In March, Carla Merritt, president and CEO of La Droit Park Development Co., secured a $3 million, 10-year contract with the Government Services Administration to handle the leasing of 8,000 square feet of retail space. It is on the ground floor of the 438,000-square-foot federal office building that houses more than 1,200 employees in Washington, D.C.
That is a remarkable accomplishment when you consider Merritt only founded La Droit Park Development in January 2006, and eight years ago she didn't know anything about the ins and outs of retail real estate.
A former office property manager, Merritt is one of the successful graduates of the 10-year-old Real Estate Associate Program (REAP). She passed through the program in 1999.
“I always wanted to get into retail,” Merritt says “If it weren't for REAP, I would have never found my way in to the industry.”
Founded in 1997, by ICSC with the help of a $1 million grant from General Growth Properties' founders, the Bucksbaum family, REAP was created with the mission to train minorities for professional careers in commercial real estate.
As of March 31, REAP has placed 99 minorities of various ethnicities at dozens of companies in the United States including Ackerman & Company, CB Richard Ellis, Jones Lang LaSalle, General Growth Properties, Citigroup Realty Services and Wal-Mart Realty. While many who have matriculated through the program are African American, it is inclusive of all ethnic minorities. Graduates from the Class of 2006 included one Asian and two Latinos.
After graduating from REAP Merritt did a one-year internship at brokerage firm Insignia ESG as a leasing facilities coordinator before accepting the position of assistant general manager at Jones Lang LaSalle. In 2000 she oversaw leasing and property management of the five office buildings that comprised Black Entertainment Television's headquarters for 18 months. That was followed by four and a half years as a leasing associate at the Rappapport Cos. in McLean, Va.
This year, Merritt's Washington, D.C.-based, firm, La Droit, is on track to generate $250,000 in revenue from retail development, property management and construction services.
With the American population expected to become minority-majority by 2011 and spending by minorities combined projected to hit $2 trillion, retailers are raising their profile in the ethnic markets, with brokers and developers seeking more minorities to assist in the marketing of their shopping centers.
It only makes sense that companies would try to diversify at the management ranks as well. And while REAP has made an impact, it still has a long way to go. According to REAP, there are less than 500 ethnic minorities in the retail real estate sector. When you consider that ICSC has 65,000 members, it means that less than one percent of the industry is ethnically diverse.
“We've moved the needle, but it's still just a drop in the bucket,” says Mike Bush, REAP's founder and executive director. According to Bush, a retired vice president of real estate at Giant Food, hiring managers at real estate concerns recruit REAP graduates because they find it challenging to identify experienced minority real estate professionals on their own.
A 2005 REAP graduate Felicia M. Hamilton, real estate manager for excess land at Wal-Mart Realty, understands the factors that sparked interest in her from hiring managers in the industry, but, it is her performance on which says that she wants to be judged. Hamilton, who has an MBA from the University of Phoenix and a bachelor's in accounting from Dillard University worked as a residential real estate broker before taking part in REAP.
“There's a fine line between hiring someone of an ethnic background to penetrate a market and hiring an experienced individual regardless of their ethnicity,” Hamilton says.
Bush quickly quells any notion that the program is a social exercise. “Our associates add value,” he says. “The numbers show we've been successful identifying and placing talent. During the six months of coursework, followed by a one-year internship, professionals with three years of work experience and a bachelor's or advanced degree are trained to lease, manage and develop shopping centers, mixed-use properties and office buildings.
Many real estate companies and brokerages note their sponsorship in the program augments their in-house efforts to recruit, attract and retain minority talent. However, many firms contacted for the story declined to talk about their diversity efforts.
Developers Diversified Realty, the nation's fourth largest retail real estate owner and manager, ramped up its efforts last year to increase its minority hiring.
Nan Zieleniec, senior vice president of human resources with Developers Diversified Realty explains diversity within its workforce forges strategic business goals and that is to service a broader array of customers in the marketplace. For example, she says, in DDR's February acquisition of Inland Retail Real Estate Trust it was able to retain its regional property manager, Carlos Mena, which will further heighten the company's visibility throughout the Southeast.
“He is familiar with the market and the properties and he can speak to sole proprietors for whom English is a second language,” says Zieleniec, “That's an advantage when you're dealing with cultural nuances.”
In 2006, DDR forged a relationship with the Cleveland chapter of the National Black MBA Association through which it hired a new business development manager. And, this year, DDR is committed to bringing on at least one of REAP's graduating students.
Taubman Centers also recognizes that being culturally understanding makes good business sense, says Tom Pawlak, vice president of human resources. But the firm draws the line on hiring a minority for the sake of selling to a minority group.
“We're not just trying to find Black people to sell to African Americans, what we look for are ethnic groups that can expand the ideas and approaches for the company,” Pawlak says.
The philosophy precedes the spate of corporate diversity initiatives begun over the past decade, rather, it is the longstanding mantra of the company's founder A. Alfred Taubman, Pawlak says. “We don't do things just because they're right, we do them because they make good business sense,” he says.
Cash and cachet
Although the residential real estate industry has had greater success in diversifying, according to Bush, most retail real estate firms don't go recruiting in those waters because the skill set is very different. Jennifer Millman, vice president, shopping center division, for the Millman Search Group, adds that retail real estate executives don't give residential brokers a chance because they want to perpetuate the sector's elite status.
“Retail is perceived to be the most prestigious sector within commercial real estate, she says.”
Indeed, compensation is typically much higher in retail compared with industrial, office and residential. She says, someone with a college degree, and four years of experience leasing shopping centers can command a $100,000 salary.
Many residential and industrial real estate professionals are lured to retail in large part because it is more lucrative.
“Compensation is higher,” says Merritt. “Commissions are based on three percent of the total aggregate of the deal.”
High or low visibility?
The idea to start REAP came to Bush while he was still with Giant Food and was trying to lure more retail development to the Washington, D.C. metro area.
“I asked why weren't there more people who resembled the community running the stores to which the managers responded if we could find them, we would,” Bush says.
Therein lies the issue, retail real estate's longstanding history of being dominated by Caucasian males.
“It does seem like most of the brokers and leasing agents in the industry are white males,” says Clifford Sondock, director of leasing, at Jericho, N.Y.-based Spiegel Associates.
Sondock, who has been in the retail real estate sector for 25 years, noted that while the majority of the leasing agents are men, he says there is no question that the industry has become more reflective of the changing demographics in America. “The onus is on the ethnic groups to make themselves known,” he says. “I wonder if people of these races are seeking this as a career.”
Millman adds, many ethnic groups aren't aware of the industry and its professional opportunities. There is a disconnect between working in retail and working on retail real estate. Compounding matters is that most colleges don't have curriculums on retail real estate, so there is not much recruiting on campuses. Instead, much of the industry remains about who you know and there is still a healthy dose of people entering the industry as part of the family business.
Whether real or perceived, Judith B. White, professor, Tuck School of Business at Dartmouth University says that when you walk into a room and you're the only one, you know it, and it puts more pressure on you to perform. And with so few ethnic minorities in retail real estate, the pressure is only heightened. White says that pros in the industry need to realize when they work with ethnic minorities, “This person is here because they're really good.”
Kumea Shorter-Gooden, psychologist and professor at Alliant International University says the industry must let go of stereotypes to effectively recruit. “The biggest challenge is building relationships; especially in leasing,” Bush says. “You have to link up with someone who'll introduce you to all the players.”
Retail real estate industry veteran Harriett Edwards, vice president of retail leasing with Forest City Enterprises, got into the industry before REAP existed and says it helped to have mentors able to see past her skin color. Edwards points to colleagues at her current firm as well as General Growth Properties and Taubman Centers, where she got started. “They had all the (ethnic minorities) included long before it was fashionable because it was good for the company and its projects,” says Edwards.
Edwards, however, says it wasn't always easy and recalled instances as recent as the early 1990s when retailers stammered and stuttered when they saw she was African American. And over the phone, she says people openly vented their contempt of minority populations. Declining to name the retailer, Edwards recounted, the store's representative saying to her, “Boy, there's nothing but a bunch of darkies walking through there with boom boxes.”
Edwards recalled going to her boss, restating the conversation to which she said he replied, “Don't lose sight of the deal and charge him more rent.”
While charging more rent may have been a way to get back at him, Edwards says, the negative comments were indeed hurtful. However, she didn't let it get in the way of her goal.
“It was and is a conscious effort not to let it affect my performance,” she says.