investor Quintin Primo III realized a long time ago that being an African American in commercial real estate was an asset, not a liability. “Being black in a room full of white professionals makes me different, people tend to remember. That is valuable,” says the proud 51-year-old chairman and CEO of Capri Capital Advisors, a Chicago-based institutional real estate advisory firm.
Primo has made the most of his opportunities, and today his company manages $2.8 billion worth of real estate assets on behalf of institutional clients. “Diversity is a very powerful tool,” Primo says, “and it's becoming increasingly powerful as the urban marketplace is becoming viable as an investment vehicle for institutional investors.”
Last January, for example, Capri beat out 18 other bidders to acquire an 850,000 sq. ft. shopping mall in south Los Angeles. “We argued that as a minority-owned firm with a substantial track record, we would be the best buyer for the property,” he explains.
Being black might seem like a weak source of competitive advantage in a country where 13.4% of the population is of African descent. The commercial real estate industry has a market valuation of approximately $5 trillion and employs 100,000 professionals, less than 1% of whom are African American, according to the Real Estate Executive Council (REEC), a national minority real estate consortium. By comparison, according to REEC, 8% of retail professionals are black.
Michael Bush, the executive director of the Real Estate Associate Program, a Washington, D.C. group that works closely with the International Council of Shopping Centers (ICSC) to attract minorities to commercial real estate, estimates that the number is probably around 600 to 700. That's just an educated guess, though, says Bush. “Nobody keeps statistics because they're too embarrassed to keep them.”
Signs of progress
Although their presence remains small, African Americans who are well established in the industry say that staffs are slowly growing more diverse.
“When I started in the industry, you walked into a boardroom and all you saw were white men,” recalls William Lampley, a principal at Kellogg Partners, an Atlanta-based firm specializing in tenant representation.
Now, say Lampley and other African Americans who have been in the industry for over a decade, the industry is beginning to get a little more diverse than it once was. Most executives say the progress has been driven largely by the demands of large corporations and pension funds who want their vendors to become more diverse.
Suburban overbuilding also means that many of the bestare now in largely black and Hispanic urban cores, where blending into the community can be an advantage.
“If General Motors wishes to do business in India, it hires Indians. If General Motors seeks to do business in China, it must hire Chinese,” says Primo. “You would be considered disingenuous if you, as an institutional investor, were to go into these communities and have no diversity on staff.”
CB Richard Ellis is one firm that's gotten the message loud and clear. “Certainly, as a service provider, our clients are becoming more and more diverse, and it's becoming incumbent on us to make sure we respond to that in serving our clients,” says Jack Durburg, senior managing director at CBRE in Chicago.
Cushman & Wakefield is another firm that is making efforts to woo minority talent. In 2003, Cushman joined a marketing alliance with Concordis, the country's largest minority-owned real estate firm. It's also tried to attract more minority.
One coup for C&W: the recruitment three years ago of 29-year-old whiz kid Samir Idris, an Atlanta-based broker who has already generated more than $1 billion in sales (see profile on p. 38).
“Diversity,” used in the industry as an umbrella term that encompasses everything ranging from minorities and women to investing in underserved urban markets, is also becoming a more popular subject for the industry as a whole. A conference called the Global Diversity Summit in Commercial Real Estate attracted over 350 industry professionals to Atlanta in July.
Real estate was also on the agenda at a diversity conference sponsored by CalPERS (Public Employees' Retirement System), and CalSTERS (California State Teachers Retirement System) in San Jose in April.
While it might not be too surprising that Wall Street is interested in any topic the trustees of a combined total of $300-plus billion in assets consider important, CalPERS CEO Fred Buenrostro Jr. said at the conference the 500 attendees who showed up more than exceeded organizers' expectations.
Many companies have long reached out to minorities through organizations such as Bush's REAP program, which has found positions at many top firms for more than 50 minority real estate professionals. Another initiative with similar goals is the Emerging Leaders Program, a minority recruitment project founded several years ago by REEC.
The brainchild of Primo, the Emerging Leaders Program is an 18-month commercial real estate internship at Capri or a large firm such as GE Real Estate or Trizec. ELP is intended by its sponsors to help recruit promising minority candidates into the field. Like REAP, the goal of ELP is not just to add more minorities to the industry, but to recruit some highly qualified young business people.
At ELP, most of the candidates are young MBAs with gilt-edged business credentials — professionals like 30-year-old Careina Williams, whose resume includes a bachelor's and master's degree from Harvard University and a stint at Goldman Sachs — not the kind of people who lack options.
Now a vice president at Capri, where she is raising capital for a fund devoted to urban development, Williams says that ultimately demographics and market needs will push commercial real estate to become more diverse. Right now, however, she says she has found that commercial real estate is still far behind Wall Street when it comes to diversity. “It's almost like the last frontier,” she says.
A league of their own
Yet even if the leadership of commercial real estate wants the industry to become more integrated, hiring decisions are still made by individuals further down the ladder, and African-American professionals say that getting to that decision maker is sometimes hard to do.
Many observers say that one reason for the present lily-white complexion of the industry is simply because commercial real estate was a closed world for a long time, dominated largely by family businesses. “If you are born into it, or if you play golf with the right people, or if you socialize with the right people, it's pretty easy to find the door. But if you don't, you don't even know there's an industry,” Bush says.
Breaking in requires finding someone who is willing to take a chance on you, explains Tanya Nebo, a real estate attorney for Holland & Knight in Atlanta. That can be hard to do, if you don't have the right contacts. “People tend to do business with people that they're comfortable with,” she says.
To act as a counterweight against the traditional old-boys' network, African-American real estate professionals are now actively cultivating their own networks. Associations for African Americans in real estate have cropped up in major cities such as Washington, D.C., Atlanta, New York, and Chicago.
Beyond the opportunity to get to know each other, the leaders of some of these groups are also trying to teach colleagues a bit more about the traditional social side of the real estate game. The African American Real Estate Professionals group in Washington, D.C., for instance, sponsors an annual golf outing. Co-founder Herman Bulls, CEO of Jones Lang LaSalle's public institutions group, says that he was “very serious” about the event.
With the exception of Tiger Woods, Bulls says, not many African Americans play golf, and it can put them at a disadvantage. “I'm not saying that you have to play golf to be successful in real estate, but there are a lot of tournaments and that's where a lot of the deals and lot of the information is passed.”
African-American executives are trying to give something back to the industry in various ways. Looking back on his own career, Primo chalks up much of his success to the fact that after foundering for a few years under a racially insensitive boss in his first real estate job, he was “rescued” by an African-American executive.
Primo's mentor told him to ignore insensitive or racist remarks, and taught him that in the long run, doing excellent work was “infinitely more important than the color of my skin.” Primo is trying to return the favor now, through his association with ELP, where he has made interns' access to mentors a key component of its design.
Two steps forward, one step back
The pro-diversity programs may themselves be creating some unintended side effects. One complaint: a number of large, non-real estate corporations set aside some minor parts of their business for minority-owned real estate firms, but some say such set-aside business can turn into a trap for a firm that's looking for greater success.
On the tenant-rep side of the business, many big companies are happy to work with a minority firm, but only to a degree, says Lampley of Kellogg Partners. “A lot of them want to paint you into a bucket,” he says, explaining that big corporations often want to assign projects that do not include critical assets or assets that are not going to be extremely profitable. “That's sort of how they check the box that ‘we've addressed supplier diversity.’”
Once the box is checked, the companies are sometimes reluctant to give the minority firm bigger projects and more lucrative deals. While this has been a source of frustration, Lampley says that he can get out of that trap by joining forces with a larger firm. Through Kellogg's partnership with Grubb & Ellis, for example, one of its Fortune 500 clients was finally able to see “we were more than a small boutique.”
Primo has a similar concern about “emerging manager” programs, a practice many pension funds have of setting aside relatively small investment allocations for minority managers. The problem, Primo says, is that it's difficult for an investment manager to build much business through the typical $10 to $15 million allocation, even if the advisor buys 10 properties this way.
Primo explains that the reporting requirements of all those boards of directors eat up time, and yet the scale is too small to ever reach enough critical mass that the pension fund would ever consider the advisor for a large-scale project. “That's a model that just doesn't work,” Primo says. “You are doomed to failure. You'll make no money, and you'll eventually go out of business.”
Primo says that he and his partner had to acquire a larger firm in order to break out of the “emerging manager” class. As a larger firm, Primo and his partners were finally able to get hold of larger allocations. “Overnight, we went from being an also-ran to being a major competitor,” he says.
Others are not convinced that the business is really changing in any meaningful way for African Americans. Some executives note that African Americans are still under-represented on the transactional and investment side of the business, which are among the commercial real estate service industry's biggest profit centers.
There are also very few African-American developers. Michael Roberts, CEO of the Roberts Cos., and president of the National Association of Black Hotel Owners, Operators and Developers, points out that out of 55,000 hotels in this country, only 235 are black-owned.
By comparison, the St. Louis developer says that Indians and other Asians own 38% of all the country's hotels, a discrepancy he ascribes in part to the unique difficulties African Americans face in getting banks to make loans for developments in black neighborhoods.
Bennett Voyles is a Paris-based business writer.