming, many investors or consultants saw a risk”

Tammy Jones
Basis Investment Group

The launch of Artemis at a time of few women-led real estate businesses blazed a trail for others to follow, and yet Harmon wishes she had started Artemis earlier in her life. “I had always wanted to start my own business, but my family was the priority,” she says. “My husband had a very demanding job too, and I believed the demands of starting a new business while raising a young family would prove too overwhelming. I didn’t want to start a business in the investment management space, where you are a fiduciary first and foremost, until I could allocate all my time and make it my top priority.”

Harmon believes the question of timing is a greater consideration for women. “I don’t think the debate that was going on inside my head goes on inside of men’s heads. I think if they have an opportunity to start a business, they start the business.”

That said, Sabine Schaffer, who co-founded Sydney-headquartered hospitality and build-to-rent specialist Pro-invest Group with Ronald Barrott in 2010, is proof that it need not hold women back. “I decided to start Pro-invest almost at the same time as starting a family. I was pregnant during my first fundraising,” she explains. “There is never ever the perfect time. Do not let yourself be held up by that if you have a strong conviction about an idea.”

For one founder, who asked not to be named, improving the work-life balance was a key motivator in her decision to set up a firm in the first place. Citing the challenges of managing across multiple time zones together with children at home, she left her senior role in a global firm to found a US-only business. She says this gave her more control over the allocation of her time between personal and professional. “I didn’t want to be an owner in a large pool, because I wanted to be able to influence the company, and I wanted to be able to control that company’s influence on my life. Why women don’t found companies now so that they can do exactly that, I don’t know.”

One reason for this could be a woman’s fear of losing what control she already has. According to Ghada Sousou, CEO and co-founder of real assets executive search and advisory services firm Sousou Partners, women are more loyal to where they work. “It takes us much, much longer to extract a woman from her role, because she places a lot of importance on relationships and how she’s been treated,” she says. “It’s much more difficult for her to leave if she is treated very well. I think there’s some guilt involved, too.”

Being the brand

Such feelings of loyalty tap into what Sousou describes as women’s tendency to believe in themselves as part of a group. “At the risk of overgeneralizing, women tend to shy away from taking full credit for their achievements when compared to their male counterparts,” she says. “This can in turn affect their perception of the risks involved in going out on your own, which requires full confidence in your own abilities separate from those of the wider team.”

2%

Proportion of total capital raised for real estate funds accounted for by women-founded firms, per PERE data

1.7%

Proportion of US-based real estate assets under management held by women-owned firms, per 2021 Knight Foundation research

For Schaffer, she gained the confidence to partner with Barrott and set up Pro-invest through building a track record that was more clearly her own. “When you work for one of the big companies, a lot of people talk to you because of the branding on top,” she explains. “But when I worked for a couple of years for a very small Middle Eastern private equity company, it wasn’t the company’s brand name that was enabling the successes, it was me.”

One might argue the industry needs more time to produce enough senior women with track records strong enough to support the leap to founding a firm. Indeed, only 9 percent of women hold C-suite positions, as per the CREW Network report – a figure unchanged since the association’s 2010 study. Even so, industry perceptions are hard to shift.

“Throughout my career, I had great male mentors and great male partners and bosses, and I was typically the number two,” says Harmon. “However, founding Artemis is what allowed me to see that maybe we were getting access to capital because the number one was male.”

She recalls her experience raising her first fund at JE Roberts in 1996. Despite having no track record as a fund manager or an institutional fiduciary, a new team and $10 million of GP commitment, the firm attracted $435 million for the fund in less than a year. 

Fourteen years later, however, when raising Artemis’s maiden fund, it took 22 months to secure $436 million in the aftermath of the global financial crisis. Harmon says she and Pritzker called 225 investors to find 11 “courageous” institutions that invested. They also felt the need to be the largest investors in the fund. “We wanted to put our money where our mouths were, and alignment of interest was a very important foundational value for us. So, we put up $50 million of GP equity.”

Artemis Real Estate Partners I went on to generate a 23 percent IRR, 700 basis points above target.

“Capital raising was a challenge in the beginning, in part because of the market, but also I think there is an almost unconscious perception that being different is a risk,” says Harmon. “Proving that difference is a strength and not a risk? That was my challenge. Thirteen years later, Artemis’s performance is proof we achieved just that.”

Daring to be different

Fear of difference in this industry, and the role it can play in access to capital, extends beyond gender, too. 

According to 2021 research by the Knight Foundation into the US asset management industry, only 1.8 percent of real estate firms are owned by racial or ethnic minorities, which is the lowest proportion of any asset class. This proportion dips even lower, to 1 percent, for assets under management. For women-owned firms, the proportions are only marginally higher, at 2.8 percent and 1.7 percent, respectively.

“Proving that difference is a strength and not a risk? That was my challenge”

Deborah Harmon
Artemis Real Estate Partners

“I saw so many white males roll out of investment banks, hang a shingle and then go raise $500 million the next day,” says Tammy Jones, the African American founder of Basis Investment Group, a real estate lender and equity investor, in 2009. “It’s hard for first-time funds, but it’s particularly hard for women and people of color.”

When looking for capital to partner with starting out, Jones faced a string of rejections, despite targeting family offices that she had worked with in her previous role building a $6 billion platform at CWCapital, a subsidiary of Canadian pension plan Caisse de dépôt et placement du Québec. 

“I felt like when you saw me coming, many investors or consultants saw a risk. I had to try to figure out how to de-risk myself, just like when I’m making an investment. I looked at the mitigants and made sure Basis had a track record before going out with the first fundraise.” 

As such, it was not until 2017 that Basis launched debt fund BIG Real Estate Fund I, which closed on $410 million in 2019. “I can trace every dollar in my first commingled fund to a woman or a person of color in some leadership position in the chain,” says Jones. 

In addition to an investor and consultant community more accustomed to dealing with white men, a female founder faces another major obstacle in building her business: the homogeneity of networks in an industry reliant on personal connections and trust.

“In real estate in general – and the lending side is definitely a poster child for this – folks do business with the ‘boys club,’” says Jones. “It’s hard to break into that because people are used to doing business with who they are used to doing business with.”

For Rachel Renucci-Tan, an entrepreneur who founded China-focused real estate manager TAN-EU Capital in 2009, this boys club was an overt reality. “Doing business in China, if you’re not male, then you can’t go out drinking. The second half of the evening becomes impossible for a woman, so you have to go home. But if you are male, that conversation goes on, and that’s where a lot of business is done, in those after-dinner conversations that I cannot access, even as the owner of my company.”

As a Chinese-Filipino woman with a real estate background working in London and Paris for firms like Macquarie Capital Advisors and Société General Asset Management, Renucci-Tan observes that gender bias is more subtle in the West, but says even in the UK and France she needed to work much harder to be seen and heard. 

After TAN-EU had raised, realized and exited a €200 million fund – which was structured in a €400 million JV with SOCAM, a subsidiary of Chinese developer Shui On Group – Renucci-Tan made the decision to leave real estate altogether. In 2016, motivated by the destruction caused by Typhoon Haiyan three years prior, she moved back to her native Philippines to found a sustainable agriculture business aimed at boosting the production of rice in a country heavily reliant on rice imports. 

She encourages women, immigrants and people from the diaspora to see their differences as their biggest assets. “I see trends, I see patterns that I believe someone more socially integrated would not necessarily see with the same kind of passionate discernment.”

Ignoring the naysayers

Even as they faced obstacles in a male-dominated industry, the founders PERE interviewed also experienced a lack of support from other women. “Any female who is choosing to found a company has heard plenty about why they shouldn’t, and why they won’t be successful, I guarantee that,” says the founder who asked not to be named. 

“We seem to be warning every woman that it’s going to be hard, that you’re going to get mistreated or that not everybody is going to support you. But why are we saying that? I have gotten so many warning messages all throughout my career – thank God that I just don’t listen.”

When Yung reflects on that Women’s Tea in Seattle, she senses a reluctance among women to appear too ambitious in front of others. “Afterwards I received a few emails from people who told me they had thought about it but were afraid to raise their hands. I think there’s a little bit of that gender bias even among ourselves.” 

Ultimately, however, these female founders were unphased by the warnings of others and took a leap of faith during challenging times. Indeed, Harmon, Jones, Schaffer and Renucci-Tan were all prompted to start their firms by the transformative events of the GFC. For Yung, it was covid-19. 

“Even for myself, I don’t think I was ever going to say I was going to start my own business, I was just going to do it,” she explains. “Without the pandemic, I wouldn’t have had that catalyst. Until the market changed, it was never going to change.”

With the private real estate cycle continuing on a downward trajectory,  Yung could see more hands raised were the female founders question asked again soon.

Financial firepower

Paying women more will enable a new generation of female founders

“When you start a private equity firm you have to hire people and pay them before there is any revenue, so you have to be able to find the funding for that,” says Sagehall’s Lanhee Yung. “There are groups that do that, but when you’re working all day with your head down, you’re not looking for the funding.”

Yung stresses pay parity is thus one of the most important factors for would-be founders. If women are paid more, there will be more women financially able to start their own firms. “Everywhere you can, promote women, pay them better than they think they should get paid,” she says.

According to Sousou Partners’ Ghada Sousou, remuneration for senior women in real estate has greatly increased in the past five years amid rising demand from investors looking to invest with diverse teams. “A strong senior female investor is likely to be more targeted than her male counterpart today as funds look to balance male/female population. You could even argue that she may achieve a stronger offer than her male counterpart, if for no other reason than supply/demand forces.”

As compensation practices improve, at least for senior women, Yung’s best advice for budding founders is to save as much money as they can. “I always felt like this is what I was saving for.”