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Women Lose Ground in C-Suite

Some 20% of female executives exit top jobs as recession devastates portfolios.

It has been a brutal year in the C-suite, where women executives of commercial real estate-related firms have endured major setbacks after their long climb to the top. Across the country, as company revenues and the value of portfolios have plunged, businesses have slashed payrolls, at times dropping entire divisions.

An estimated one in five women executives has lost her job over the past 12 months in an industry where women already were underrepresented at the highest levels, says Gail Ayers, CEO of the Commercial Real Estate Women (CREW) Network, an 8,000-member organization based in Lawrence, Kan.

Chief financial officers and attorneys, including senior partners at prestigious law firms, have been particularly hard hit, says Ayers. “Outstanding women have lost their jobs this year. When we struggle to get women at the top, it's devastating to see them cut. There are so few in those positions that it's absolutely painful.”

Women have not been singled out, but because they represent a smaller pool at the chief executive and chief operating officer level, they may be suffering more than men as a group, says Tony LoPinto, CEO of New York-based executive search firm Equinox Partners.

In 2008, the Building Owners and Managers Association, based in Washington, D.C., estimated that more than half of its 17,000 members were women, but only 5% of member CEOs were female. Only three of the country's 169 publicly traded real estate investment trusts were run by women in 2007, CREW reported.

But patterns are slowly changing. Los Angeles-based CEL & Associates reports that by 2014, women are expected to represent 43% of commercial real estate professionals, up 6% from 2008. By 2020, women could occupy 40% of C-suite positions.

Over the course of the recession, though, companies have retrenched at the C-suite level, says LoPinto. “The effect on organizations has been so significant that women have lost ground.”

In his 35 years associated with the commercial real estate industry, nothing compares with the severity of today's recession in causing job and revenue losses, he says. Women and men alike are caught in the riptide, and developers, finance and lending professionals have swirled into joblessness.

Some economists say the country is poised for recovery, but LoPinto expects few gains for women in 2010. “It's going to be difficult for women to make any material progress until we get back into a full growth cycle.”

As the number of executives has shrunk, so has the size of paychecks. In June, a new survey by Chicago-based research firm FPL Advisory Group showed that total compensation for C-suite real estate executives dropped by nearly 20% in 2008 compared with the previous year.

CREW has contracted with Cornell University to conduct a survey in 2010 comparing pay between women and men. CREW's 2005 report showed that 58% of men in commercial real estate reported income over $150,000, but only 24% of women earned as much. Three times as many women as men earned less than $75,000.

Apart from pay levels and executive losses, an issue that cropped up during the recession relates to the high level of restructuring and distress in portfolios, says Ayers. A number of CREW members have alleged that female financial officers or corporate attorneys who present unpopular deal restructurings to resolve distress situations, including properties under water, are dealt with more harshly than their male counterparts and more often lose their jobs, Ayers says.

“The woman who brings that deal to the table with the same options that a man brings, tends to get no support. There's a feeling across the board that the expectation is different for guys than for the women, and that women have to perform extraordinary feats to continue to be held in high esteem.”

A new beginning

Chicago-based executive search consultant Sharon Krohn deals with the aftermath of downsizing, as a stream of laid-off developers, brokers, lenders and architects come to her for help. “There have been furloughs, but more straight out downsizing and elimination of whole lines of business.”

Clients learn to move from the old, pre-recession economy to new positions. For example, a woman who worked for a developer can use her financial skills and portfolio knowledge to help a bank process foreclosed properties.

One response to bloodletting in the workplace is that countless women are starting their own companies, creating niches and becoming their own bosses rather than endure the caprices of corporate life. Owning a business is a way to keep more of the revenue they generate.

Tanya Little was chief operating officer of the U.S. mortgage capital business at RBC Capital Markets, Royal Bank of Canada's investment banking division.

She led the team that developed the strategic plan for a lending unit that originated $2.3 billion in commercial mortgage-backed securities (CMBS) in its first year. But as lending evaporated and CMBS was shunned, her unit was eliminated.

“Everyone who worked on [the CMBS unit] was laid off. It was just like every other bank and lending institution out there. There are many products that are not sold anymore,” says Little.

In October, she and her twin sister, Angel Benschneider, co-founded Dallas-based Hart Advisors Group, which manages assets of 3 million sq. ft. of commercial space and is growing its client base.

Next Page: Leaders pilot rough seas

Laid-off workers also are being recruited. After a decade with a Detroit-based law firm of 250 attorneys, Meg Van Meter lost her job when the firm trimmed its real estate department.

Barely 10 days after she wrapped up her work, another firm came calling. In July, Van Meter, who is adept at closing retail and industrial transactions, became senior counsel in the Southfield, Mich. office of law firm Warner, Norcross & Judd, based in Grand Rapids, Mich.

Van Meter used the tumultuous downsizing period to earn the Leadership in Energy and Environmental Design (LEED) professional accreditation from the U.S. Green Building Council. She did so because an increasing number of commercial tenants demand green buildings.

Meanwhile, she networked at conferences and took time to define her strengths. “I worked intently on a business plan that's very effective for me,” she says. “I feel like mine is a success story.”

Leaders pilot rough seas

Women who have held on to leadership posts are making painful decisions as they steer their firms through the rough waters. Lauralee Martin, chief operating and financial officer of brokerage Jones Lang LaSalle (JLL), directed massive layoffs. The company reported a net loss of $14 million in the second quarter and a year-to-date loss of $76 million through June. “We've laid off over 1,400 on a global basis,” says Martin.

But downsizing has pitfalls. “If you cut costs too much or wrongly, you destroy your business value. If you do it the right way, you can make yourself stronger and more competitive,” says Martin. Recently, JLL issued $200 million in common stock to bolster its balance sheet.

“Lauralee Martin has done an excellent job. She's an extremely capable leader,” says senior analyst Will Marks of San Francisco-based investment bank JMP Securities. In 2008, JLL merged with Dallas-based brokerage Staubach Co. in a deal valued at $727 million. “Despite making one of the largest acquisitions in the sector, the company has maintained a safe balance sheet,” says Marks.

Among other nominees for National Real Estate Investor's 2009 Outstanding Women in Commercial Real Estate is Faith Hope Consolo, chairman of the retail leasing and sales division at Prudential Douglas Elliman in New York City, where she heads a team of 28 people.

Consolo played a key role in transforming sections of Manhattan, bringing new retailers to Fifth Avenue, Madison Avenue and Times Square with a facelift costing more than $15 billion.

But the credit crisis has scuttled many deals. In one recent case, a major retail group completed an expansion plan and arranged for bank financing. “Then the bank reneged on the buildout.”

Still, like other leaders in commercial real estate, Consolo remains indomitable. “You make the deal, and you remake it again and again.”

Denise Kalette is senior associate editor.

Next Page: Attorney Wells Rescues Troubled Investments

Attorney Wells Rescues Troubled Investments

By Denise Kalette

With $1 billion in troubled investments at stake and a hornet's nest of current legal troubles buzzing, the attorney that a major institution chose to be by its side was Amy Wells, a partner at Cox, Castle & Nicholson in Los Angeles.

Her clients represent an A-list of the country's largest pension funds, from the New York Common Retirement System to the California Public Employees' Retirement System to the California State Teachers' Retirement System, as well as groups in Wisconsin and Arizona.

She helps clients acquire commercial real estate assets and dispose of them. When they are in trouble, she comes to the rescue. Currently, Wells is examining distressed investments made by funds in an effort to salvage them by renegotiating or restructuring the terms.

“The dollar size can be staggering because of the size of their investments,” she says. In some cases, real estate portfolio developers or other major participants are headed toward bankruptcy.

While it may sound mundane, a critical service she provides is the ability to advise clients on what is normal and acceptable at the negotiating table. That becomes essential when a financial adversary tries to convince her client that certain deal terms or practices are “normal.”

Several pension funds have suffered steep declines in the value of their portfolios in the wake of the global economic meltdown. Although most giant funds are strong enough to maintain their core portfolios, many no longer can provide earlier levels of cash flow.

Meanwhile, investors, including institutions, are prowling for buying opportunities, and the distressed assets make attractive targets. Those owned through a joint venture also present an opportunity for the healthier partner to buy out the weaker one at a discount.

Wells aggressively protects clients, while allowing deals to proceed. She was recently appointed a special attorney general for the State of Washington related to her role as legal counsel to the Washington State Investment Board.

Texas Entrepreneur Turns Modular Model Into Gold

By Denise Kalette

When Gail Warrior-Lawrence first laid eyes on modular buildings more than 20 years ago, a light bulb popped on. She knew she could turn the unimposing prefabricated wood panels into a sturdy and appealing new model for cost-conscious construction, if given a chance.

Now, as president and CEO of Warrior Group, a modular development firm based in DeSoto, Texas, she builds school structures and housing for the military.

A building at Fort Sam Houston so wowed a military official with its brick exterior and detailed interior that he suggested she call it a hybrid, not modular.

The firm's revenue zoomed from $15 million in 2006 to $122 million in 2008 and is projected to reach $135 million this year. Warrior's quality work has led to a growing number of federal contracts. About 95% of projects involve building barracks for the U.S. Army Corps of Engineers.

“I think it's a matter of seeing what was coming down the road and positioning ourselves to be there,” says Warrior-Lawrence. When the military's base realignment program, calling for certain base closures and expansions, was announced, she seized the opportunity. Because they were prefabricated, modular barracks could be assembled quickly to meet tight schedules for housing troops.

It took several trips to Washington, D.C. to convince the military to go modular rather than renovate old barracks.

Although they are occasionally embellished with brick, Warrior's buildings are built of wood, have a 25-year lifespan, and can be certified under the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) program. Prefabricated sections are shrink-wrapped and trucked to building sites. The firm builds on a contract fee basis and does not own the structures.

“At one point a $500,000 project for us would be considered huge. Now we're doing $40 million, $50 million projects,” says Warrior-Lawrence.

Next Page: Industrial REIT Executive Walks Narrow Finance Line

Industrial REIT Executive Walks Narrow Finance Line

By Denise Kalette

Gayle Starr used to stride through warehouses bustling with workers and forklifts and find that she was the only woman in the building. Now she is senior vice president of capital markets at San Francisco-based AMB Property Corp., the giant developer and operator of industrial warehouses that owns 156.9 million sq. ft. in 14 countries.

One of a handful of top women executives in the industrial sector, she is responsible for AMB's secured and unsecured debt. She averages a dozen corporate and portfolio financings annually and tends more than 40 lender relationships.

Starr has fought the recession on the front lines, closing loans despite the credit crisis. As with other REITs, the company's stock has come under fire, freefalling from a 52-week high of $57.13 to a low of $8.73. The stock closed at $22.99 on Aug. 26.

In the second quarter, AMB acted decisively to retire some of its debt by issuing equity and selling properties, improving its financial position from the first and fourth quarters.

“They've done a fairly good job of deleveraging their balance sheet,” says Chicago analyst David Rodziewicz of Morningstar. But he is concerned by AMB's development pipeline of 9 million sq. ft. set for delivery by 2010, when $1.6 billion of its debt matures.

Through June, AMB sold $461 million worth of properties with an average stabilized cap rate of 6.9%. In a second-quarter earnings call, chairman and CEO Hamid Moghadam said the REIT's debt shrank by more than $750 million while available cash rose by $300 million.

As she sought loans, Starr followed a conservative path, avoiding commercial mortgage-backed securities. “We didn't do any fancy derivatives. We did basic financing with life insurance companies.”

An attorney, Starr joined AMB 17 years ago, learning property and asset management, construction and development. She travels the globe to secure loans, closing $2 billion in financing in 2008.

Her low tolerance for high-leverage loans still guides AMB's financing. “That has worked out for us immeasurably.”

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