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How to Rise in Commercial Real Estate
A RE|STRUCTURED LIVE Panel Event
PRESENTED BY RE|STRUCTURED NEWS
PHOTOGRAPHY BY ALEXANDRA STEWART
VIDEOGRAPHY BY CHASE ALI-WATKINS
May 16th, 2024
On May 16th at the Directors Guild of America Theater, the RE|STRUCTURED News team hosted a commercial real estate based panel event, inviting their audience to learn from industry leaders, interact with other like-minded professionals, and further their knowledge on the commercial market. In a dynamic and insightful setting, industry veteran Bill Fishel moderated the conversation amongst a distinguished lineup of speakers, including Jay Luchs, Vice Chairman of Newmark, Marineh Dermovsesian, Associate Director of Real Estate at McDonald’s USA, and Josh Katzin, CIO of Eldridge Acre Partners, each sharing their unique perspectives and expertise. Together, they delved into their starts in the industry, the challenges and opportunities that shaped their careers, the latest trends within the LA market, and advice as to how to succeed as an agent and investor.
“How did you get started and begin your career in real estate and did you ultimately achieve the level of success that you have?”
Jay: I grew up in Potomac Maryland, outside of Washington DC, and I went to the University of Virginia. My friends and I were sitting around as a group watching “Melrose Place," the popular TV show at the time, and I got caught up in wanting to be in LA to get involved in the entertainment business. I came out here for a week and submitted my resume to a company called Brillstein Grey Entertainment. That bold move is what got me into LA and immersed me into the world of entertainment for the following five years, as I couldn’t get myself to leave the city. Despite my family’s deep roots in real estate, given that both my dad and grandfather worked in the industry, I tried to fight it and resisted following in their footsteps. That being said, I found myself joining the real estate business, it was an inevitable path. I discovered that real estate offered its own form of entertainment, filled with true content and daily variety.
Josh: Growing up, I never envisioned a future in real estate, but I definitely fell into it to some extent. Upon graduating college, originally, I had no idea what career path I wanted to pursue. I got a job which was perfectly tailored to someone without direction: management consulting. I worked in consulting for a couple of years and then transitioned and worked for a private equity fund. I then went back to business school and when I graduated, I reflected upon my experience in private equity, where we acquired various businesses. I realized that not all of these businesses made me excited/ignited my passion. At the same time, when I was at business school, I interned at Colony Capital. At the time, I thought to myself that if I were to invest in anything, real estate would be the ideal choice. The dynamic nature of the real estate industry drew me into the industry and it stuck with me. I came out of school and it’s been a straight shot ever since then.
Marineh: I was a hybrid between these two gentlemen. I wanted to go into entertainment, but I didn't know what to do exactly. When I was younger, I told one of my coworkers that I want to apply to entertainment companies and work in the finance department. He gave me a website and I spam emailed my resume to every single entertainment company I could find. FOX called and said that while I applied for finance, that spot was taken. They offered me the real estate department and I happily accepted. I entered the real estate department at FOX and I managed to grow within the organization and the department through turnover, being a go-getter, and wanting to learn more about the industry. Eventually, I found my footing in real estate, grew within FOX and partly into CBRE, and then ultimately, taking a position at McDonald's.
"My advice is to invest genuine effort into your work; in this era, genuine dedication will go an even longer way.”
“How did you differentiate yourself? What were some of the things you think back on or what were kind of, you know, breakthrough moments for you?”
Marineh: The most pivotal moment of my career was during my interview with FOX. The woman interviewing me asked me if I knew the answer to various real estate-related questions and to each question, I answered “No.” I think it’s very important to be honest when you’re interviewing or when you’re speaking with people. If you dig yourself into a hole and then start drowning in it, you're realistically going to either quit or get fired. At the end, the interviewer asked if I had any questions for her. I nodded my head and said “Am I going to be challenged in this position?” She looked at me and said “That is a really good question.” She was impressed because I flipped the script on her by asking what the company would offer me that would help me grow. I knew that if I was going to be stagnant and entry level, there would be no point to this position. After the interview, when I was eventually hired, the interviewer told me that my question at the end of the interview was the differentiating factor in giving me this job. I provide this example to share that it is imperative to lay that expectation and foundation for your future employer and make it clear that you don’t just want to start at their company, but you also want to grow there.
Jay: I initially began my career at a firm named Epstein and Associates, and then I transitioned into the technology sector for a couple of years by joining Insignia ESG. CBRE subsequently acquired that company, and I spent 12 years at CBRE before moving to Newmark, where I have been for the past 11 years. Early in my career at Newmark, I began working for two bosses who specialized in selling office buildings—a field I was entirely unfamiliar with at the time. I was determined to impress them, so I took on the role of an assistant in 2001, carrying out their many requests. This included reaching out to property owners to ask if they were interested in selling their office buildings and shopping centers. To answer your question, my primary motivation was to show my commitment because that effort and resilience goes a long way. People always recognize and appreciate when you put effort into your work without cutting corners. In today's world, it seems that such perseverance is less common amongst the younger generation. My advice is to invest genuine effort into your work; in this era, genuine dedication will go an even longer way.
Bill: Jay, your response reminded me of a story from my early career. I began in Dallas, Texas, working in finance, where my role was to connect investors with those in need of capital. I had been reaching out to a particular individual for six weeks regarding a maturing loan on a really interesting retail property, which was set to be the most significant deal of my career at that point. Finally, I got the opportunity, executed the deal successfully, and we were really happy with the outcome. At the closing dinner, amidst a table full of people, I thanked him personally for the opportunity. I asked, "Why did you choose to hire me?" Without hesitation, he replied, "Oh, that's easy. You called four times. I'm a busy man. I tell my assistant to take note if an unknown caller contacts me. If they call again, we take another note. If someone calls four times, I know they're serious. That's when I'll speak with them. If they interest me, I'll meet them; if not, I'll tell them I’m not looking for anything." This interaction and the experience as a whole left a lasting impression on me. He saw something in me, gave me an opportunity, and I learned a significant lesson as a result.
Josh: I always thought that taking a position in which you assume the highest level of responsibility is generally a good thing. An extreme example was when I was early on in my career. Having some experience in international investing, my boss approached me with a unique opportunity: the company was rapidly expanding in Asia and needed someone to step up and relocate to the Hong Kong office. At that time, my wife and I had just discovered we were expecting our first child, and I was convinced she would never consider the idea of such a move. That night, I brought up the topic with her, saying, "Honey, an unexpected opportunity came up at work." She surprisingly responded and said, "Absolutely, let's do it." We then relocated to Hong Kong, where I spent four transformative years. While I didn’t stay there forever nor build my entire career there, the experience of having moved there helped spur my path to a leadership position, more so than I could have achieved somewhere else. Ultimately, the experience highlighted the importance of being willing to take bold chances and moves.
“What were breakthrough moments for each of you in your development?”
Jay: When I was working as an assistant at Insignia, which later became CBRE in 2001, I kept driving past a building on Rodeo Drive with papered windows. It belonged to Tommy Hilfiger, the company that was trying to sub-lease the space without any sign or indication that it was available. I wasn’t on that side of the business yet——I was involved in investment sales, dealing with the buying and selling of buildings— but I was determined to figure out what was going on. I asked someone I knew, who knew someone at Tommy Hilfiger, who eventually connected me with Tommy Hilfiger's lawyer. This led to us securing the sub-lease for the property. It wasn't the most lucrative deal since it was a sublease and given the payment structure, it was not a big money maker. Still, I managed to bring in Brooks Brothers as a tenant. Fast forward 15 years, I ran into Robbie Anderson who is a prominent figure in Beverly Hills, who remembered the work I put into this deal from 2003. He hired me as his leasing agent, and we negotiated with major companies like Apple and a Tesla-type company, although the deals ended up falling through. Robbie told me to put the building on the market, asking $300 million. While I earned only $20,000 for the initial deal and had to split it with my two partners, many years later, I sold the property to LVMH for $245 million. This deal marked my first real entry into the world of real estate on Rodeo Drive. This experience taught me that hard work and persistence pay off, even if success doesn't come immediately. That initial sub-lease may not have been a major financial win, but it was a pivotal moment in my career, as it was my first entry into Rodeo Drive, which changed my life.
Marineh: I have a disruptive personality, in the most positive sense, and when it comes to my personal goals, I thrive on breaking the mold and embracing new challenges. I don’t like repetitive routines. When the opportunity at McDonald's presented itself, despite my lack of experience in retail real estate, I approached the interview with honesty. During my interview, a key question I often ask myself resonated deeply: "Why not me? Why wouldn't you pick me?" If there’s no real reason against it, I go for it. My approach with McDonald's was straightforward: I uphold a strong foundation in real estate, even if I lacked specific retail experience. Retail, after all, is just one component of real estate. I again was very forthcoming in my interview and this attitude, along with my solid background, secured me a position at McDonald’s. Less than two years into my position, a promotion opportunity presented itself five months ago. Again, I asked myself, "Why not me?" I knew who I was up against and to be honest, I knew I was better. When my boss pointed out my short tenure of nine months, I emphasized my 20 years of experience in the field. This mindset—questioning why not me and believing in my capabilities—was a watershed moment. It taught me that if there’s no reason you can’t do something and you present yourself confidently, others will believe it too. In real estate, this mentality is crucial. The worst outcome is a "no," something we encounter regularly in this industry. Embracing this perspective has been really pivotal for me, as it’s allowed me to take advantage of opportunities and face challenges head-on.
Josh: In the early part of my career, a significant watershed moment was the global financial crisis, which left a big mark on many of us. During this period of time, I witnessed many prominent industry figures, those who had achieved great success in their lifetime, ultimately falter when the tide went out. The events leading up to and following the crisis revealed a great deal of questionable decisions.What I learned from this experience was the importance of self-reliance in both business and life. No one can provide you with all the answers. From 2008 to 2012, even the smartest and most successful individuals were not immune to the pitfalls of the industry. It helped me understand that we must pursue our goals with determination and independence, instead of relying on others.
“What are some of your routines or best practices? What are tips and tricks that you would share that make you the best in class professionals?”
Jay: My daily routine is almost like a reality show without the cameras. Every day is different and my calendar is constantly changing, but I’m consistently always running around town. Rather than sitting at a desk, I consider my car my office, as I navigate through various parts of the city—Malibu, a place I love very much, West Hollywood, where I live, Beverly Hills, and occasionally downtown. My day involves a lot of zigzagging around town. I often pull over to check messages and emails, although sometimes I catch myself checking them while driving—a habit I’m trying to break. Despite the fast pace, I make it a point to stay connected and responsive throughout the day. This has been my way of working for over twenty years, and I haven’t changed many of the practices I adopted back then. I never want to reach a point where I feel too important to engage in these routines. I realize that it is a lucky dream to live and work in LA, and therefore, I approach my work and life with humility, because I know it can change at any moment.
Marineh: I intentionally surround myself with individuals who are smarter and more skilled than I am. There is no benefit in hiring clones of myself since I already do what I can do. Instead, I bring on board people who are experts in their respective fields and whom I trust wholeheartedly. I don't try to outthink these experts; rather, I am a huge proponent of "playing up." If you only interact with people at your own level, you will remain stagnant. Therefore, I believe we must challenge ourselves by talking to people who are more knowledgeable than we are, because it’s the only way to learn. Additionally, I believe that being grateful and kind to people is really powerful. We must listen to others’ ideas and not be dismissive. I also believe in the importance of transparency. In the real estate industry, transparency is essential because the ultimate goal is to close deals. No one tries to outwit others, as the objective is a mutually beneficial outcome. Therefore, by being transparent and forthcoming, you can work through many challenges and create an amazing working environment.
Josh: I find it really challenging to focus on the right things amidst the constant flow of demands and ideas. From the moment I wake up, I immediately check my phone, and I already have 100 things to do, as people are sharing a flood of ideas, deals, and tasks. If I were to pursue every single one, it would lead to a day in which I don’t accomplish anything meaningful. There are days when my calendar is filled with meetings, and by the end, I wonder what was actually achieved. On the other hand, there are days when I manage to shut out the noise, focusing on what truly matters. These are the days that I find interesting, like boarding a plane to pursue a promising opportunity or dedicating time to an important person. Those are the remarkable days. Finding a balance between these extremes is hard, but it’s really crucial for both productivity and fulfillment.
“I developed the mentality that only until the ink is 98% dry will it probably happen. It’s important to have a soft gaze on what’s coming and never getting too high or too low, but staying steady.”
“When the market is down, as it was in 2008, or a deal falls through, how do you pick yourself back up, bounce back, and come out stronger from it?”
Josh: I find that with a deal-based business, the ups and downs are tremendous. I don’t know if this is a good or bad thing, but I’ve reached a point in my career where until the ink is dry, I don’t believe a deal is happening. That being said, there are moments where you get over the “hump” and think to yourself “I think this thing is actually gonna happen.” and you allow yourself to believe. That thought and sense of assurance is a dangerous moment for me.
Jay: For me, a very real life example of the market being down is 2020, during COVID. I usually do about 100 deals a year, and that year I did one lease. My entire year was spent negotiating rent reduction for tenants, helping about 300 different clients, and I didn’t make one dollar. Every single situation was different–three months free, two years free, etc. It went on and on, and all I could say to myself and to my team was “Take names this year, it will come back.” Two years later, all of a sudden, retail bounced back, with luxury brands experiencing incredible activity. We’re now back in a strange period, as interest rates are high again. However, the point is that 2020 is a strong example because it felt like the world was ending. My advice would be to hold strong and take these market downturns as opportunities to learn, grow, do research, and take names, because if you focus and believe, success will come back around.
Bill: If there was utility to getting frustrated when something went wrong, I would get mad whenever things didn’t go my way. I started developing this probabilistic view of the world, and to Josh’s point, I developed the mentality that only until the ink is 98% dry will it probably happen. It’s important to have a soft gaze on what’s coming and never getting too high or too low, but staying steady. It’s difficult because we have all been in situations in which we do mental math and think “If this happens, then this is what it means to me and this is what it will produce for me” However, with time you learn that those mirages can crash and they are not worth the high of it. If you stay steady you will end up making the very best decision that you can.
Marineh: I believe it's important to be able to pivot and stay agile. For example, in California, developers are struggling due to high interest rates, and we're entering lease agreements with those who can't meet their obligations. Instead of losing the deal, we adapt by proposing to buy the property. This provides them with the capital they need and allows us to secure the asset, even offering to purchase at a McDonald's cap rate, which is usually very attractive. Essentially, we prefer to buy, and they prefer the immediate cash flow. This approach shows how applying a different method to an existing solution can be really effective. Flexibility and creativity are crucial. If there isn't enough inventory in the market, we might approach an auto body shop on a prime corner and offer $2 million. Often, such mom-and-pop businesses will accept the offer, allowing us to secure the property. The key is to be innovative and consider alternative scenarios. It's easy to get bogged down by the challenges of the COVID era or the 2008 financial crisis, but you need to find ways to make a livelihood. By thinking creatively and remaining flexible, you can navigate through difficult times and achieve success.
“Marineh, I've been hearing either rumors or rumblings that fast food chains are going bankrupt or closing, and I don't know if that's to the lower economic demographic. I'm curious if you've actually heard the same or experienced the same.”
Marineh: I have not experienced that, but I am fortunate to work for a company that has thrived, even during the COVID-19 pandemic. During that time period Mcdonald’s profits were higher than they've ever been primarily due to their ability to pivot. We closed our dining areas and focused exclusively on drive-through service, which accounted for the majority of our business. You may be familiar with Burger King and other fast-food chains, whose models can vary significantly. Burger King, for instance, operates under a full franchise model, where franchisees control the real estate. In contrast, McDonald's employs a corporate-guaranteed lease model, providing a more of a safety net. This approach has allowed us to remain opportunistic when we hear news of things closing down. While many have struggled, we have not faced the same challenges.
“When the market is down, as it was in 2008, or a deal falls through, how do you pick yourself back up, bounce back, and come out stronger from it?”
Josh: I find that with a deal-based business, the ups and downs are tremendous. I don’t know if this is a good or bad thing, but I’ve reached a point in my career where until the ink is dry, I don’t believe a deal is happening. That being said, there are moments where you get over the “hump” and think to yourself “I think this thing is actually gonna happen.” and you allow yourself to believe. That thought and sense of assurance is a dangerous moment for me.
Jay: For me, a very real life example of the market being down is 2020, during COVID. I usually do about 100 deals a year, and that year I did one lease. My entire year was spent negotiating rent reduction for tenants, helping about 300 different clients, and I didn’t make one dollar. Every single situation was different–three months free, two years free, etc. It went on and on, and all I could say to myself and to my team was “Take names this year, it will come back.” Two years later, all of a sudden, retail bounced back, with luxury brands experiencing incredible activity. We’re now back in a strange period, as interest rates are high again. However, the point is that 2020 is a strong example because it felt like the world was ending. My advice would be to hold strong and take these market downturns as opportunities to learn, grow, do research, and take names, because if you focus and believe, success will come back around.
Bill: If there was utility to getting frustrated when something went wrong, I would get mad whenever things didn’t go my way. I started developing this probabilistic view of the world, and to Josh’s point, I developed the mentality that only until the ink is 98% dry will it probably happen. It’s important to have a soft gaze on what’s coming and never getting too high or too low, but staying steady. It’s difficult because we have all been in situations in which we do mental math and think “If this happens, then this is what it means to me and this is what it will produce for me” However, with time you learn that those mirages can crash and they are not worth the high of it. If you stay steady you will end up making the very best decision that you can.
Marineh: I believe it's important to be able to pivot and stay agile. For example, in California, developers are struggling due to high interest rates, and we're entering lease agreements with those who can't meet their obligations. Instead of losing the deal, we adapt by proposing to buy the property. This provides them with the capital they need and allows us to secure the asset, even offering to purchase at a McDonald's cap rate, which is usually very attractive.
Essentially, we prefer to buy, and they prefer the immediate cash flow. This approach shows how applying a different method to an existing solution can be really effective. Flexibility and creativity are crucial. If there isn't enough inventory in the market, we might approach an auto body shop on a prime corner and offer $2 million. Often, such mom-and-pop businesses will accept the offer, allowing us to secure the property. The key is to be innovative and consider alternative scenarios. It's easy to get bogged down by the challenges of the COVID era or the 2008 financial crisis, but you need to find ways to make a livelihood. By thinking creatively and remaining flexible, you can navigate through difficult times and achieve success.
“Marineh, I've been hearing either rumors or rumblings that fast food chains are going bankrupt or closing, and I don't know if that's to the lower economic demographic. I'm curious if you've actually heard the same or experienced the same.”
Marineh: I have not experienced that, but I am fortunate to work for a company that has thrived, even during the COVID-19 pandemic. During that time period Mcdonald’s profits were higher than they've ever been primarily due to their ability to pivot. We closed our dining areas and focused exclusively on drive-through service, which accounted for the majority of our business.You may be familiar with Burger King and other fast-food chains, whose models can vary significantly. Burger King, for instance, operates under a full franchise model, where franchisees control the real estate.
In contrast, McDonald's employs a corporate-guaranteed lease model, providing a more of a safety net. This approach has allowed us to remain opportunistic when we hear news of things closing down. While many have struggled, we have not faced the same challenges.