W H A R TO N A L U M N I C L U B O F N E W YO R K | SU MME R 2 016
HOW TO SELL
1,700 PROPERTIES
IN NYC AND OTHER WHARTON REAL ESTATE STORIES
EXECUTIVE COMMITTEE Kenneth Beck WG’87 President 646-416-6991 kbeck@whartonny.com George Bradt WG’85 Executive Vice President 203-323-8501 gbradt@primegenesis.com Rosemarie Bonelli WG’99 Vice President, Finance 212-828-8644 finance@whartonny.com Blair Duncan WG’85 Vice President, General Counsel 347-731-6206 generalcounsel@whartonny.com Udayan Chattopadhyay, WG’01 Vice President, University Relations 212-421-4035 universityrelations@whartonny.com Diana Davenport WG’87 Vice President Volunteer Services 212-606-3834 volunteer@whartonny.com Chuck Forgang W’78 Vice President, Career Development 212-938-0500 careerdevelopment@whartonny.com Jeff Greenhouse W’97 Vice President, Marketing & Communications 215-650-7250 marketing@whartonny.com Jennifer Gregoriou W’78 Vice President, Programming 516-551-2992 programming@whartonny.com Regina Jaslow W’97 Vice President, Business Development 347-879-0024 businessdevelopment@whartonny.com The Wharton Business School Club of New York 1324 Lexington Avenue, Suite 409, New York, NY 10128 Phone: 212-463-5559 Club website: www.WhartonNY.com FRONT COVER :
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LETTER FROM THE PRESIDENT
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Summer 2016 eal Estate impacts our lives. Our identity connects to where we live. Our home may be our biggest financial obligation or asset. A corporation’s building affects the satisfaction of its workforce. And in New York City, iconic buildings represent its skyline and its resilience. This issue focuses on the real estate industry’s influence on the economy, and the Wharton alumni who influence this industry, often rising to the top because of their disciplined approach. Bob Knakal, W’84, who holds the record for the number of investment properties brokered in New York, recognized while still an agent, back in the 1980s, that the real estate investment sales business is actually an information business, and paid attention to data that others ignored. Thanks to Nick Petkoff, WG’02, for writing on Richard Wagman, W’91, founding partner of Madison Capital, who recognized early on, that becoming an expert in a specific market was crucial to exploiting opportunities. Ara Hovnanian, W’79, WG’79, CEO of Hovnanian Enterprises, focused on quality, to expand his company out of Northern New Jersey to over 300 planned communities nationwide today. Bringing the expertise of real estate mavens to club members has been the goal of the re-launched Wharton Real Estate Investment Group (WREI), thanks to Chair Celina Kuoch, W’98, who decided to give back to Wharton. Be like Celina. Lead! WRIE’s panels showcase market trends, family offices, real estate technologists, and more. If you are in the real estate field, you are welcome to join! Who knows why after so many years WCNY did not have a retail affinity group. Especially with so many alumni working in retail-related industries here in the New York area. To make up for the wait, our new Wharton Retail Network (WhRN) has created powerful events, some focused on fashion, others on food. Read about the six interactive events WHRN has held over the last year, and the vision of WhRN Chair Susan Teplitz, WG’86. Thanks also to active club member, Umang Malhotra, WG’11, who covered one of WCNY’s Career Series events, for the magazine, featuring George Bradt, WG’85, of Prime Genesis, on the subject George’s life work: onboarding! If you are not acquainted with the work of David Rose, the founder of the New York Angels, read up on his insights delivered at our Speaker Series event The Startup Checklist, titled after David’s New York Times’ best seller of the same name. Lastly please join me in thanking our premium members and facility sponsors who make it possible for WCNY to present events and affinity group meetings to you each week throughout the year. Be inspired by these alumni in 2016. Be like them, and “Take the Call.” Kenneth Beck, WG’87 Chief Executive Officer | CEO Connection President | Wharton Club of New York T 646.416.6991 | F 646.292.5129 kbeck@ceoconnection.com • www.ceoconnection.com
WHARTON CLUB OF NEW YORK MAGAZINE PUBLISHER Kenneth Beck, WG’87 kbeck@ceoconnection.com
EDITOR Kent Trabing, WG’01 ktrabing@optonline.net
MANAGING EDITOR Peter Hildick-Smith, C’76, WG’81, P’13 peter@codex-group.com
LAYOUT & DESIGN Alberto Faccon afaccon@gmail.com
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HOW TO SELL 1,700 PROPERTIES IN NYC! – BOB KNAKAL, W’84
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A VISION TO BUILD HOMES – ARA HOVNANIAN, W’79, WG’79
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REAL ESTATE
HOW TO SELL 1,700 PROPERTIES IN NEW YORK CITY!
BOB KNAKAL W’84 Chairman, New York Investment Sales Cushman & Wakefield
Let’s say you want to broker the sale of more properties than any other single broker in the history of New York City — and we’re talking commercial investment properties — office buildings, multi-family buildings, warehouses, retail properties and development sites. Step 1: Attend Wharton. Step 2: Read this interview! Step 3: Work harder than Bob Knakal, W’84, who by the way, is not stopping anytime soon. I know because I visited Bob at the Cushman & Wakefield office in Midtown Manhattan, looked around for his office, and he waved to me from his desk among a sea of brokers. It turns out he’s never had a corner office. And it will help if you start young. Bob recalled, “My freshman year at Wharton, I wanted to be a Wall Street guy. For a potential summer internship, I ran around New Jersey, where I grew up, dropping off my resume at every commercial bank and investment bank I saw. I came out of a Paine Webber office and saw a sign that said “Coldwell Banker.” Thinking it was a bank, I dropped off my resume, and later that afternoon, they called me to come 4
| WHARTON CLUB OF NEW YORK | WHARTONNY.COM | SUMMER 2016
in the next day for an interview. That evening, I went to the library to research this bank and discovered it was a real estate brokerage firm, and almost didn’t go to the interview. That company was the only one hiring college kids for the summer, so I did end up working there and had a fantastic experience, but still wanted to be an investment banker. Then in my sophomore year, I took an entrepreneurial management class. This guy who ran a dog food business came in and spoke to us. He told us, “When I was at Wharton, all my friends wanted to be Wall Street guys, and they ended up being Wall Street guys. I sell dog food, and I love it! So don’t think you have to be a Wall Street guy.” That made me think, and I spent the next two summers at Coldwell Banker (CBRE) and began to take the few real estate classes that Wharton offered at the time, and here we are today.”
After four years at CBRE in Manhattan, Bob Knakal co-founded Massey Knakal Realty Services in 1988. He grew it to become the premier brokerage service for midmarket buildings, and sold it for $100 million on December 31, 2014 to Cushman & Wakefield. If you heard Bob speak at WCNY’s real estate-focused events over the years, you likely noticed how intentionally he approaches real estate in New York City. Working in real estate myself, I was excited to have the chance to dig deeper into how he thinks. You said that, early on, you recognized that you weren’t in the real estate business — you were in the information business. So Massey Knakal focused on gathering and analyzing data. What was one of the first analyses that you did? Analytics have a lot to do with figuring out what you’re doing. When I got out of Wharton in 1984, there were 60 brokers doing leasing and only four in the building sales business at CBRE: Paul Massey, who had joined the previous year, and three brokers who had been at it for over 20 years. I knew I wanted to sell buildings, so the boss said, “Why don’t you hang out with Paul, and he’ll show you where the coffee machine is.” We quickly realized that we were on our own, and decided to split everything 50/50, and one year later, we were the heads of that building sales department. We ran it for three years until we decided to start our own firm. A couple of take-aways from my Wharton education. First, in statistics, we learned that a higher probability leads to a higher expected value, so we decided that we would represent only sellers. We analyzed transactions, and saw that most brokers represented buyers and sellers. Representing buyers was a lot less work,
BOB KNAKAL BROKERED THE SALE OF 21 PENN PLAZA, NEW YORK, NY IN 2014 FOR $244 MILLION
but the likelihood of success was much lower than if you represented only the sellers. Second, when we realized that our investment sales business was actually an information business, we designed a territory system that allowed us to put a broker in each neighborhood. That broker knew more about that neighborhood than anyone else, which allowed us to apply analytics with a much higher degree of accuracy than other brokers. That set a foundation for us to grow the firm like a jigsaw puzzle,
neighborhood by neighborhood, block by block and building by building. It was very pragmatic and required great discipline, but was probably the simplest brokerage platform ever developed because it was so highly specialized. How would that advice apply to other industries? Specialize. You need to differentiate yourself and create a competitive advantage — you have to articulate how you are different from all of the other people who are doing what you are doing, READ ARTICLES ONLINE AT READWNY.COM
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MASSEY KNAKAL EMPLOYEES 2013. PAUL MASSEY FOURTH FROM LEFT, BOB KNAKAL, W’84, FIFTH FROM LEFT
and why clients should work with you. By focusing on working only with sellers and only on exclusive listings and by implementing our territory system, we were able to differentiate ourselves very early on. This made our learning curve much steeper than it would have been otherwise and established a tangible track record very quickly. Understanding the information to focus on is key as there is such a massive amount of information out there. It helps to compartmentalize the information. For example, there are 165,000 commercial properties in our statistical sample in New York City. By disaggregating that into bitesize portions, you can understand much more about that sample. And presenting it in such a way that it provides benefit to your customers, creates value. This was the basis for Massey Knakal’s territory system. Think about baseball. If you specialize in data on pitchers, the speed they throw, what pitches they throw, the frequency they throw, the pitch they like to throw, depending on the counts of the batter, you can come up with a much more compelling argument than someone who studies all baseball statistics. Regardless of the field you are in, by specializing, you can stand out above the pack. 6
On your first day of work after graduating from Wharton, you met Paul Massey, and continued working together through to the sale of your company. What has made your partnership work? More than anything, I believe partners need to have the same work ethic. Our growth, both personally and professionally, was very interesting. In the beginning, we did everything together from sales, interviewing potential employees and doing the books, to taking the trash out and painting each office. The past 15 years of Massey Knakal, Paul ran the company, and I focused on sales. I was involved in the strategic direction of the company, from the 40,000-foot level, but Paul did the dayto-day oversight. I’ve probably spent more time with him than any other human being, and I bet if you added up the thousands of hours that we individually worked over the past 32 years, maybe there is less than 10 hours’ difference in the number of hours we’ve each worked. So you can have similar or complementary skill sets, but as long as the work ethic is the same, I think it will work out. If one of our employees had an issue with something and wanted our opinions and spoke to each of us separately, we almost always gave the same advice.
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Name some early significant decisions that drove your success. Unbeknownst to me at the time, playing baseball was actually a great decision. My older brother Jeff attended Wharton and played baseball at Penn. As a kid, I always wanted to follow in my brother’s footsteps. Our high school baseball coach was the brother of the baseball coach at Penn. Excelling in high school baseball helped with college. It wasn’t a scholarship, but I’m pretty sure that helped me get in.
REAL ESTATE Take Manhattan as a microcosm. South of 96th Street, there are 27,649 buildings. Of that stock, the average turnover has been 2.6% a year over the past 32 years, which means when somebody buys a building here, they hold it for 40 years on average before selling it. Half of the product that goes on the market actually sells, which means about 5% of the total stock of buildings are for sale at any time. With regard to our business, looking at things pragmatically and deciding to really understand the business was a great decision. That’s why, when it was time to sell the firm, we were so attractive to Cushman & Wakefield and other buyers. We really knew the market, and market participants knew that. For example: take Manhattan as a microcosm. South of 96th Street, there are 27,649 buildings. Of that stock, the average turnover has been 2.6% a year over the past 32 years, which means, when somebody buys a building here, they hold it for 40 years on average before selling it. Half of the product that goes on the market actually sells, which means about 5% of the total stock of buildings are for sale at any time. When we began calling property owners, 19 out of 20 times, someone would say, “No, I’m not selling.” That never got us down because it made us feel like we were much more likely to get a “yes” on the next call. If you know what the numbers are in the market, it makes analysis much easier. Let’s talk about the market — 2015 was a banner year. 2014 and 2015 were the two best backto-back years for commercial real estate investment sales in New York City history. There were 5,533 buildings sold in NYC in 2014, the highest number ever! And in 2015, building sales reached the highest dollar volume of all time at $74.5 billion! Today, it appears the market may have begun a correction phase as values have gotten well ahead of fundamentals. Land and hotels are facing challenges, which is not surprising as they are typically the first sectors to correct. Other sectors are hanging in, but headwinds are present. Today, we are seeing positives mixing with the negatives, and the direction in the short term is not very clear. In New York, we are very lucky that people from around the country and around the world want to continue to come to the city to live and work. This has led to over 600,000 jobs being created within the
past six years here. This is a period of unprecedented growth and has helped our fundamentals considerably. If the current administration can keep crime in check, this trend should continue. What did you learn from your father? He taught me good study habits. In the 1970s, school systems were experimenting with what was called “open classrooms.” We used to get our week’s worth of homework on Mondays. My father pushed me to get all my work done by Tuesday night so I could have more time for sports. I also learned a lot from my older brother Jeff, especially how to be competitive. Jeff was six years older than I, and coached me in basketball and baseball and pretty much everything else. Certainly, in a commercial brokerage, it’s very competitive. So on resumes we receive, we look for some sign that competitiveness is part of a candidate’s makeup. Brokers are very autonomous, so they have to be selfstarters as well. Why did you sell Massey Knakal? We built the business to someday sell the business. We were approached over the years because I believe our competitors admired our platform. It was a platform that was very difficult to replicate. It’s impossible to morph an existing building sales platform into a territory-based system because you’d be telling brokers — who normally could do anything, anywhere, any time — that they’d need to work in a disciplined manner within strict geographical boundaries. The only alternative is to grow the territory system organically from scratch, and that takes a long time. We almost sold the business around 2000. We wanted $8 million, and the buyer wanted to pay only $7 million. Then, in 2007, we had a compelling $50 million offer, which fell through for a variety of reasons, but it taught Paul and I that, whenever we did sell the business, we would be on five-year employment
contracts with the buyer. We thought that buyers would perceive the five-year contracts having more value if we were in our 50s and not in our 80s. So in the summer of 2014, knowing Paul would be 55 in 2015, we hired Perella Weinberg to market the firm. We closed on the sale December 31, 2014. Perella did great work, and obtained 10 offers for us, with two bidders at $100 million, which gave us negotiating power to get very advantageous terms. One of the great things that have come out of selling the company, is that I can spend more time with my wife and 7-year-old daughter. What is your approach to work, your philosophy in business? I love what I do, and in fact, when I speak to young people about their career moves, I always advise them to find something they love doing. I have the best job in the world. All I have to do is talk! As long as I keep talking, I can keep doing this. No reason to slow down! I do tend to work too much, as my wife Cynthia often reminds me. And that presents one of the biggest challenges in life. The most difficult thing in life is finding the right balance between your work, your family, your community, your faith and your health. Clearly, you make sacrifices in some areas at different times. Most importantly, I think there are two philosophies that you can have in business. If you have the philosophy that, in business, there is enough to go around for everybody, then you’ll be happy. For example: I was retained as the exclusive agent to sell One Court Square in Long Island City. The ownership decided to refinance the property’s $310M mortgage instead and kept me on as their advisor during the process. If they decide to sell in the future, I’ll be there for them. If you think it’s a zerosum game, and everything the competitor gets is one less for you, you won’t be happy. And to develop young people is very rewarding. Of the top 20 brokerage firms in New York City, three of those companies were founded by people who started at Massey Knakal. We were happy. We are proud of them! ♦ – KT To view hyperlinks in this interview, and Bob Knakal’s bio, please visit www.readwny.com/ real-estate. READ ARTICLES ONLINE AT READWNY.COM
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REAL ESTATE
CELINA KUOCH, W’98 Chair: Wharton Real Estate Investment Group New York Regional Manager TerraCap Management, LLC When Celina Kuoch, W’98 was invited to revive the Wharton Real Estate Investment Group (WREI) in 2013, she was returning to New York, reorienting herself after working overseas and starting a new job. She thought: “Why not? I have my contacts here and globally. It would be nice to give back to the school, and to the alumni community in New York.” She also had years of experience in real estate deal sourcing, negotiation, acquisition, investment bank lending and advisory, and capital fund raising in North America, Europe and Asia/Pacific. That includes acquiring and managing over $3.5 billion of real estate assets.
I met Celina near her apartment for our interview. She was taking a 40-minute break from taking care of her newborn. “Raising a baby is not a textbook thing; running financial models is so much easier. We feel blessed that he’s healthy. I’m learning so much every day!” New York has been good to Celina. Her family came here when she was 6 years old, from China through Thailand and then Vietnam. She grew up in the Bronx and was able to attend the Bronx High School of Science, where in her senior year, she attended some Wharton information events, which led to Wharton! And later earned her M.S. in Global Finance in a joint program of the Stern School of Business at New York University and The Hong Kong University of Science and Technology On the other hand, New York can be a tough place to live. She remembers, “A group of older kids came onto our train one day, with knives, and asked me and my high school friends for their wallets or necklaces, and then they got off at the next stop. My group of friends looked at each other. We just got mugged!” She recalls, “You have to work hard. Most people are successful not just because they want to be successful. They faced adversity. That drive to succeed usually starts with the drive to survive. Then they just keep going. It’s like golf — once you get over the hurdle of doing the basics, well, then, it’s fun to keep improving.”
WREI EVENT: REAL ESTATE OUTLOOK AND OPPORTUNITIES . JODY KRISS, W’97, EAST RIVER PARTNERS CIO; CELINA KUOCH, W’98; EVAN DENNER, CAMPUS EVOLUTION CIO; AND ROBERT GRAY, TERRACAP MANAGEMENT CIO
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After Wharton, Celina joined the investment banking program at Deutsche Bank, and then learned fund management while working at Lazard Freres. “My real hands-on work was when I was head of real estate
REAL ESTATE
PANEL FOR FAMILY OFFICE INVESTMENTS: MODERATOR IS MARGARET ISA BUTLER, SHAREHOLDER, M&A AND PE, GREENBERG TRAURIG; LEAH ZVEGLICH, MANAGING PARTNER/ TRUSTED FAMILY ADVISOR, ASTER FAMILY ADVISORS; VICTORIA VYSOTINA, CEO, VV STRATEGIC GROUP; PAUL KANG, CIO, ALTACAP SFO
asset management for five years at Wafra Investment Advisory Group — a sovereign wealth fund that invests in commercial real estate in North America on behalf of The Public Institution for Social Security of Kuwait. ”Managing assets and turning around challenged real estate portfolios after the 2001 internet bubble, from 2002 to 2004, was not easy. Taking over investments from your local joint venture partners and becoming the controlling partner is not what fund managers seek to do, but it gave me some great experience in negotiating with people and running strategic initiatives to turn around our assets. It meant replacing leasing and sales people on the ground and taking on new renovations.” ”Then, in 2007, an ex-colleague of mine from Deutsche Bank formed a new fund, raising $100 million. He asked me to go buy real estate in China, India and Southeast Asia. I thought, ‘Wow, I’ve never worked overseas.’ I am Asian, and I speak Mandarin. It was great to understand commercial real estate in another country. It is harder, because as a foreign firm, you can’t sue someone and win. We depended on our joint venture partner to come through. Evaluating those partners is critical. We looked for partners who had their own track record, usually over 20 years. They were family businesses with real estate and construction experience. They were the day-to-day operator, making sure the construction materials were onsite, doing the political work to ensure approvals were in place, and ensuring that the legal terms were good. For example, in India, if it’s not your land, then you can have intransigent squatting. “By this time, I had developed a strength in asset management and acquisitions. An opportunity arose in Europe to broaden
my skills further. A firm based in Geneva asked me to raise capital from institutional investors and family offices throughout Europe. It was not raising capital for a project that I was controlling, but connecting the funder as a limited partner to a third-party operator. In the U.S., we are secure in the business and legal system, so funding decisions can be made on the basis of their financial merits. In much of Southeast Asia the legal is less secure, but they are quick to meet you. Europeans are conservative however. The meetings are longer, and you need to meet for a number of times, so they can know who you are. Overall, working abroad for five years was an enlightening experience. You will learn just as much outside of work, as you will learn on the job. There is a quote by a Greek historian, Plutarch, which describes how my experiences help shaped my perspective on life – ‘What we achieve inwardly will change outer reality’. I recommend everyone to go abroad for a year or two before settling down in the city of their choice.”
TIM WANG, HEAD OF INVESTMENT RESEARCH, CLARION PARTNERS
“Our vision with WREI is more academic — to invite professionals in real estate to speak to interested alumni, from recent grads to senior executives. Attendees enjoy the theory and the dialogue that we have.” on Commercial Real Estate. He gave his forecast on the investment climate, that if you’re not overleveraged and you bought at a discounted price, and you’re in a location where there is not much new construction supply, then you should be in decent shape over the next several years. Even as we cycle down, because of low interest rates and globally, negative interest rates, the commercial real estate market has good legs to stand on.”
Learning is a key theme for Celina and her two co-chairs, Nick Petkoff, WG’02, and Eric Bashford, WG’88. Since 2013, WREI has hosted over a dozen events, for alumni seeking to learn and to connect with other alumni working in real estate commercial investments, as well as those working in related industries of insurance, finance and technology.
I asked Celina about attendees’ responses. “Happy hours are great, but we thought that, if you’re coming for 90 minutes after working all day, you want to gain something. Based on expressed interest from WREI members, I put together a panel of professionals: Family Office Investments. We learned that private family offices are entrepreneurial in their investment styles and are willing to take risks with their direct investments. Sometimes, they can make quicker investment decisions than institutional investors.”
Celina points out, “Our vision with WREI is more academic — to invite professionals in real estate to speak to interested alumni, from recent grads to senior executives. Attendees enjoy the theory and the dialogue that we have. Recently, Tim Wang, the Director and the Head of Investment Research at Clarion Partners, headed our WREI event: 2016 Economic Outlook
While not slowing down, Celina is taking time to enjoy her family. She also paints, taking advantage of what she learned while attending two years at the Parsons School of Design to study oil painting. She continues to take classes at the Art Students League of New York, to both paint and inspire her blog on artists and art fairs.♦ – KT READ ARTICLES ONLINE AT READWNY.COM
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BUILDING IN A HIGH BARRIER TO ENTRY MARKET Richard Wagman, W’91
Founding Partner, Madison Capital by Nick Petkoff, WG’02 Soon after I started in real estate in 2005, I heard Richard Wagman, W’91, speak at a conference. He had great insights and was also funny and approachable. Over the years, we have kept in touch, and he has been a great mentor, especially after I started my own company in 2014. Plus, his firm Madison Capital, with a portfolio of 21 assets under management in New York City, had accomplised average IRRs exceeding 25% through 3 real estate cycles! I thought other Wharton alumni can benefit from his knowledge and advice.
Speyer. I was inspired to go into a business that you could touch and feel and have a direct impact on its success or failure. Instead of buying stocks in IBM or Starbucks, I would rather redevelop a building and lease it to a Starbucks or IBM.
Did you choose real estate right out of Wharton? I graduated in 1991 from Wharton. In college, all of my peers were excited about securities analysis and statistics, and I was always more interested in bricks and sticks. My friends would go to hear John Reed, then Chairman of Citibank and Robert Rubin, then CEO of Goldman Sachs; I went to see the retail and real estate icons of our industry, people like Sam Zell, Sam Walton and Jerry
In order to get that job, I sent out 125 resumes to basically all the members of the Zell/Lurie Real Estate Center at Wharton. I got over 100 rejection letters (I posted those on my wall for inspiration). One morning, I got a random call at 7 a.m. and was asked to get to New York City within three hours. I got an offer to help open Yarmouth’s Paris office (the interviewer had noticed that I spoke French). It turned out to be an amazing opportunity.
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How did you start in real estate? I started by doing internships during my college years. First, I did an internship at my family business, which owned some small industrial buildings in Montreal — demolishing interiors. Then I worked for a ‘super’, who was in charge of fixing and furnishing a hotel. I still remember his name, Aurelio. He would constantly yell at me to work faster and smarter. He would make me go up 20 floors, assemble the beds for each room and then run down to get more boxes. We did 325 rooms, with two double beds in each room. I got progressively more interesting jobs over the summers. In my junior year, I worked for the Yarmouth Group, which was a predecessor of Lend Lease Corp., and an institutional real estate advisor for public and private pension funds.
REAL ESTATE
I worked with a managing director of the company — I did everything, from programming phones, opening boxes, setting up the office, to arranging meetings with CEOs of major French companies.
with retail at the base. Within a few years, we sold a portion of the portfolio to a public REIT called Corporate Office Property Trust.
After graduating, I worked for a year in Yarmouth’s New York office, and then moved to Paris to help make that office a success, and finally to London where the company opened another office. I left in 1994 and started my own company.
Real estate is all about becoming an expert — once you buy a building, you get to know the neighborhood and your market. You get to know the neighbors and the opportunities. So we bought one building, and another across the street, and then in a neighboring area. Subsequently, we bought a small portfolio in Montreal. It was working off of our new market expertise and past job experiences in execution that enabled us to grow the business. At Principal Property Group, we started with high-networth investors and then moved on to family offices. Later in my career, we worked with larger institutions as investors such as Fortress Investment Group, Goldman Sachs, AT&T Pension Fund, J.P. Morgan Investment Management and Prudential Insurance Company.
What was the urge to be an entrepreneur? One of the most enjoyable parts at Yarmouth was setting up and building a new business. I did it twice. So my biggest rush early in my career was getting things done from the ground up. I moved back to New York and worked with a German partner and established a company, Principal Property Group LLC. It was 1994, the depths of the real estate downturn in New York. We ran the business from a living room in our shared two-bedroom apartment, and we slowly grew it until we owned just under a million square feet of Class B (above average) office buildings
How do you buy 1 million square feet in a few years?
How did you start Madison Capital? There were three of us who started the company, and we had three desks and three phones. We started it in 2002 and had a business plan — our focus was to acquire value-added High Street retail assets in high-barrier-to-entry markets like Manhattan. We felt it was an underserved asset class, particularly in the institutional real estate market. You have limited supply and significant demand from retailers to be in prime areas. We focus on large gateway cities, such as New York and Chicago. We initially made equity investments with friends and family as investors — our first acquisition was a $15 million asset. Then we did $25 million, $50 million, $100 million and $200 million. And our financial partners became larger and larger institutions over time. What facets of real estate do you find most exciting? Are there any deals at Madison Capital that turned to be more challenging than you expected?
1655 BROADWAY, NEW YORK, NY – A RETAIL CONDOMINIUM OWNED BY MADISON CAPITAL
What excites us is to own assets in evolving neighborhoods so that we can in some way shape these neighborhoods or at least help in the progress. So when we see a trend or a driver of change, we try to capitalize on it. Being part of the history and the evolution of these neighborhoods is both motivating and humbling. We recently acquired a portfolio of buildings in the meatpacking district in Chicago, and the owner was a meatpacker. The owner is still operating his business, still slaughtering animals in the building. There was blood in the hallways as we toured the building. We saw a change in the fabric of the neighborhood, with a newly built Soho House Hotel down the street, an Ace Hotel being built in the neighborhood and Google taking 360,000 square feet across the street from our project. We looked at who the right tenants are today and who the right tenants will be five years from now and how to position our buildings to exploit these opportunities. On the other hand, you can miss the boat. You want to be on the leading edge, but not on the bleeding edge of these opportunities. We were too early on the Lower East Side. We invested in Delancey Street between Allen and Eldridge Streets when the Seward Park/Essex Crossing was being talked about, but long before the project got off the ground. We decided not to wait and sold the property three years ago. It will take another five years for READ ARTICLES ONLINE AT READWNY.COM
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to the table. Building a strong team and also building relations with partners are aspects of the business that I love — whether with institutional partners, brokers or lenders. It is a very important and enjoyable part of the business — knowing and respecting each other. If you can build these relationships over time, you will be very successful. Any interesting buy at that time that you can mention? Yes, we bought an asset at 100 Broadway, which was 60% leased at the time. Downtown was a different market in 2010, World Trade Center was under construction as was a lot of infrastructure, but nobody wanted to be there. We improved occupancy in the building and terminated Borders, the retail tenant for a nominal sum. Many people expected Borders would bankrupt and were saying “just wait them out.” But we wanted to control our destiny. So we bought Borders out, saved 12 months, and then released the space to two great-credit tenants that served both the building and the neighborhood (and tripled the retail income). We try to be proactive with our entire portfolio — we don’t wait until a tenant is three months in arrears with the rent to initiate a conversation. We were the only landlord in New York City to pay Borders to leave, and we are happy we did it. How can you sum up the benefits of Wharton for your career? The business is really about people and relationships, and the longer you stay in the business and cultivate these relationships, the better you will do — both from a personal perspective and business perspective. There are people I do business with who went to Wharton with me 25 years ago. There are people I bounce ideas off who had interviewed me during college. There are also young associates who come up with ideas that are new and creative. Fraternity brothers at Penn, bankers or attorneys who have come out of Penn. I also make cold calls to chairmen of companies, who are Wharton alumni, and they pick up the phone and give you advice that is not self-serving. And I know the Wharton Club has the Take the Call campaign, which is great! I try to help students coming out of the Wharton undergraduate and MBA programs with guidance and suggestions. We like to help people starting their own businesses because we have been there and want people to succeed in our industry. Getting to know people and treating them with respect from early on is very important. The people who start now can be partners of yours or maybe on the other side of the table one day. Having decency and respect goes a long way. Who else do you seek as a sounding board? 100 BROADWAY. A NEW YORK CITY TURNAROUND STORY
the neighborhood to mature. While this is a humbling experience, we learn from these mistakes. Did you make Madison Capital different from the previous companies you started? If yes, how? We try to learn from our past experiences. We have grown this company in fits and starts. In 2009, we had to look at the business and reinvent ourselves. We took advantage of the opportunity and tripled the size of our portfolio in 2010 and 2011. It was challenging — some of our investors were no longer active in the market, and a partner of ours left the company. We analyzed our model and concluded that we had the right approach to High Street retail. That gave us the conviction to acquire more of it from 2010 to 2012 when most companies were afraid to act. Our team is great — great professionals who bring creative ideas 12
| WHARTON CLUB OF NEW YORK | WHARTONNY.COM | SUMMER 2016
Our partners at Vornado and Related or even competitors. We are extremely fortunate to work with great people, and we often bounce ideas off them. But this is not all — you have to be open to fresh ideas. I get great advice or different points of view from junior team members in our office, lawyers and bankers, as well as others in different industries, such as investment bankers, private equity investors and hedge fund folks. Finally, what interesting books have you read recently? Both my parents are Holocaust survivors, so I spend a lot of time reading history books. I read books about the Holocaust from the German, Polish and Jewish perspectives. This topic is an integral part of my life. ♦ Nick Petkoff is Principal at ANG Real Estate Partners and Vice Chair at the Wharton Real Estate Investment Group (WREI) at the Wharton Club of NY. Contact Nick at 212-769- 9220 or at nick@anginvestmentpartners.com.
REAL ESTATE
A VISION TO BUILD HOMES Ara K. Hovnanian, W’79, WG’79
Hovnanian Enterprises, President, CEO and Chairman of the Board Ara K. Hovnanian, W’79, WG’79, is CEO of New Jersey-based Hovnanian Enterprises, the parent company of K. Hovnanian Homes, which has designed, built, marketed and delivered over 312,000 homes since the company was founded in 1959. His family, Armenians from Iraq, traversed the classic American journey, arriving with nothing but an appreciation for the fundamentals: private property, capital markets and an ethic to deliver value. Ara is one of a few submatriculants at Wharton, finishing his undergraduate degrees in accounting , finance and real estate and his MBA in four years. He helped his father build their company to $6 billion in revenues, got caught in the recession, and today is rebuilding their dream company. The housing industry is a significant player in the economy. What key drivers make it cyclical? What place does Hovnanian Enterprises fit in this industry? The long-term business driver is household formation. The inputs to the demographic black box are birth rates, marriage rates, divorce rates, immigration and longevity. All these factors, except for marriage age, are moving demand for shelter in the right long-term direction. What makes the shortterm cycles vary include interest rates, overbuilding, the overall economy and mortgage issues. Hovnanian is in the suburban, “for sale” part of the housing industry, very different from rental properties. Most (98%) of our homes are low-rise construction, which means three stories or less, although we are in the process of creating a 14-story condominium building in Weehawken, New Jersey, facing New York City. Depending on how you benchmark us, we are between the sixth and tenth largest homebuilder in the U.S., and we operate in about 16 states, from California to New York. Can you talk about some noteworthy developments created by Hovnanian? Unlike high-rise developers that do a few major projects, we create many developments. Right now, we have 300 different communities across the country that are open for sale. One noteworthy project in our history is Society Hill at Newark, where we built almost 2,000 homes that transformed an area that was unsafe to walk in, even during the day, to a safe and thriving community. In another more recent project, we hired Dutch designer, Piet Boon, READ ARTICLES ONLINE AT READWNY.COM
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and created a series of modern homes in Scottsdale, Arizona and Washington, D.C. suburbs, that are unusual for a production home builder such as ourselves. We executed them well, and they were both popular and profitable. Third, we specialize in a genre of housing, “lifestyle over 55” communities. We understand and offer the amenities, staff, club director and activities that this market desires. We directly employ over 2,500 people, and indirectly employ 25,000 people, including the electricians, carpenters and craftsmen on the job. Providing a home that people live in, and that becomes their biggest financial investment, is very fulfilling. Do any of these point toward a future for Hovnanian? All of them. Our niche is that we are not a one-niche builder. Our homes are priced from $100,000 to $3 million. They range from single-family homes on 3-acre lots, to 13 townhouses per acre. We cater to everyone from first-time homebuyers to empty nesters to seniors. Can you talk a bit about your father’s story in starting the company? My father’s family moved to Baghdad, Iraq, in the early 20th century. Although Iraq wasn’t the friendliest country for Armenian Christians, there was stability. When his father became ill, my father dropped out of school and took over his father’s small contracting business, which he then built into a major road-building business. When King Faisal was overthrown by the Baathists, our family and my relatives came to America. My father and his three brothers with limited resources started building homes. As the business grew, they ended up going their own ways, in a friendly way.
We directly employ over 2,500 people, and indirectly 25,000 people including the electricians, carpenters, craftsman on the job. Providing a home that people live in, and that becomes their biggest financial investment, is a very fulfilling.
(PHOTO R.) ARA HOVNANIAN, W’79, WG’79, WITH HIS FATHER KEVORK HOVNANIAN ON A SITE.
When did you start working for your father? From the age of 5, on weekends, I drove around to the different projects with my father. In high school and summers during college, I did construction labor, and got my broker’s license at the age of 16 and sold homes from the age of 17. In 1979, upon my graduation from Wharton, my father made it clear that he would be proud if I chose to work in his business, if I was interested, but would be supportive of whatever career choice I made. It was important to me that he didn’t make me feel pressured to enter the business, and I’ve taken the same position with my son, who recently decided to enter the business. What part of the business appealed to you? I liked touching all of the parts. Good or bad, I’m a generalist. I started as a laborer, sweeping houses, cleaning bathrooms, moving appliances and selling houses, so I combined the nitty gritty of the business with a degree from Wharton. I became comfortable with all aspects of the business — from construction, to human resources, to making finance presentations. What did you learn from your father? Making sure your word is your bond. He wanted to show the world that he stood behind what he did by putting his difficultto-pronounce Armenian name on the company. People advised against it, but he said, “No, it’s my name. I stand behind the product.” The other one is — and it’s apropos of the difficulties our industry and our company have endured the past 10 years — “You can make a lot of mistakes in business. You can hire the wrong people, have the wrong product and invest in the wrong
REAL ESTATE technology. But the one mistake you can’t make is to run out of cash.” This is especially true because real estate is both capitalintensive and cyclical. After 2008, a lot of the top public builders went bankrupt, entered a forced merger or were taken over by bondholders. We did not anticipate the Great Recession, and were particularly aggressive in 2004 to 2005. We didn’t think that we were highly leveraged, with 50% equity and 50% leverage. In the past eight years, we did focus on that motto — “Never run out of cash” — and we have been able to survive. Didn’t another alumnus play a role in Hovnanian’s public offering? Yes. The faith, Mike Millken, WG’70 had in us was a key part of our story to go from a small builder to one of the top 10 builders in the country. Drexel Burnham Lambert was particularly proud of funding entry-level housing. Two years after graduating, I was on the road touting our first public bond offering, which we did with Drexel in 1981. Our first meeting with Michael was on a Saturday morning at 7:00 a.m. in Los Angeles. We were in a conference room, and it was at 7:05 a.m. I said to his associate, “I knew he wouldn’t be here at 7:00 a.m. Who would be here at 7:00 a.m. on Saturday?” The associate said, “Oh, no. Mike’s been here since 6:00 a.m. — he’s just finishing up in the next room.” Sure enough, Mike soon came in, closing one briefcase and opening another with our materials. That was our first experience with Mike, and we went on to do many high-yield bond offerings with Drexel, and Drexel took us public as well, in 1983.
How has your education at and relationship to Wharton played a role in your career? Wharton taught me the language of business, from the fundamentals of accounting and finance, to sales and management. You have to learn to speak English if you want to write, and you have to speak business to be a businessman. Today, I serve on the Board of Overseers of UPenn’s School of Design, where I had taken architectural design classes. I speak occasionally at Wharton, and am a Research Sponsor at the Samuel Zell and Robert Lurie Real Estate Center. What drives you to keep working after you reached a level of success? My father drove the same car and lived in the same house from when he started the business to becoming a billionaire. Money wasn’t what motivated him. He wanted to create a great company and leave a legacy, and he achieved that. I have some of the same dreams, although I’ve had to take a step back, because housing got hit by the whirlpool of the 2008 recession. I have to work to restore the company to what it was. Notwithstanding that, I love what we do. I eat, sleep and breathe the business. We were making $6.5 billion in revenues and had $2 billion in equity at the peak of the market; at the bottom, we made $1 billion in revenues and lost our equity, and the debt remained. This year, our revenues are on target for $3 billion in revenues, so we are building our company again. We will steer ourselves through this challenging financial situation and adverse times, to attain our position as a leader in this industry once more. ♦ – KT
(PHOTO BELOW) A K. HOVNANIAN MODEL HOME AT
CARILLON ESTATES IN DALLAS, TEXAS
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WCNY AFFINITY GROUPS
WHARTON RETAIL NETWORK: EXPLORING THE WORLD OF SELLING FASHION AND FOOD One of WCNY’S newest affinity groups, the Wharton Retail Network (WhRN) held six sold-out events over the past nine months. Its initial events focused on fashion retail, and this year, it began offering events on food retailing. WhRN founder and Chair Susan Teplitz, WG’86, works with alumni who have sector experience to design, develop and implement each event. She helps the event chairs to identify moderators, speakers, and then steps back so they can run it. Once they have run events they can help future chairs run events. The results have been well-thought out events with top quality panelists and the high-participation of attendees. Overall, superb experiences. Susan is a Senior Managing Director with The Lansco Corporation, (http://www.lansco.com/bios/teplitz-susan/) a leading retail leasing firm based in New York City with partners in all major markets in the U.S. Susan works with retailers based in the U.S. and abroad to expand their retail presence, with a focus on fashion and apparel and, to a lesser extent, on luxury food and beverage. Susan is also an independent brand consultant, with 17 years’ experience working with brands on their marketing and supporting them to enter and expand across the U.S. Susan’s approach to helping her clients is making sure their brand’s DNA are reflected in their brick-and-mortar stores. She notes, “In choosing the stores’ locations, as well as their look and feel, the retailer shapes its customers’ experiences.” Susan founded the
Wharton Retail Network to expand her own network, which she can then offer to her clients. I asked Susan about founding the group and what her thoughts on its future are. Susan explained, “I wanted to join an affinity group that was focused on retail, and we didn’t have one. So I started it. I began by reaching out to a number of CEOs in retail to discuss what they felt were the most important issues affecting their industry. I also reached out to The Jay H. Baker Retailing Center, at the Wharton School, to get its feedback. Based on that, I developed a survey and sent it to interested alumni to see which events they wanted to attend, which formed the basis for our first year’s schedule. The purpose of the group is to discuss issues important to retail today. We’re Wharton alumni, right? So we want to be educated and to educate; to personally develop; and to examine trends and thought leadership that impact retail, both fashion and food. It’s becoming a forum to explore best practices and to hear from industry leaders, especially alumni. To stay relevant, we will continue to look for feedback from alumni on which topics to explore, and will try to involve more alumni to organize and chair events on these topics.
JONATHAN TRETLER, C’93 AND CARLOS TROSTLI, WG’86, MODERATORS FOR THE EVENT: A CONVERSATION ON THE DISRUPTIVE CHANGES IMPACTING THE FOOD WHRN FOUNDER SUSAN TEPLITZ, WG’86
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AND BEVERAGE INDUSTRY
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The following event summaries show just how many industries are involved in bringing fashion to our lives and food to our tables. With such a vibrant array of events and discussions, WhRN invites you to consider participating in the future. EVENT: How Fashion Brands Communicate with Wall Street Before and After Going Public
ANDY ROSENTHAL, W’80; MARK LITTMANN, W’06; MARGAUX KNEE; NICK MORRIS, W’95; AND DEB BARDHAN, WG’11. PANELISTS AT SO YOU SAY YOU WANT TO START
A RETAIL FOOD AND BEVERAGE BUSINESS?
Two top-tier executives with decades of experience discuss bringing retailers through their initial public offerings: Margaret Mager of MBS Value Partners, and Richard Baum, the Managing Partner of Consumer Growth Partners. EVENT: What Do Marilyn Monroe, Elvis Presley, Michael Jackson and Shaquille O’Neal Have in Common? Jamie Salter, Chairman and CEO of Authentic Brands Group, talked about the power of licensing to drive profitability and how to position an iconic brand in the luxury space. Jamie also discussed the particulars of licensing deals, and measuring brand impact and equity by region. Susan worked with event co-chair, Jacqui Maurice Jenkins, WG’96, Dean of Graduate Studies for LIM College in New York, to develop and organize this event. EVENT: Technology and Retail: Past, Present and Future A panel of all-Wharton retail technology leaders focused on E-commerce technology trends, maximizing revenues across channels, using consumer analytics to drive sales, using technology to monitor field rep activities, and how to measure the ROI of technology The moderator was Carl E. Rosen, WG ‘77, Principal of Shelter Rock International, and former COO of Bulova and CIO of Loews. Panelists included: • Sonia Gupta, WG’14, Director of Global E-Commerce and Operations of ADAY, a women’s athletic apparel startup. • Yash Kothari, W’15, Co-Founder and CEO of Prayas Analytics, a technology solution that helps retailers run A/B tests on their stores using customer data • Mike Demko, WG’99, COO of GP Shopper, a leader in retail mobile application solutions • Rachel MacPherson, W’93, former General Merchandise Manager of ShopBop/East Dane. EVENT: WhRN/WAAN Showcase for Rising Fashion Retail Startups 80 alumni and friends participated in a showcase on March 16, for rising fashion startups seeking feedback on their pitches for investors. Eight groups gave presentations to angel investors, faculty and WhRN members, which was followed by Q&A and networking.
The hosts were WhRN members in fashion, including Susan Teplitz and Robert Whipple, WG’09. Robert is a Principal in the consumer team at Apax Partners, a leading global private equity advisory firm, including key deals with Cole Haan, FULLBEAUTY Brands and Advantage Sales and Marketing. Investors were invited to the showcase by Deb Bardhan, WG’11, Chair of Wharton Alumni Angel Network (WAAN). Deb is CEO and Co-Founder of Xpand.io, that onboards new hires to reduce turnover and increase ROI. EVENT: A Conversation on the Disruptive Changes Impacting the Food and Beverage Industry I attended this event and was amazed by the number of questions for the panel from attendees, all excellent. Co-chaired and moderated by Jonathan Tretler, C’93, WG’97, and Carlos Trostli, WG’86. Jonathan is an investment banker with 18 years of experience covering the food and beverage industry and, for the past two years, led the coverage of this industry at RBC Capital Markets. Carlos is the President of OnPoint Business Development, a consultancy serving clients in New York metro area. Carlos is a senior global executive with 20 years of experience in the consumer packaged goods industry at companies such as Quaker Oats, Unilever Foods and Reckitt Benckiser. The panelists who actively engaged the audience, were: • Patrizia Barone, Vice President of Regional Regulatory Affairs at Unilever, where she leads the strategic regulatory activities for the North American region. Answered questions about how her firm incorporates a company like Ben and Jerrys. • Wendy Weinstein Karp, C’84, Founder of W2K Consulting, a consumer-focused marketing resource. Wendy is a marketing consultant with over 25 years of food and beverage and onpremises restaurant experience. Wendy fielded a number of queries from how millennials approach food choices, to how companies innovate to handle waste, to the sharing economy, such as neighborhood cooking clubs! • Nick Morris, W’95, Co-Founder of Health Warrior, a chia-based snack food company, explained how they grew, in five years, to 75 employees with products in over 11,000 stores. Nick is currently Head of Trading at Weiss Multi Strategies. READ ARTICLES ONLINE AT READWNY.COM
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WCNY AFFINITY GROUPS
EVENT: So You Say You Want to Start a Retail Food and Beverage Business?
Other professionals included: • Mark Littmann, W’06, a Corporate Counsel at Danone.
How do you start a food and beverage business? What are the details of funding, structure, sales and distribution? What are some key attributes to integrate into my product, when developing? These were a few of the questions answered at this nuts and bolts speed dating, with five teams of professionals rotating among five groups of entrepreneurs
• Jamaal Brown, WG’10, Co-Owner of Tea and Jam in Williamsburg, Brooklyn.
Moderators were event co-chairs Saloni Varma, WG’07, who is a Senior Finance Manager at Unilever, leading Dove Bar and Body wash globally, and has worked at KPMG, UBS and ORIX globally; and Nick Morris (mentioned above). A few of the participating professionals were: • Elly Truesdell, the North East Regional Local Forager for Whole Foods Market. Ely spoke on the channels for product submission and consideration at Whole Foods Market. • Zack Gazzaniga is COO at Kensington & Sons, which successfully launched award-winning product lines. Questions Zack addressed included: How do you turn a home recipe into a production-ready formula? How do you source ingredients and manufacturing facilities? • Deb Bardhan, answered questions such as: What criteria need to be met for angels to get interested? How much should you raise? What sections should be included in your investor pitch? • Susan Teplitz addressed questions on setting up a physical store.
• Ron Offir, WG’96, CEO and Founder of Offir Consulting, a digital advisory firm. I asked Susan about alumni interested in getting involved with WhRN. She shared, ““We seek members working for or with retailers of food, clothing and accessories. Within fashion, we will focus on the luxury and contemporary segments. Food includes consumer packaged goods, restaurants and local food providers. We’re especially interested in involving alumni with sector experience, who would like to suggest and chair new events that would be of interest to our community. I will support them and work with them through every phase of chairing the event. Some events we are exploring for the remainder of the year are: 1. A Cooking Competition and Tasting Seminar 2. Healthy Food: Fad or Trend? 3. How a Startup Can Measure Customer Lifetime Value and Use it as a Decision Making Tool Also, there will be a holiday party where alums can meet the designers/owners James Jurney (W’ 90) and his wife and business partner Gwen, who own Seize sur Vingt and are launching Groupe NYC, a vertically integrated incubator of high end men’s and women’s clothing.” ♦ – KT If you would like to get information on upcoming events, please email Susan Teplitz at whrn@whartonny.com
(PHOTO L.) MODERATORS SALONI VARNA, WG’07 AND NICK MORRIS, W’95; (PHOTO R.) SHANE EMMET SPEAKING TO JAMAAL BROWN, WG’10 AT SO YOU SAY YOU WANT TO START A RETAIL FOOD AND BEVERAGE BUSINESS ?
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SPEAKER SERIES
HOW NOT TO BE AMONG THE 40% OF LEADERS FAILING IN THEIR FIRST 18 MONTHS WCNY Career Series
by Umang Malhotra, WG’11 “Converge. Then evolve.” This was one of my favorite take-aways from the WCNY event, “Executive Onboarding Conversation with George Bradt.” It was part of the Career Series held by the Wharton Club of New York on March 8 in New York City. George Bradt, WG’85, author and founder of PrimeGenesis, hosted a conversation on executive onboarding and leadership transitions. With 40% of leaders failing in their first 18 months, onboarding, according to George, is one of the crucibles of leadership. If onboarding goes poorly, it can be detrimental for everyone involved — leaders, employees and families included — but if it goes well, it can be a career accelerator. What started as a talk related to ideas around Bradt’s program, The New Leader’s Playbook, evolved quickly into a candid and practical discussion on onboarding, team building and successful leadership, encapsulating lessons and perspectives from George’s experiences and series of books. The session was filled with realworld, often humorous, examples of organizations and leadership stories that demonstrated the key points of onboarding. In attendance were 15 Wharton alumni sitting around a long boardroom table, posing related and unrelated questions for George. The session almost had a dinner table conversation feel to it, allowing attendees to bring some of their most pressing professional questions to the table, with George tailoring his talk around those questions. Here are some key takeaways.
Converge. Then Evolve. George said, “Earn it. Don’t assume it. You have to converge into the new organization you join, and earn the right to lead again. Past experience and performance are relevant only until the point of getting the interview and job. Among other things, get a head start by managing all stages of onboarding. This includes managing the time period between the offer and acceptance, by proactively reaching out to the team members you will be managing. It also includes managing the aspects after Day 1 and setting a collaborative tone, before you can begin to evolve your team as the new leader.” It’s Up to You George pointed out, “You are responsible for your own onboarding into a new organization or group. You chart out your own plan and decide to get a head start. When it comes to managing a new team that is geographically dispersed (or virtual onboarding), it’s all about relationships. Attempt to have occasional meetings in person and face to face, or using video technologies for informal conversations, since ‘hallway chats’ do not happen on their own in a virtual setting.” Change One Variable at a Time George shared the example of Nike’s approach to change by citing the company’s entry into new markets and product categories. Instead of entering a new country and new market segment with a new product category all at the same time, Nike leads with what it
knows and does best, changing one variable at a time. This was shared as an analogy to changing one’s job. “Start by changing one variable at a time — function, industry, company or country, leveraging your skills in the process.” This perspective seems as relevant in the context of looking for a job, as it is to launching a new product or service or targeting a new market segment to allow for leveraging one’s strengths and capabilities. Major Pitfalls to Succeeding in a New Role An interview question is a subset of three questions: 1. Can you do the job? (Strengths) 2. Are you going to love the job? (Motivation) 3. Can the employer work with you? (Fit) This memorable framework also applies when evaluating why some employees are not succeeding in their roles. This WCNY session was of immense value to those of us building our own companies, and constantly hiring and onboarding new team members. I’m sure it was valuable to others in attendance evaluating career transitions and being proactive about onboarding into and succeeding in their new roles. Umang Malhotra, contributed to this article. Umang runs her own design and digital marketing agency, The Ideas Team, Inc., and is an active member of the WCNY. You can reach Umang on LinkedIn or at umang@ideasteaminc.com.
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SPEAKER SERIES
THE STARTUP CHECKLIST! Entrepreneurial Speaker Series — David Rose A brilliant speaker in serial entrepreneur David Rose; an inspiring venue at the Grace Building across from Bryant Park, just a block away from Grand Central Station; and an intelligent audience. Not to mention free books! Jennifer Gregoriou, W’78, head of the Programming Committee at WCNY, has done it again!
his previous talk to the Wharton Alumni Angels Network. David has now shared his extensive experience in both roles, with both ups and downs, and his books are very practical and methodical. And of course it was great to meet more Wharton alumni who were at various stages of starting a new venture.”
David Rose is currently the CEO of Gust, which operates a collaboration platform for over 300,000 startups and 50,000 earlystage investors. He is also the Founder and Chairman Emeritus of New York Angels, and has invested in over 110 early-stage companies through his Rose Tech Ventures. David opened his talk with such speed and enthusiasm that he sounded like a Dickensian “Ghost of Entrepreneurial Adventures Past,” bringing us through the dizzying rises and falls of his startups and the lessons he learned. This journey showed why he wished he’d understood the details in the complex process of starting, growing and exiting a scalable business. He took us through his newest book The Startup Checklist: 25 Steps to a Scalable, High-Growth Business (Wiley; April 2016), a New York Times best-seller.
Marjorie Lau, WG’89, is starting up a beauty brand focused on skincare. “Having spent 20 years in the industry, primarily with Estée Lauder, I know the ins and outs of the beauty business. I find the startup world exciting, but enormously complex, as a first-time entrepreneur. The Startup Checklist is truly a nuts-and-bolts guide to ‘here’s what it takes to get things done.”
Why do people need this book? Because there are inherent differences between a lifestyle business and a scalable company like Uber or Twitter, where you will: 1) Have a co-founder 2) Have employees 3) Give equity to employees 4) Require initial investments 5) Think and act globally 6) Want to constantly grow 7) Focus on the company, not your role 8) Look for an exit He went on to summarize his 25 steps, focusing on some of the more arcane legal and vesting steps that the Wharton audience appreciated. Moreover, he illustrated them with horror stories from his own or others’ experiences — all in 50 minutes. Following are comments from Wharton alumni who attended Rose’s discussion: Francis Barker, WG’89, is an investor who is involved in several WCNY groups, and has invested in and joined the board of directors of a healthcare predictive analytics company, Allazo Health, founded by Cliff Jones, W’07, WG’13. “David Rose’s comments focusing on mission-critical steps for startups built on
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| WHARTON CLUB OF NEW YORK | WHARTONNY.COM | SUMMER 2016
CLUB
THE WHARTON CLUB OF NEW YORK APPRECIATES THE ENTHUSIASTIC SUPPORT OF THE FOLLOWING PREMIUM MEMBERS: BENEFACTOR MEMBERS: Ramkrishan Hinduja, W’91 Hinduja Group of Companies Regional Chairman, Americas (212) 355-0755 www.hindujagroup.com
Nancy Goldfarb, W’78 Smart Transition Strategies, LLC President (973) 610-0808 www.smarttransitionstrategies.com
Daniel Lowy, WG’13 EMU Health CEO and Principal (646) 681-2225 www.emuhealth.com
Patricia Posada Klapper, WG’93 The Klapper Institute CFO (203) 966-4113 www.theklapperinstitute.com
Christopher Stavrou, WG’67 Stavrou Partners General Partner (212) 297-6110
... AND TO OUR WCNY VENUE SPONSORS The WCNY organizes a large number of events throughout the year. This is made possible through the generosity of our alumni who host WCNY events at their offices. We are honored to include among our recent facility sponsors: •
GOLD MEMBERS:
Clearbridge Investments, LLC
•
Kaye Scholer LLP
•
KPMG LLP
•
Cooley LLP
•
Lee & Associates LLP
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Debevoise & Plimpton LLP
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Lee Hecht Harrison, LLC
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DonorsChoose.org
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Lyrical Partners, L.P
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General Assembly
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PwC LLP
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Halstead Property, LLC
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Skadden, Arps, Slate, Meagher & Flom LLP
Allen Levinson, W’77, WG’78 Retired Karl J. O’Farrell, WG’89 Steel Wheels, LLC Managing Member (212) 798-3152 Keshab Panda, CRT’11 L&T Technology Services Managing Director and CEO (732) 609-1571 www.lnttechservices.com Janice Stanton, W’81 Contrarian Capital Management President and Portfolio Manager (203) 862-8204 www.contrariancapital.com Note from Editor: To view hyperlinks to club events, company names, published books, and other items, please read articles at www.readwny.com.
READ ARTICLES ONLINE AT READWNY.COM
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CLUB
TAKE THE CALL! The Wharton alumni community is one of the most exclusive and powerful networks in the world. A key element to our success is the willingness of alumni to help other alumni. Take the Call is a simple concept: Wharton alumni should buy from, hire and help Wharton alumni. And if a fellow Wharton alum calls us for any reason, we Take the Call. The Take the Call Forum allows you to directly reach 30,000 Wharton alumni in the New York City metropolitan area. Promote yourself! Find opportunities offered by your fellow Wharton alumni! Help alumni get answers! Gain ideas and useful information! Just submit your message at www.whartonny.com/forum.html. Here are some excerpts from the latest Take the Call Forum.
WCNY Can Always Use Additional Space The WCNY organizes a large number of events throughout the year. These events range from small and focused gatherings on a particular theme, right up to the annual Joseph Wharton Awards Dinner. Our events provide opportunities for Wharton alumni to network and reconnect, and for sponsors to gain access to one of the most dynamic business communities in the region. Email gsanchez@whartonny.com if your firm would like to be a WCNY venue sponsor. Multiple Job Opportunities at Innovative Non-Profit: DonorsChoose.org We’re a growing nonprofit seeking to fill several roles in New York City and San Francisco. We have best-inclass benefits, a collaborative team,
and we’re changing our educational system while having fun. For more details, go here: https://www. donorschoose.org/jobs. Thank you! Cesar Bocanegra, WG’08, Chief Operating Officer. Mobile Apps Investment Fund I am creating a fund for investing in mobile apps startups in U.S. Please contact me if you are an interested investor. Thanks! Rohit Mahajan, WF’08, rohit.mahajan@icloud.com. Looking for First Exec Hire/CoFounder for SaaS Startup Looking for experienced startup exec. to join legal matter management/data analytics collaborative SaaS platform. Product has been released, first clients secured. Outstanding angel investors and board members. Looking for the first outside exec. to join with a mandate to help build out the team/operations and help raise capital. Contact Nicolas Economou, WG’99, nico.eco.personal@gmail. com.
YES, I want to be a Contributing Member of the Wharton Club of New York, giving me benefits including: yy More access to fellow alumni yy Eligibility for leadership positions
yy 1/2 price on most WCNY events yy Special, members-only discounts on
special services, and health insurance
Name
Credit Card Number
Address
Expiration Date
Town/State/Zip Phone Email Please complete application and mail to: Wharton Business School Club of New York, 1324 Lexington Avenue, Suite 409, New York, NY 10128
Supporting Membership - $95/year Silver Membership - $500/year Gold Membership - $1,000/year Benefactor Membership - $4,000/year – includes membership in the Penn Club To complete your application online, please visit www.whartonny.com/memsub.html Questions? Please contact Gabriela Sanchez at: gsanchez@whartonny.com
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P r o m o t i o n Ad e v e r t i s e m e n t
NEW JERSEY
FINANCIAL LEADERS
Creating Value for Business Owners and Ultra-High-Net-Worth Families Donald Gross, W'83, WG'85 and Summit Financial Resources, Inc.
T
he “family office” has long been the refuge of ultra-highnet-worth individuals and owners of closely held businesses – a place where their entire financial picture remains in sharp focus, their interests monitored, updated and protected, “administrivia” handled and family affairs coordinated. Summit Financial Resources, Inc., with over 200 professionals and support staff, is giving the family office model a run for its money. Founded in 1982, Summit has long advised and managed the business and family affairs of successful clients. They range from senior executives of public and private companies, to investment bankers and asset managers, to closely held companies and entrepreneurs across all business sectors. Donald Gross is a 27-year industry veteran armed with a BSE and an MBA from Wharton. His experiences as a financial advisor, cofounder of Dunbar Capital and business investor have shaped his team’s hard-hitting, proactive approach to holistic wealth management. He welcomes calls and can be reached at 973-285-3621 or dgross@sfr1.com.
“We use every tool we have – our planning platform, in-house firepower, industry relationships, passion and creativity – to generate value for our clients,” says Donald Gross, senior financial advisor. “In essence, we’re a family office, but without the fixed overhead expense. In many cases we work with existing family offices, as well as the client’s existing tax, legal and accounting advisers, on a project-specific basis.”
The Fractured Approach vs. The Integrated Solution The Piecemeal Approach vs. Summit’s Integrated Solution
Goals & Objectives
Income Tax Minimization Estate Tax Minimization
Investment Management
Lack of: Time Expertise Coordination On-Going Review Defined goals
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Design and Ongoing Review by our Structuring Professionals:
Results in: Unnecessary Income and Estate Taxes Forgone Opportunity Undue Risk
What Makes Summit Different? • Think Tank Approach. An in-house, multidisciplinary team of tax, estate, trust, risk management, asset protection, investment management and business succession structuring professionals. • Integrated and Holistic Planning. Client-driven, cohesive, integrated and actionable strategies that are based on specific client goals. • Wide-Ranging Experience. Hundreds of families in the U.S. and internationally are supported by Summit. • Ongoing Monitoring and Updating. Clients receive continuous alerts on opportunities, tradeoffs and exposures. • Global Quarterback. Summit streamlines and coordinates clients’ financial affairs to help minimize income and estate taxes, rationalize insurance coverage and protect assets, reduce insurance and investment management fees and expenses, develop succession
Goals & Objectives
Business Succession & Retention
Asset Protection & Liability Management
Family Wealth Planning
Tax and Accounting Specialists, Estate and Trust, Fringe Benefits, Risk Management and Asset Protection Professionals 1
plans and business exits, as well as gain access to unique and creative opportunities. “Clients appreciate our passion and willingness to challenge ourselves – and them – to be open-minded, creative and decisive,” Gross says. “They know we are ‘all in’ – completely upfront and fully focused on their interests. “I am eager to speak with those families who are interested in getting a second opinion or may be uncertain as to whether their financial and family interests are completely integrated. I’d also be happy to speak with anyone who wants to talk with a team that leads with structure and strategy. At the very least, individuals will probably walk away with an idea or two to examine with their existing financial management team. I can be reached at 973-285-3621 or dgross@sfr1.com.”
Donald Gross, W'83, WG'85 Summit Financial Resources, Inc.
Donald K. Gross offers securities and investment advisory services through Summit Equities, Inc., member FINRA/SIPC, and financial planning services through Summit Equities Inc.’s affiliate Summit Financial Resources, Inc., 4 Campus Drive, Parsippany, NJ, 07054, summitfinancial.com. Tel. 973-285-3600. Fax. 973-285-3666. ©2015 EMI Network • 800-999-1950 • eminetwork.com
WCNY – CALENDAR So You Want to Start a Hedge Fund — Keynote Address by Ted Seides
Mets Vs. Cardinals at Citi Field Special & Social Events Committee
Wharton Hedge Fund Network (WHFN) Event – Monday, June 13, 2016 at 6:00 p.m.
Tuesday, July 26, 2016 at 7:00 p.m.
This 56th event of WHFN since 2005 features Ted Seides, Managing Partner of Hidden Brook Investments. Ted will be discussing his recently released book of lessons learned as a backer of and allocator to young hedge funds. Complimentary book.
Join fellow Wharton Alumni and watch as The Mets take on the Cardinals at Citi Field! Register now! Tickets will sell out quickly. Location: Citi Field, Flushing, NY WCNY Gets Hands-On With Fine Chocolate! Special & Social Events Committee
Penn Club Business Networking Group
Friday, September 16, 2016 at 6:30 p.m.
Friday, June 24, 2016 at 12:30 p.m.
Last year’s sold-out, hands-on, make-your-ownchocolates event returns, with Bojan Stoyanov, WG’99, and Elaine Boxer, WG’02.
Business networking group meets at noon, once a month over lunch at a world-class midtown Manhattan location, the Penn Club! Thursday Evening Leads Council New participants must contact leadschair@ whartonny.com before attending this meeting. Please be sure to include your full name, line of business, company name, email address and phone number.
Check website for full details on exceptional upcoming events! Whartonny.com/events.html
Location: Voilà Chocolat at 221 West 79th Street (near Broadway), New York City