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By Joy Kang '18
Michelle Felman is an Adjunct Professor of Business at Columbia Business School. She is a Trustee of Forest City Realty Trust (NYSE: FCE) where she serves on the Compensation Committee. Professor Felman is also a Trustee of The Partners Group (PGPHF), a global private equity firm where she serves as the Chair of the Investment Oversight Committee. She also sits on the Board of the Turner Impact Fund, a social impact platform that invests in education, workforce housing and healthcare. She is a member of the Board of Directors at the Cumming Corporation, a global construction management firm and Reonomy, a real estate technology platform. She is the founder of JAM Holdings, an investment and advisory firm.
Professor Felman began her career at Morgan Stanley in the Investment Banking Division after graduating with an MBA from the Wharton School at the University of Pennsylvania. She later joined GE Capital as a Managing Director of Business Development, where she was responsible for the acquisition of real estate and non-performing loans from the Resolution Trust Corporation (RTC), banks and insurance companies in the United States, Canada, the United Kingdom and France. In her role, she was responsible for setting strategy for entering new markets and developing new products for the commercial real estate division.
From 1997 to 2010, she served as Executive Vice President - Acquisitions and Capital Markets of Vornado Realty Trust. During her tenure, she helped grow the REIT from a $3 billion equity capitalization company to a $16 billion equity capitalization company. During that same period, Vornado diversified from a strip center company into the largest owner of office buildings in New York City and Washington DC. She remained a consultant to VNO through 2012. She served as a Board member of LNR, the largest special servicer in the United States, until the company was sold to Starwood Capital in 2013.
At CBS, Professor Felman co-teaches Advanced Seminar in Real Estate with Adjunct Professor Russell Platt of Forum Partners. She co-authored the case study on The Amazon/Whole Foods Market Transaction: Implications & Impacts on REITs (2017). In a recent interview with Joy Kang ’18, she discussed her thoughts on the current real estate market as well as her experience and advice to aspiring young professionals.
You are well known for professional expertise in commercial real estate. Could you share your experiences on how you got your career started and how it has progressed?
Prior to business school, I worked for Kidder, Peabody & Co. in the tax shelter group analyzing real estate and oil and gas deals. After the tax law changed in 1986, the group and its products became obsolete. I was able to parlay that real estate exposure into a real estate operational role and worked for a small real estate developer in New York that specialized in retail and multi-family assets.
I decided to pursue a career in Real Estate and realized I needed an MBA. I went to Wharton and was fortunate to get one of the few investment banking real estate jobs with Morgan Stanley after the stock market crash of 1987. When the RTC crisis emerged in the early 90s, I was able to leverage my investment banking experience to move to the principal side of business. At that time, the markets were in turmoil; many S&L banks were taken over by the government and the first real estate opportunity funds were formed.
I got my most valuable investing experience while working for GE Capital. GE Capital was not a regulated financial institution, so we were able to take advantage of both our unregulated status and our AAA cost of capital to buy assets and NPLs from regulated institutions that were under pressure. We were all novices back then and learning together. I decided that my highest and best use was not necessarily working on the sealed bid process being run by the RTC. I instead leveraged my skills to convince some institutions that had not been taken over by the RTC to sell assets to us. For seven years at GE Capital, I focused on private acquisitions from banks and insurance companies. I was able to close the first private (non-RTC) distressed deal in the U.S. and Canada. I was in my late 20s with enormous responsibilities and able to step up at a very early age.
During your time at Vornado Realty Trust, you helped grow the REIT from a $3 billion equity capitalization company to a $16 billion equity capitalization company. During that same period, Vornado diversified from a strip center company into the largest owner of office buildings in NYC and Washington DC. What was the most challenging project you encountered and why? Can you talk about your experience during this growth?
I joined Vornado Realty Trust right after Mike Fascitelli joined the company. Steven Roth, the founder and chairman of Vornado, brought Mike in to help Vornado evolve from a retail-focused company to a diversified company. Mike had great relationships as a banker at Goldman Sachs which enabled us to do our first NYC acquisition – buying the Mendik Company which was trying to go public. That was our first foray into the New York office business. Our vision was to buy assets in great cities with great management teams and then augment the platform with individual asset acquisitions.
Our strategy in Washington DC was similar. The Charles E. Smith Company was the largest owner of office assets in DC. We ended up buying their office business and merging it into Vornado. Washington DC was a bigger challenge for us than NYC, because the rent growth parameters are very different. The challenge for me with this business was making sure that we bought those assets at the right basis. It sounds cliché to say “buy low and sell high,” but it really is true; if you pay too much on the buy you have to grow your way into the value proposition. We ended up buying the Smith assets at under $200 per square foot, a very important number to me. After many years as the market in DC transitioned, we demolished many of the older buildings, built new buildings and recreated a more vibrant, urban Crystal City. In addition, we augmented our business by buying the Kaempfer company, a developer that also retained small ownership interests in their buildings. This deal was critical as it enabled us to acquire an entrepreneurial management team along with an embedded option to buy brand new downtown buildings through our sliver equity. We would have the “first look” to augment our dominant Crystal City portfolio with Class A downtown buildings.
An interesting fact was that we signed the contract on the Smith portfolio at the end of August just prior to the tragedy of 9/11; Reagan Airport, directly across from our assets, was closed indefinitely. We could have enforced our force majeure clause but we were committed to the deal.
You have extensive experience in retail REIT and co-authored a case study on The Amazon/Whole Foods Market Transaction: Implications & Impacts on REITs (2017) at CBS. What was the most challenging project you have encountered and why?
Following the Amazon and Whole Foods merger, Professor Platt and I decided it would be an amazing case to write for CBS. Retail REITs and retail in general have been under pressure in recent years and online shopping was a big cause of this. In the past decades, grocery retail was the most stable asset class for investors. But grocers have been moving to a click and collect model, leading to fewer people shopping at physical stores, impacting the in-line stores due to a decrease in foot traffic. Because of technology, retail space is going through a dramatic change. In the Amazon-Whole Foods case, we look at the dramatic changes due to this dynamic.
Real Estate is often described as being demographically homogenous, especially at the executive level. What has your experience been like as a successful businesswoman and what advice would you give to rising female leaders in the industry?
I am a first generation American and my immigrant parents believed that one can achieve anything in America, the land of opportunity. They didn’t see black, white, male or female; instead, they only saw opportunities and were simply thrilled to live in this country. Growing up in such an environment, I didn’t think that being a woman in the business world was an obstacle. I thought if I worked hard, I could accomplish all my goals. But of course, in retrospect, looking at the facts, I was an exception to the rule.
Being a woman was, in fact, a positive. If i was in a room full of males, people would generally want to talk to me. I was also a bit of tomboy and an extrovert so I felt that I could carry on conversations with men about anything. This could be viewed as a relatively naïve perspective, but looking back I think it helped me succeed. I realize now that I was a needle in a haystack, but during my career I didn’t really see it that way. If I would give advice to those who want to be in the real estate industry or any industry for that matter, I would say: “You can’t change the world but you can change yourself.” As a woman, you should have the confidence to speak up when you see a promotional opportunity that is not coming your way or a project you want to work on. More importantly, learn how to play golf! I think that the world is going to change, but slowly. It will change because many of the younger generation of men were raised by working moms. My two sons thought every mother worked. They didn’t think that there was anything unusual about it. My oldest son works for a woman CEO and he does not think that is abnormal. In fact, he thinks it’s great! There is a greater awareness now of men who are in their 20s about the benefits of diversity. Much of the top levels of corporations are still “old school,” but that will change over time.
When some men hire women, he may think that in a few years the candidate may get married and have kids and leave the company. You can’t change the way any one person thinks, but you can be the best that you are. Show that person that you are determined, smart, with a strong work ethic, and your actions will prove them wrong.
You have taught at several academic institutions. What makes Columbia unique for a real estate professional?
I taught at Wharton for four years, but it was a half semester class for both undergraduate and MBA students. Because the students were at differing levels, it was more challenging to teach. Columbia really treats its adjunct professors unbelievably well and I feel very appreciated by the University. They value what outside working professionals can bring to the Columbia community. From a student’s perspective, every classmate has a diverse background to share. At CBS, many students who focus on real estate are from family businesses, which allows for even more interesting perspective and dialogue in the classroom.
At Columbia, you teach Advanced Seminar in Real Estate. What do you hope that students take away from your course?
What Professor Platt and I try to do is give students a wide array of real estate cases. Students appreciate being exposed to different asset classes which they otherwise don’t get to explore in other classes. For instance, we did a crowd funding agriculture case, a data center in the UK case, a technology real estate case, as well as a residential development and a corporate REIT case. We show students that real estate is not just about numbers—it’s about assets, people, integrity, and relationships. I really try to have my students walk away with an understanding that there are numerous paths to follow in the industry.
What skills do you recommend an MBA student should obtain while he/she is in school?
If you are going into real estate, it is about math at the end of the day. You really want to polish your financial and analytical skills, including accounting, corporate finance, modeling, M&A, and capital markets. It is also important to learn from your fellow students in group projects. Do not underestimate that! One of the largest benefits of business school is that students bring lots of real life experience from a diverse set of industries. Business school is also a great place to enhance your EQ. Ultimately, you need both qualitative and quantitative skills to succeed in life. Lastly, be honest with yourself on what you like and what you are good at. Business school is a good place to explore all of your interests and determine where you want to focus your career.
How did your MBA help you achieve a successful career in the real estate industry, and what advice would you give current MBA students and young professionals looking to pursue successful careers in the real estate industry?
Getting my MBA at Wharton was critical for me. I only worked for two years; one year in a financial analyst role and one year in an operational role. I didn’t have any family connections, so Wharton enabled me to open new doors to new opportunities. I was one of those annoying eager first year students talking to every second year about their summer jobs and previous full-time positions so I could land a great job. I tried to soak in as much interaction and knowledge as possible, while also expanding my network.
One piece of advice I would give to all students is be nice on your way up. You never know who you’re going to meet on your way down. One day you may want to call on one of your fellow students for potential opportunities, so be kind and be open-minded. Another piece of advice is try not to stay in your comfort zone in business school; branch out to get to know as many people as you possibly can. Your personal network will become one of your greatest assets.
Joy Kang ’18 is a second year MBA student focusing on Real Estate at Columbia Business School. She is a graduate of Carnegie Mellon University with a Bachelor of Architecture and previously worked for a global construction and engineering corporation to enhance her on-site experience. She plans to pursue a Real Estate Development career in New York City after school.