Hilary Spann:

I think people believe that acquisitions is a pound the table negotiation style and whoever's loudest wins. But in truth, it's really sitting down and listening to what your prospective partner's objectives and needs are and figuring out what the best way is to meet those while at the same time achieving for your own investors what they need. And if it's done well, it's really a collaborative process.

Nancy Lashine:

Hello and thanks for tuning into Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Park Madison is a capital solutions and advisory firm serving the global institutional real estate business. We sit at the intersection of real estate managers and their capital partners. In bringing these two groups together we speak to a broad range of thought leaders about recent trends in real estate investing, capital markets, operations and technology. And on this show we try to bring some of those insights and conversations directly to you. My guest on today's rebroadcast is Hilary Spann. We spoke in January 2021, having just turned the page on 2020 unsure but hopeful of what a post pandemic future might hold. Everyone was talking about a return to "normal," but no one knew what normal would be. Of course, we're still in that discovery process. At the time of our conversation, Hilary was overseeing the America's real estate portfolio for one of the largest public pensions on the planet, CPP Investments.

CPP has roughly half a trillion in assets under management with investments in 55 countries. Approximately 7% is allocated to real estate through a combination of direct investments and private partnerships. We discuss CPP's outlook for different geographies and property types and where they are actively deploying capital. I hope that you agree with me that one of the more rewarding aspects of this episode is my discussion with Hilary about her personal career journey and how she ended up in her role at CPP. She has since moved on to be executive vice president at Boston Properties. Hilary's inspiring rise as a female leader in the real estate industry and her words of encouragement serve as timeless advice for others.

Let's talk about how you came to your current role at CPPIB. Hilary, why don't you start at the beginning for us?

Hilary Spann:

Sure. Well, first of all, Nancy, thank you for having me today. It's a pleasure to be here. I grew up in Hartwell, Georgia. It's a town of about 5,000 people in the foothills of the Appalachian Mountains in northeastern Georgia, and I'm actually there right now. It's a lovely, lovely place and I enjoy coming back to visit it. It's a very, very big contrast to New York City.

Nancy Lashine:

So let's talk about real estate. How did you end up in real estate? Is it something... Was it a passion from when you were younger or an accidental state?

Hilary Spann:

Somewhere between, I guess I would say. My mother is a visual artist, a painter and a potter primarily. And my father owns companies in the manufacture housing sector. I somehow added those two things up in my head when I was a teenager and decided that I should become an architect. So I studied architecture for my undergraduate degree, but really quickly, even when I was in school, realized that design wasn't my calling. My fellow students would put their projects up on the boards and I would just say, wow. And I would look at my own and go, so maybe design is not my calling. After graduate school, I went into real estate consulting with PricewaterhouseCoopers and that job landed me as a consultant to JP Morgan in New York in 2000. And so that's how I got from being an architecture student to an investor in one minute or less.

Nancy Lashine:

Terrific. And then you ended up in JP Morgan in an acquisitions role, is that right?

Hilary Spann:

I actually started out as an asset manager. I was an asset manager for a couple of years, and my boss at the time, Jim Walsh, who was the head of asset management at JP Morgan's Real Estate group, basically said, I think you'd be better suited for acquisitions than asset management. So I don't know if he kicked me out of the group, but he encouraged me to go talk to the acquisitions team and find a role in acquisitions, which I did. So I joined the acquisitions team right at the end of the dotcom bust essentially.

Nancy Lashine:

Wow, I hear that and I think Hilary, you are so lucky because there were so few women, there still are so few women in acquisitions and real estate. And to have your boss suggest that you're better suited to acquisitions and asset management is fantastic. So that sounds like you were also in a great place.

Hilary Spann:

I really was. Ben Gifford, who was our chief investment officer at the time with basically no fanfare whatsoever, built the most diverse acquisitions team in the industry at the time, I think. And at his retirement party, I told his wife Jane that he was the first feminist I ever worked for, which she thought was great.

Nancy Lashine:

Well, I didn't know we shared that in common. We should start a Ben Gifford fan club. Ben sat two offices down from me when I worked at the O'Connor Group, and it was Ben who walked into my office one day with this big fat green book called The Money Market Directory and said, here, if you're going to go help us raise capital, you'll need this. And he really helped me as a mentor in those early years at the O'Connor Group, and he's just a spectacular human being.

Hilary Spann:

He's fantastic. Can't say enough good things about him.

Nancy Lashine:

Yeah, and Jane's terrific too. Jane was one of the first women I knew who kept her own last name when I met other people in the working world, so she was a hero in my book.

Hilary Spann:

Yeah, she's fantastic. She's great.

Nancy Lashine:

Tell us a little bit about your career at JP Morgan. What were the different twists and turns in your journey there?

Hilary Spann:

Well, as I mentioned, I started as an asset manager and I was handling our California, Southern California mostly office portfolio. And I was enticed into that role. I remember my manager at the time saying, California is great, the portfolio is a 100% leased. Come out, it'll be fantastic. And then the dotcom bust happened and the portfolio went from 100% lease to about 60% leased overnight practically. And so I spent the next couple of years restructuring leases, doing bankruptcy workouts, figuring out how to meet operational priorities with budgets that were just not anywhere close to what we thought they were going to be. And it was hugely educational. And that experience really informed my acquisitions career when I made the transition over to acquisitions because I wasn't just looking at a bunch of numbers on a page. I had actually lived the experience of dealing with tenants and dealing with building operations.

And I should add that we didn't have an operating partner for the assets I was managing. So I was the part, I was the operator effectively working with a third party management company. So to have had that experience really was instructional in terms of how should you structure transactions, what diligence should you do, et cetera. So that was fantastic. Toward the end of the dotcom bust, as I mentioned, Jim Walsh effectively fired me from asset management and told me to go find an acquisitions job. I'm joking, of course, but he asked me to look into the acquisitions role. And I dabbled a little bit in acquisitions in the Southeast, but ultimately I wound up working on the Northeast acquisitions team handling New York City. And I had that role for the longest of any of my roles at JP Morgan. And then I ultimately wound up running the Northeast team before I left for three or four years.

So I feel like I had a new role every three or four years at JP Morgan, and that kept things really fresh and interesting the entire time I was there. It was just a great place to learn the business and I really had a lot of fun.

Nancy Lashine:

Sounds like it. And JPM is one of the best places to build skillset and work with super high quality people. I'm curious because over the last couple of decades you've had an incredible opportunity to build your career. I don't know very many women who've had two decades of successful acquisitions or investment in acquisition history. And obviously you're one of the preeminent people now in our business. What advice would you give a woman who might be considering an acquisition career based on your experience as you look back, what were really formative and important decisions that you made?

Hilary Spann:

Well, the first thing I would say is to believe that you belong at the table and to take the job. I think in certain instances I've seen friends of mine who are women ask themselves, do I really belong here? And the answer to that is definitively yes, you belong here. There's not one personality type or one style that can be successful at acquisitions, and I think that you really just have to build your own approach to it. That having been said, I think that it's really, really important if it's possible to be in an organization that values diversity and that will support you in that role. Honestly, I found it very easy to do acquisitions with JP Morgan, and I feel like that is partly attributable to the fact that JP Morgan was on my business card.

I think that people check bad behavior when they're coming to deal with blue chip organizations. And I didn't have a lot of bad experiences. And in fact, a lot of my joint venture partners, and I was going through it in my head before we spoke today, I think they were all men. I think all of the joint ventures that I did at JP Morgan were in partnership with companies that were run by men. But a lot of those joint venture partners have become really good friends of mine and mentors. So I don't want to minimize the fact that there are challenges for women in the industry and in particular in pursuing acquisitions as a career. But if you can work for a large institution that values diversity and values putting the best person in the role, then you can have a strong career. And I've been hugely appreciative of how well I was received by the industry, particularly in New York.

Nancy Lashine:

That's terrific. Well thanks for that. So now you're at TPPIB running the Americas. And just to clarify, the Americas is everything from Canada through the US and are you down to Brazil as well?

Hilary Spann:

Yes, yes. So I have three teams that report to me. One that's based in Toronto, one that is based in New York and one that is based in Sao Paulo. So our major markets in Canada are Toronto and Vancouver, in the United States, top five markets plus a smattering of other markets depending on the strategy or property type. And in Brazil, really just the deepest and most liquid markets, which are Sao Paulo. And we have a couple of investments in Rio. So that's the geography that I cover.

Nancy Lashine:

And CPP has a global footprint, is that right as you allocate capital?

Hilary Spann:

Yes, it does. So CPP Investments, for those who are not familiar with it, is one of the largest and most sophisticated investors in the world. It is a public benefit corporation, a crown chartered corporation that sits remote from the government of Canada. And its mandate is to invest the excess reserves of the Canada Pension Plan, which in the American context would be the Social Security Administration. So it's the federal retirement plan for Canada. And it has a global footprint. We have offices all around the world including Hong Kong, Sydney, London, Mumbai, New York, Sao Paulo, Toronto and San Francisco. And so we're active all across the globe in public markets and in private markets.

Nancy Lashine:

And do you get involved in the capital allocation process or do you just get an allocation every year and say, this is what we'd like you to commit? How does that work?

Hilary Spann:

We operate as a global business. The real estate business is a global business, and we have a long-term return target for the entire department that we have to meet as a group. So the members of the investment committee, including myself, are all incentivized to do the best deals that we can do regardless of where they are located geographically. So we don't set up different return requirements by individual market and duke it out among the markets. To help local teams evaluate deals, the return that I just described, that long-term return target is distilled down to country level returns in local currency, and then it's also further broken down by investment strategy. Is it a core investment or a development investment, for instance? But those local returns are designed to help us calibrate the relative attractiveness of the deal across markets versus being its own benchmark against which the local teams are measured, if that makes sense.

Nancy Lashine:

Can you share with us what your return expectations are for the Americas?

Hilary Spann:

It varies by market and it varies by sector, frankly. So we very rarely do core investments, but our investment targets there would be in the middle to high single digits. So we just did an office deal in Seattle where we expect that we will achieve a levered return that's close to 10%. That was done during COVID. And so there was some dislocation in terms of the number of people that were competing for that deal. And if you contrast that to Brazil, our expectation is that we would be getting 14% unlevered for a similar deal. So it really does run the gamut, and I would say the most competitive pricing in the markets today is for logistics. Logistics basically in any market. And multifamily comes in a close second. Office and retail trail I would say. And we do not do hotel investing, so I don't really have a view on returns for hotels.

Nancy Lashine:

And do you have a different target return in Canada because it's the home based country?

Hilary Spann:

Not because it's the home country. No. To the extent that there are different dynamics in Canada versus the United States or versus Brazil, then yes. I would say that we have a slightly larger portfolio in Canada than a non-Canadian investor might have, but it's performed exceptionally well and it's really been a benefit to our portfolio to have it. So we're very happy with the fact that we're slightly over allocated to Canada, particularly our investments in Toronto and Vancouver.

Nancy Lashine:

How do you think about currency risk even in the Americas? Are you hedging your AI risk or do you just think long-term?

Hilary Spann:

We generally don't hedge currency. For developed markets any fluctuation in currencies usually converges to the mean over time, and we have a very long-term view, so we don't hedge for that reason in developed markets. For emerging markets, hedging currency risk is expensive and the frictional costs of doing that would eat up a lot of our return. And the thesis anyway for emerging markets is that over the long term, the currencies are expected to strengthen against the developed markets anyway. So again, a lot of the way we deal with it is informed by the fact that we have a very long-term investment horizon and a long view of these things. And so we don't hedge currency for those reasons.

Nancy Lashine:

You guys have had a long and deep relationship in Brazil. And so how has Brazil performed for you over the last year or so?

Hilary Spann:

Brazil was emerging from a historic downturn pre-COVID. And one of the interesting things about the market there is that historically there has not been a lot of debt used on investments because interest rates are so high, have historically been so high down there. And what I found is that the correction in Brazil was really only half of a correction because unlike the United States where you see assets become distressed because they're over leveraged, that really doesn't happen in Brazil. So what you might see happen is that rents adjust or occupancies decline, but the owners are generally really well capitalized. And so if you're planning to go bargain hunting in Brazil during a downturn, it's really challenging to do it.

The way that we've created value in Brazil is by partnering with best in class operators, both to acquire, but also to develop assets. And most of our portfolio in Brazil is logistics. We have office and then we do have exposure to retail in Brazil, which performs X COVID quite well, given the fact that the infrastructure doesn't really support a robust e-commerce business yet, it's getting better. E-commerce is becoming more viable, but people still go to malls and they like malls because they're enclosed, they're safe, they have security, they're air-conditioned, they're pleasant environments. And so we have exposure to retail there as well. And they've performed fine. And in fact, we've continued to acquire through the crisis, through the COVID crisis in Brazil.

Nancy Lashine:

Obviously nobody was prepared for COVID-19, and it's not your first downturn, as you mentioned. And some people just had a real estate portfolio that was lucky, heavy in logistics, maybe a suburban multifamily focus, but everyone has some assets that haven't gone according to plan. So have you been doing anything differently to COVID, and if so, what would that be?

Hilary Spann:

Because of our long-term investment horizon, we haven't really had to make major changes to our investment strategy. We've been lucky, I would say that we've been able to invest through the crisis, both in the private markets and in the public markets. The volume of transactions slowed dramatically, obviously in the second and third quarters of 2020, but it's picked back up again in the fourth quarter. I had a conversation this week with one of the heads of a capital markets group, and he told me that the fourth quarter of 2020 might be their best quarter ever in terms of transaction volume. So that was a little bit surprising to me. The volume has definitely slowed, but it's as much as possible business as usual. Again, because we are looking out in an investment horizon that's 50 years or more for the fund's objectives, we tend to look through short-term fluctuations in economies and markets. COVID is obviously unprecedented, but it is also a time-limited event at some level, and it hasn't affected the way we've been investing.

Nancy Lashine:

Yeah, I'm sure our audience is really interested to hear what you're investing in today. Can you share with us some of the opportunities you're most excited about?

Hilary Spann:

So I would say that one of the most interesting things that we've done during the COVID crisis had its origins about two years ago. At that time, we established a listed real estate program, and it was designed to compliment our private program. So in instances where we could not get exposure through the public markets to a sector or to a geography, we built this program so that we could access it through the public markets. Having that program in place as we entered into the COVID crisis proved to be really valuable for the fund as we saw the public markets plummet in the spring, and we've been able to take advantage of the short-term pricing dislocation to accumulate ownership positions in really high quality names that we're trading at very large discounts to [inaudible 00:20:40]. Some of that is reverted at this point, but that was one of the most, I guess, tactical things we were able to do, to take advantage of the dislocation and the crisis.

And otherwise we've been continuing our investment programs. On the private side, we've closed multifamily joint venture, we've acquired an office asset. We're looking at expanding our logistics portfolio, which we have a large portfolio in logistics in the US. And so I would say on the private side, it feels very much like business as usual. We haven't yet seen a large volume of opportunities that feel like they're priced particularly well as a result of the COVID crisis, and so we've just been continuing to execute our business plan.

Nancy Lashine:

So if we can talk about property types for a few minutes, you mentioned logistics, obviously it's the most popular property type now. What are you seeing in your own portfolio and have you adjusted your strategy in any ways given the competitiveness from capital?

Hilary Spann:

Sure. So we've been investing in logistics for a long time, well before e-commerce became the primary driver of the sector. We have a sizable exposure to industrial in the Americas and it's growing. That's also true globally. It's primarily driven by large, long-dated development deals that require a strong balance sheet to execute. And so we've been able to differentiate ourselves from other investors by being willing to commit our capital long-term at scale to very complex projects. And we've seen a return premium in exchange for that. So we generally don't pursue acquisitions or shovel ready development because the returns have been rung out of those two spaces by the demand from global investors. But when it comes to a large multi-phase project that has entitlement requirements, possibly some environmental contamination, and, and, and, and. Those are the kinds of investments that play to our strengths, and that's really where we focused our efforts, and it has reaped benefits for us in terms of both the size and the quality of our portfolio and the returns that we've been able to achieve.

Nancy Lashine:

Are you generally the only capital investment investor in those transactions, or do you partner with other investors or do you partner with the developer? How do you approach them?

Hilary Spann:

The answer is different in different areas of the world. In the United States, we are generally the only capital partner. In Brazil, we have multiple partners in one of our joint ventures, and we are the only partner in another one of our joint ventures. And in Asia, you might get a third answer still. So I think the common thread is that our geographic reach as a company plays to the sector because there are only a handful of large global players and we've been able to develop strong relationships with them across markets globally. And so that's facilitated deal flow and capital placement even though they're different across the different markets. But the common thread is that we do have a handful of partners globally that we invest within in multiple markets.

Nancy Lashine:

That makes sense. And it certainly, it's great knowing once you have a partner, how you work together and building out those relationships-

Hilary Spann:

Absolutely.

Nancy Lashine:

... scale, because I would imagine for you, scale is so important and just efficiency of transaction time.

Hilary Spann:

Absolutely. Yeah, exactly right.

Nancy Lashine:

So let's talk a little bit about the most opaque sector of the market right now, which is office. Are you primarily in the gateway markets and what's happening in your office portfolio today?

Hilary Spann:

We are primarily in the gateway markets. Look, we believe that once there is a vaccine, people will want to return to the office. We believe that there may be some reduction in demand around the margins, certain jobs can be performed remotely. We think that there will also possibly be a willingness among employers to allow employees to work remotely one or two days a week after this is all over. But I don't know about you, but I miss collaborating with my colleagues in-person. I like them, I want to spend time with them. And while we've been successful in doing business during the crisis, I can't wait to get back to seeing people in person. I'm really ready to be back in the world again.

And so I think office has a central role in our lives for the purposes of building culture in an organization, for the purposes of collaboration in organization. And I believe that the great global cities will remain great global cities. So that's my pitch about office. In terms of our existing portfolio, it's performed fine. Our physical occupancy in terms of how many people are sitting in desks has been affected obviously, but we've been pretty lucky in terms of collections. We have very high quality assets and mostly we have credit tenants in those assets. So our collections have been pretty strong, and we're just both just at a human level and as owners of the real estate waiting for people to be comfortable coming back to the office. I think it's going to take an effective vaccine rollout for that to happen, but once it does happen, I think people will come back.

Nancy Lashine:

Yeah, I certainly agree with you about office. The history of the world, the history of the growth of cities. And I also, by the way, grew up in New York City, so I have a bias, but there's the economic damage that's happened over the last year will take a few years to recover from, and the tax base has been eroded. So there's some things that we're going to have to work through, but depending upon your time horizon, it could be a very interesting buying opportunity. And that's really what I wanted to ask you is do you see the next year or so as being an interesting buying opportunity for office?

Hilary Spann:

Yeah, so we just acquired in partnership with Hudson Pacific, an office asset in Seattle. It was a 100% leased to Amazon. We don't generally do core investing because our cost of capital is not usually competitive in that space, but we were able to pick that asset up at pricing that we thought was compelling. And we are actively evaluating partnerships to pursue value add opportunities in the office space. And that value add could come in the form of leasing assets that have become less than stabilized as a result of tenant departures. It could come in the form of being an older asset that has upgrade needs relative to being competitive, whether it's data infrastructure or just environmental, et cetera.

And so at a price, it's interesting. So I definitely think that we will be making investments in office in the future, and we will likely remain very interested in our top five markets, which are Boston, New York, San Francisco, Los Angeles, and Washington DC. I think that there is probably an increased willingness to look at knowledge markets that are slightly smaller as a result of this. So whether it's Seattle, as I just mentioned, or Austin or Nashville or some of these other markets that may become more attractive to us, but the major markets are the major markets for a reason, I think.

Nancy Lashine:

I hear you. Retail, are you looking perhaps to pick up some retail during this period of distress, or are you in more of a wait and see mode? How are you thinking about it?

Hilary Spann:

So as you know, retail has been in transition for a while, long before COVID accelerated it. I think that one of the things people forget about retail is that retailers are a lot more price sensitive when it comes to rent than say an average office tenant because it comprises a lot larger proportion of their operating budget than it does for an office tenant. And the rents had just run and run and run. And finally, I think some of the retailers had had enough. And I live near SoHo. I live just outside the boundaries of SoHo in New York City. And as I walk around SoHo, when I'm pushing my son early in the morning for his early morning nap, there are lots of vacant storefronts. And I just look at that and I think, well, the landlords haven't yet come to terms with what the rent is now. I don't know if I know exactly what the rent is, but I do know it's probably not a thousand dollars a square foot for a side street in SoHo.

And once that happens, once the landlords start to come back to reality on what rents retailers can support as part of their business model, I think there's an incredible opportunity because a lot of the interesting local businesses that made New York a really great place to be 20, 25 years ago, were forced out as a result of the cost of rent. And this is actually an opportunity for them to come back. And so when that adjustment happens, and I don't know how long it's going to take, it could be years before it happens, but when it happens, I think that there's a really interesting buying opportunity. And so we're watching it. And I would say the same in the grocery space. Grocery is not exempt from e-commerce as a phenomenon, as a potential threat, but obviously people need necessity based retailing that's convenient to their homes.

And so we think that that's a potential opportunity that we're watching. Enclosed malls have a long way to go. We own some, and I think that it will be some time until that segment of the retail sector finds its footing. So we're not watching that as closely, because I think we believe there's more to come on that front before there will be really an interesting investment opportunities. But High Street Grocery anchored, there could be some interesting opportunities out there sometime on the horizon.

Nancy Lashine:

Oh, I love your image of waiting for rents to recalibrate and then having all these interesting retailers come back to New York City. I reminded of what Second Avenue has looked like during the construction of the Second Avenue subway, and there was just all these empty storefronts because the streets were a mess. There was nobody living there. The noise was pretty bad. And then all of a sudden you got these cool little wine bars and restaurants and places that were priced out of Brooklyn come up to the Upper East Side along Second Avenue, and it made it a much more interesting neighborhood.

Hilary Spann:

Exactly. So if you look at SoHo, there's a ton of vacancy in SoHo. I live in Nolita, which is immediately east of SoHo, just across Lafayette. And there's no vacancy, very little vacancy in Nolita because the rents have never been as high over there. It's much more focused on little restaurants and little boutiques. I shouldn't say there's no vacancy, but there's a lot less vacancy. And you can see these little businesses organically trying to come in there and test out the market and see if their product or their strategy works. And it's great. And I'd hope that some of that organic creativity and local grown business diversity can come back to the market. I think it'd be really cool.

Nancy Lashine:

It would and it will. We just have to wait. Patience.

Hilary Spann:

Yeah, exactly.

Nancy Lashine:

Listening to you, I'm thinking about obviously this growing portfolio at CPPIB and your very long-term perspective, how do you decide if and when to be a seller? And is there anything that you're thinking about selling in the near term?

Hilary Spann:

So we have a very disciplined sale approach. You can only actually realize a return once you sell something. And so every year we go through our entire portfolio asset by asset. We're actually going to do it the week after next, and we discuss explicitly whether or not the asset remains a hold, should be a sell, should be repositioned, should be refinanced, et cetera, et cetera. And we base that decision largely on what we think the go forward returns are for the asset. A good example of our execution on that is that we had a relatively sizable portfolio of multifamily in the Bay Area that we had built as a development strategy starting in about, I think it was about 2012. It predated me joining CPP Investments, but we had finished the business plan there. The assets were stabilized, they were leased. They're great assets, but the go forward returns did not meet our return requirements, let's say.

And so we were able to dispose of them. Actually, our partner bought us out in January of this year, and we were able to then turn around and redeploy that capital into a joint venture that we just announced it. The press release, I think actually went live today, with Greystar, to develop multifamily nationally and to redeploy that capital into higher yielding assets. So that's one example, but we have a very disciplined sale process. Now sometimes markets don't cooperate. It's not always easy to sell assets, particularly when you own in partnership, but we focus on it very heavily. And so, one of my colleagues likes to say, hold forever is not an investment strategy. So the fact that we have a very, very long investment horizon, an indefinite hold period, if that makes sense.

Nancy Lashine:

Oh, it definitely makes sense. And it's a very disciplined approach for such a large firm. So that makes sense. The last topic I want to talk about, it's a topic that I think is interesting for many of our listeners, and it's ESG. So to start with, are you thinking about climate change? And if you are, how is it factoring into your investment process?

Hilary Spann:

So looking at ESG factors is definitely part of our investment process. We have a sustainability group that sits outside of the real estate department that helps the firm coordinate its views on this, and helps us with regards to individual transactions and what those risks and opportunities may be. So for example, we evaluated a transaction recently in India where we spent a lot of time analyzing the availability of water to a given city, and it required us to do a deep dive into infrastructure and environmental policy. Obviously the deal team was located in India, so I'm using the global we. But we as an investment committee were ultimately able to get comfortable with that risk.

That's just one example. We think about it in all sorts of ways, whether it's where our assets are located. Look, a lot of the great global cities that we want to be invested in are coastal cities, and so there's some healthy tension there. But nevertheless, as we think about how to protect our investments, we are definitely aware of the effects of climate change. We own in partnership with Oxford Properties, the St. John's terminal warehouse building on Houseton Street and the West Side Highway, which is being redeveloped for Google's use. And thinking about the potential climate change risks to that asset, which is very close to the water was primary in our thoughts as we were underwriting it, and as we were structuring the redevelopment with Oxford. So yes, it's a priority and I give the firm a lot of credit for trying to roll out a global policy for the entire portfolio rather than having the deal teams take piecemeal approaches to it. It's very helpful to have the central coordination amongst the various departments of the firm.

Nancy Lashine:

And it looks like you also have a central view about diversity and inclusion. And so I'm interested how, if at all, does that impact either your hiring practices here at the US or finding partners for transactions?

Hilary Spann:

It's something we think about all the time. We're a very global organization, and so diversity is a fact of life for us. We have colleagues across many geographic markets with very different backgrounds and experiences of the world. And having respectful work that celebrates the different backgrounds and experiences of our teams is just critical to our success. And so CPP Investments has... My observation coming in, I've been there about five years now, and I was really excited about how well they walk the talk on advocating for a diverse workforce. So it's embedded in all of our conversations, so much so that in a way it just becomes, we don't have to sit down and have a specific conversation about diversity because it's a fact of life that we live with and that we work toward every day. It is also an explicit annual objective for managers of people.

So that helps if you are explicitly mandated to consider it in your hiring objectives and by extension, if you tell your recruitment partners, Hey, this is really a priority for us, they pay attention to that. We've been very successful in the United States in building a diverse team. One of my team members ran the numbers for us the other day for a different purpose and told me that 77% of the US team in the real estate group is diverse, so is either female or is a person of color. And that's exciting. We've worked really hard on it, but there's always more work to do. And it's not just about diversity of gender or diversity of ethnicity. There's diversity of experience, diversity of background. And so I think it's a constant conversation and a constant opportunity to do better.

Nancy Lashine:

Oh, that is so inspiring to hear you say all of that, Hilary. And 77% is amazing. And certainly my experience with meeting people at CPP Investments is it's a very dynamic organization. I didn't know, I feel a little older listening to you. It's just so exciting to think about you having a child still in a stroller who you can walk and then also running this business, and I'm thrilled to death about that. So I wanted to just give you the chance as a wrap up question to talk a little bit about your career as you look back. Mentorship is so important. Do you want to share with our audience who have been important mentors in your career and lessons that you've learned from them?

Hilary Spann:

Absolutely. So I mentioned earlier Ben Gifford, the Chief Investment Officer at JP Morgan Asset Management at the time that I was there. He did just an amazing job quietly and with no fanfare, building a really diverse acquisitions team, and he never asked for credit for that, and I don't think he ever got credit for that. But he showed me, and I think the rest of the industry that there is no trade-off for having a diverse acquisitions team. Talent is talent. And so he was hugely influential. My direct manager in my latter years at JP Morgan was Elizabeth Prop, who is now running the equity investment business for the Community Preservation Corporation. She went over to the nonprofit side. And she is perhaps the most intelligent person I know, both in terms of IQ and in terms of EQ.

She imparted so much wisdom when it came to learning how to deal with people and just meeting people where they are, which I think people believe that acquisitions is a pound the table negotiation style and whoever's loudest wins. But in truth, it's really sitting down and listening to what your prospective partner's objectives and needs are, and figuring out what the best way is to meet those while at the same time achieving for your own investors what they need. And if it's done well, it's really a collaborative process. And Elizabeth was just hugely influential in teaching me that and helping me find the nuance in negotiations and in forming my own style of negotiation. So without her guidance and mentorship, I would not have half of the deals on my deal sheet that I have. She was just fantastic.

And then some of my joint mentor partners have been amazing mentors over the years. Doug Steiner of Steiner Equities, Todd Waterman at WatermanCLARK, Scott Reckler, Rob Lapidus at L&L. They taught me many different things and the different deals, but each of them is brilliant in their own way and has been very, very generous with their time since we've done deals. I was very fortunate coming up. That continues today. We have great partners at CPP Investments, Boston Properties, Bonetto, Hudson Pacific Properties, Greystar. These are just amazing world-class organizations, and the opportunity to work with them and to learn from them and their teams is really special. I have been incredibly fortunate in my career to have really great mentors.

The last ones that I would add are when I was a young deal person, my lawyers, they kept me out of a lot of trouble, and they taught me how to put deal documents together and ultimately how to negotiate. So Steve Moskowitz at Stroock & Stroock & Lavan was just instrumental, as was Peter Erwin at Debevoise and Plimpton. They're both great attorneys and they really, as I said, kept me out of a lot of trouble when I was a junior deal officer and taught me the ropes along the way.

Nancy Lashine:

You've had a lot of fabulous mentors and obviously a huge runway ahead of you with the platform that you've built, the team that you have, which we haven't even had a chance to talk about, but hopefully we'll at some point in the future, and a market that just keeps feeling very optimistic as we're sitting here today in the beginning of January 2021. So I want to thank you so much for joining us today and really appreciate all of your insights. I'm sure that our listeners have enjoyed listening to you as well. So Hilary, thank you.

Hilary Spann:

Thank you, Nancy. I had a great time talking.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So if you're enjoying the show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.