← The Kirsh Connection
The Kirsh Connection
The Turnaround Playbook: How Sandeep Mathrani Saved General Growth Properties and WeWork
00:56:10
Loading summary
Transcript71 lines
- [00:01]
A
Hi, I'm Andrew Kirsch, co founder of Sklar Kirsch. On this podcast, I interview industry leaders. You'll hear their real time opinions on today's market, their background, unique career highlights and guidance for newcomers to the industry. This is the Kirsch Connection. Welcome to another edition of the Kirsch Connection. And Happy Cinco de Mayo. On this week's episode, I have Sandeep Mithrani. I, a real estate executive whose career spanned several decades. He started with Forest City, then Vernado, and then became the CEO of General Growth Properties during the great financial crisis. And lastly, he became the CEO of WeWork after the WeWork board removed founder Adam Newman. Sandeep provides invaluable insight of what it takes to run a company, to turn around a company that is facing billions of dollars in debt, and how to leverage your relationships and work with lenders when things look very bleak. I know you'll enjoy my conversation with Sandeep Mithrani. Welcome to another edition of the Kirsch Connection. Today, I am here with Sandeep Mithrani from Atlas Hill. Sandeep, how you doing?
- [01:25]
B
I'm doing great. How you doing?
- [01:26]
A
I'm doing great. Look, Sandeep, I met you at a YPO conference in Nashville, if I recall right, about a month or so ago. And I was blown away by the discussion, meeting you and hearing your background at the companies that you've been CEO from where WeWork to Brookfield Properties, retail to general growth properties. I mean, just an unbelievable track record. And now you've got your own company. And I, I'm so gracious that, and grateful, I should say, that you have come on to my podcast to share your thoughts, your history, your perspective on today's market. So thank you for coming on, thank
- [02:13]
B
you for hosting me. I really appreciate it. I'm always, always happy to learn. And I learned a long time ago that as you get older, you listen, learn and advice. So I'm going to listen to your questions, I'm going to learn what the answers are, and hopefully I can provide some advice.
- [02:33]
A
Well, I think my audience and I will learn from you, Sandeep, as I did in Nashville a couple months ago. And we'll definitely get into your time at the companies I just indicated. But let's go way back, you know, where, where did you grow up?
- [02:51]
B
I grew up in Mumbai, or my day was called Bombay and now it's called Mumbai. I was there Till I was 16, when I finished my 10th grade. And then I came to the United States As a Rotary exchange student to a small town outside Philadelphia called Phoenixville, where I went from. Actually I skipped 11th grade. I went from 10 to 12. But I grew up in Mumbai and it was a great city.
- [03:24]
A
I don't think I. Yeah, so I don't think I told you, but before I met you, my wife and I had the unbelievable experience of being in India for two weeks in December. One of my former colleagues, who is Indian, got married in Udaipur. And so we were in Delhi for a few days. Agra to see the Taj Mahal, Jaipur, and then Udaipur and Sandeep. We didn't get to go to Mumbai, but what an unbelievable experience.
- [04:01]
B
Yeah, you actually did the, you know, the I, I call it the, the first time India tour, which is generally you land in Delhi and then you do Agra, then you do Jaipur. You obviously would do a diaper for, for a wedding. But then most people go to look at the tigers, you know, and. Which is also another city in, in, in Rajasthan. And then. But I'm glad you had a great trip. If you stayed at any of the villas, they were, obviously you must have gotten seventh class treatment. If you went to a daipur, you definitely were in one of the palaces. And so it's a different way of life. And that's how we grew up. Actually. The irony is most people think of, you know, people who come from India, you know, to America. They come for bettering their, their lives and their careers. There's a whole slew of us who are here who went to, you know, I would call it the best private schools in India and you know, went to best colleges in this country. We just landed up staying here, but we, we were very blessed to grow up, grow up the way you went on the vacation. I'm glad you had a good time.
- [05:17]
A
The people, the warmth of the people welcoming us. The wedding that we went to was similar to what you just indicated. Ypo family, the hospitality, the level of service, just the colors, the, the attire. And you would be proud that my wife and I, we dressed the part. So we've got our formal Indian attire. About four or five outfits of every different occasion. The partying went until 6, 7 in the morning each night. I don't know how I literally wouldn't have a liver if I lived in India and continued that path and attended weddings like it seemed like all of these people did.
- [06:04]
B
I'll just say one last thing before we move on.
- [06:06]
A
Yeah.
- [06:07]
B
I don't possess a black tie.
- [06:11]
A
You know what I can understand.
- [06:13]
B
Indian band gala which the black one as my black tie. And I stopped wearing a regular black tie over a decade ago. And even recently on Friday, we were at an event for a black tie, and I wore my bandhala. So you can put that outfit to use more often in the United States than you think.
- [06:35]
A
Sandeep, you're using the singular word of outfit. I've got outfits. I've got five of them. I've got a bar mitzvah this weekend, and next weekend, I think I may wear my formal Indian attire to today's bar mitzvahs. Yes, I appreciate that. Thank you. You just amortized my cost by a lot. Okay, and so then after you moved here to outside of Philly, what did you do next?
- [07:03]
B
You know, I went. I did a year of high school here, and I then went to university. I went to study to be an engineer, to be a civil engineer, to be specific. My father owned two companies in India, one that manufactured ventilation equipment and one that was a construction company. And the goal was for my older brother to be a mechanical engineer and go home and take over the manufacturing company, for me to be a civil engineer and go home and take over the construction company. My brother did become a mechanical engineer. I did become a civil engineer, but neither one of us went home. So there were well laid plans. I did a. I did a bachelor's of engineering, a master's in management, both in four years. So I was quite at a young age of 20. I graduated with two degrees, and then I did actually go home at that stage for one year to work for my father in the construction business. And he convinced me to come back and study some more. So I came back to do a master's of engineering, after which I never went home. So I don't know whether I made a mistake coming back or whether that was fate. But, you know, basically, I have two master's degrees, one in engineering, one in
- [08:22]
A
business, and so then real estate. How did you get into the real estate industry?
- [08:28]
B
So, you know, I then went to, you know, follow my dream to be in the construction business, actually, you know, so I went to work for a construction management company. And we did projects where there was public housing in Washington, D.C. to the wastewater treatment plant in Washington, D.C. called Blue Water, to the Big Dig in Boston, so to Preservation park in San Francisco and Oakland, actually. So I actually went and pursued the aspect of getting good training in construction, because at that stage, still, my intent was to go back home and work for my dad. Okay. So the intent was to get us experience and Then head back home. And then in 1986, when I graduated from college at my second master's degree, you know, you do what a lot of kids do. You buy your first car. So I bought a used Nissan Sentra. You know, I think in those days it was called Datsun, even, you know, Dotson.
- [09:31]
A
Datsun. That's right. I do remember Datsun.
- [09:34]
B
And. And. And so I bought it for 30,000 dol. Hundred dollars. And, you know, living outside Washington, D.C. and Alexandria, I wanted to buy an apartment for 55,000. And in those days, you can get an FHA loan, which was 95% financing, so you needed $2,750. So I actually sold my car, which I had bought for 3,500. You know, got the same 3,500. You know, I had money for the down payment. I borrowed a little bit on my credit card at 18% to pay for some closing costs. But any rate, I was into the deal for $55,000. I had an apartment. And about 18 months or so later, with two master's degrees, I was making $25,000 a year. And, you know, literally 18, 20 months later, I was able to sell it for 75, $77,000. I made a $20,000 profit. And I said, wow, the. This real estate stuff's pretty good when you, you know, when you're making 25,000 a year, to make a $20,000 profit means, you know, changes your life. And I did the same thing. I bought a house in Woodbridge, Virginia. I sold it, made some money, made about $10,000. And I said, I like real estate. And so I always tell people, you don't know what pivots your life and what will continue pivoting your life and what experiences that you may have that may change the trajectory of your. Of your life. And so I decided to look for a job in real estate. And, you know, a company out of Staten Island, New York, hired me to design shopping centers. So I moved to Staten island to design shopping centers. And I say small company, but. But in those days, it was a $400 million company, ironically, the same size as Kymco was in 1989. And so I got my start in 89 by designing shopping centers. And again, whether it was will, whether it was wanting to do more than just being an engineer, I can't tell you what the rationale was. Or maybe it was just a desire to learn more. I decided to learn the leasing, the property management, the capital markets, because I knew when I made that small apartment deal, the Buy and the sell was key. Okay. So I registered that and by 1992, very short time, I became president of this company. I was 30 years old and I became president of this company called Sanford Nalett, which, like I said, owned Open Air shopping centers. And by then I, you know, obviously, you know, I knew a little bit about finance, I knew a little bit about leasing, a little bit about management. And we were in a recession, which is actually the best time to learn because, you know, it's. You don't learn much when there, you know, tailwinds behind you, you know, a lot when there's headwinds. And, you know, I spent, you know, a year or so restructuring all the debt of the company. And, and then, of course, by 1994, the economy had changed. So I got my start really from, you know, hands on being an engineer, you know, so learning it from the operations, design, develop and construction side of the business.
- [13:18]
A
30 years old, president of a company that had what, $400 million in assets at that time, from 1990 valuations. That's pretty impressive.
- [13:29]
B
Well, you know, you better be lucky than good. What would you say it boils down to? What, what got me to that position really was, you know, it's a, it's an interesting. So there was a, there was a, there was a piece of land that the guy, you know, the company wanted to build a supermarket anchored shopping center. It's called the Weiss Class Dairy Factory on Staten Island. And, you know, there was obviously supermarket lease done. And the question became, how do you. Finance was now 1991, 92, you know, and I sort of put my hand up and said, look, I know I'm an engineer. I know I've been pivoting a little bit to do management a little bit to be leasing, you know, let me try my hands at the capital markets thing, you know, and of course, the owner of the company, Sandy Natal, said, what do you know about capital markets? And I said, not a lot, you know, but, but I can be resourceful. You know, I, and I, I made this ridiculous comment that my brother was a banker and that should have, that should give me some advantage. But my brother was a, you know, wealth manager. He wasn't really a banker to do capital markets, but he worked at Chase. And you know, in fairness to my brother, he did introduce me to a gentleman who was in the real estate sector. And ironically, he left Chase. His name was David Arzi. And David went to work for a company called Hella Financial.
- [14:58]
A
Yeah.
- [14:59]
B
And ironically, you know, with the help of Union labor life because it was a, you know, obviously in Staten island was a union state, a union city and you know, there was a recession. And so, you know, union labor life wanted to put their people to work and so they were making construction loans. And so the combination of union labor life and hella financial, we were able to secure enough financing to pull the project off, which, you know, gave me credibility that I was more than an engineer. But it was my tenacity, I think, to even have the gumption or the guts to ask. Right. You know, and that allowed me by then to start working on, you know, figuring out restructuring the entire debt stack against the company because it was a recession, it was a bad time. And having done that successfully, you know, gave me that visibility to, to be president, I believe.
- [15:59]
A
So I would say most people who are in the real estate business today, you know, have one of three or four backgrounds. Maybe they have a legal background and they pivot from law to real estate, or they had an accounting background and they pivot to real estate or, or they maybe were in Wall street and they were in capital markets finance or they just know, had a, they started in the real estate business right from, from day one out, out of college. Very few seem to have an engineering background. What was it about having an engineering background? How did it impact you in the real estate world?
- [16:39]
B
Yeah, so, you know, I, I, I, it's a really super question because when people come to ask me for advice, I, the young people, I always tell them that you have to start out either in the leasing, the design, development, construction or the asset management of the property management arms. I never tell them to go into capital markets, never tell them to go into M and A. And I said, because if you do that, you're just an order taker because you need the information from the guys who operate the business. Okay. And so in my case, I found that coming from that background, okay? One told me how, I mean literally and figuratively how a shopping center is built, okay? So I understood all the components of it. I understood how to buy the land, I understood how to take it to an approval process, how to go through a design process, how to go to night meetings. What does it all entail? It wasn't foreign to me. It wasn't someone putting it on a schedule and me looking at it and learning I was doing it myself. Then I knew how to get an anchor tenant lease down. I needed how, I knew how to go get it financed because now I had all the tenancies. I needed what the occupancies were. So I understood that fundamental aspect of it. So as my career progressed, you know, I was always able to get my hands dirty and understand the process, you know, whether it went to just Fast forward to GGP. You know, we had 200 malls. We did a quarterly review on every mall and we probably renovated over 100 of them. Okay. But I was able to sort of sit back and say, hey, guys, that's not possible. We can accelerate the schedule. We can do this. Hey, why can't we do this? You know, hey, why can't we sequence it in this way? Hey, why can't this be the value engineering method? I had that background to ask those questions versus barking in order saying, you know what? That's really expensive. Go figure out a way to go. Save me 10%. Okay. You know, what does that mean? Okay. But I could literally talk about materials, methods, you know, and even today, you know, when I'm now an entrepreneur, I own two malls, okay. I sit on design meetings and we were sitting on a design meeting earlier today talking about sequencing of construction. Okay. And I was able to digest it very quickly and say, look, if you're going to deliver this to this tenant by this date, this is what you need to, needs to happen. Right? And everyone else on the phone is, you know, generally, you know, on the finance, capital markets, legal side of the profession. And, and they were just watching how one of the owners was interacting with the entire design team because I'd been to that movie, so I can't tell you how important it is. Okay. You know, that you need to, it's important to have that background because it comes into play. I understand costs, I can sit back and say, guys, it doesn't work. You know, tell me the components of why it's so expensive so I can make a decision on what materials to change, what to do. And so you're right there not that many people with that sort of early background. But I think it's, it's been invaluable in my life to the extent I don't know how people operate without that background.
- [20:13]
A
Yeah, no. I've had several people on my podcast who have, who have said that because of their asset management background, they've been a much better operator and C suite executive because of that. Yet let's just call it for what it is. It's not sexy. It's not the sexy part of the business. And so many early 20 year olds want to jump all the way to the capital market side and hang out with brokers. And get treated to nice lunches and boondoggles and be on that side. So how do you make the leap as a 30 year old being a president of a company of what you just indicated to ultimately becoming the CEO of General Growth?
- [21:00]
B
Well, you know, at that age, I really, I tried to buy that company and unfortunately the founder passed away and the estate did not want to sell. And then lastly, I thought I might be an entrepreneur. In 1994, I actually, from the company bought a piece of land and developed it, which I still own to date, and it is on Staten Island. And I was going to go down the path of being an entrepreneur. And through mutual friends, I was introduced to Bruce Ratner, who I like to say is the father of downtown Brooklyn. Without him, there would be no downtown Brooklyn. And Bruce Ratner had a company called Forest City Ratner, where the public company owned a portion of it and Bruce himself owned the remainder. But Bruce was responsible for creating downtown Brooklyn, which is Metro Tech, responsible for buying the Nets, bringing Barclays Stadium. And so he created what today is the foundation of Brooklyn. Okay. And he had, you know, approached me through mutual friends and said, look, you know, you've done a lot of development in the boroughs of New York City. Urban development. I want to really build shopping centers in the five boroughs of New York City. And he gave me his rational reason why. And the main reason, besides. Besides, you know, I didn't coin this term, but I coined what he was trying to do as conscious capitalism, which is to bring the conscious into the community, do the right by them, but do it by making a reasonable profit. Right. And so his whole goal was, how do I bring supermarkets, how do I bring Home Depots, how do I bring these stores into the boroughs of New York City, you know, so that we can, you know, so people can buy affordable groceries. Because before that they were buying it from bodegas and, you know, where it was very, very expensive. And just to imagine, so many years later, we're still talking about, you know, affordability, right? It's the same conversation we had in 1994.
- [23:27]
A
And what, and what time period is this?
- [23:29]
B
94 to 2002. So he said, look, would you come and work with me for a year and help me get this retail business off the ground, you know, do a startup. I really enjoyed being with Bruce and I. He's a fantastic guy. We had a lot of fun. I mean, I remember stories where, you know, he and I would go into the borough president's office and he would say, look, I want to put A Costco. And he would slam a piece of meat on the, on the, on the table and say, look at the price of the meat of meat at Costco and look at the bodega. It was just, it was, he was, he was just, you know, any. And he could see he was passionate about, you know, doing right by the community. So we had a lot of fun. We built 20 or so shopping centers in the bars of New York City over an eight year period. And, and that led to moving to Vornado and there, you know, so my first job, I restructured debt got me to a position, my second job with Forest City, I, I did a startup, my third at Vornado landed up becoming a turnaround, unbeknownst to me because I was handed over the shopping center portfolio, which at the time was, I don't know, 40% or so vacant and with great real estate. Steve had amazing real estate, but he had moved on to buying real estate and becoming an owner of office buildings. And somehow the shopping center portfolio had been neglected. And the irony was that it was great real estate. And so I had the opportunity of bringing it back to its original glory and growing it at the time 6x from where it was over the next 8 years. So I was president of his retail division and, and thereafter, I guess I read my name in the Wall Street Journal of being one of five participants or one of five candidates for the CEO job at ggp. And the funny story is the headhunter hadn't called me yet. Four out of five of the candidates I knew quite well and as a matter of fact, four out of five of us are very close friends to date. And so that started the process of the selection process to become CEO of GGP.
- [26:05]
A
And what year did you become CEO?
- [26:09]
B
November of 2010. I actually did two jobs at the same time. I continued working at Vornado till January 31 and I was CEO of GCP and I took GGP to the roadshow to get it out of bankruptcy with new ownership of Brookfield, Blackstone, Pershing Square, which is Bill Ackman, Fairholme and Texas Teachers. And we took it public in January of 2011.
- [26:47]
A
So, so when you're sitting there in 2010, we're in the depths of the Great Recession and you see all these malls that you're responsible for and people, I mean, what is your mindset? You have an engineering background. You were developing malls at Forest City and now you're in, is it fair to say, triage mode. I mean, what is the mindset in 2010, 2011. What are you trying to accomplish and how do you accomplish it?
- [27:24]
B
Well, you know, I never really think of a glass half empty. I only think of a glass half full. Always. My whole life, I never, I. I looked at all the problems that existed to be just opportunities. Okay? I had looked at the real estate. The quality of real estate was very, very good. The capital markets was turned upside down for the company. We were, we were climbing out of a recession, the green or gfc. So we were, Even though there were headwinds, we were climbing out of it. We were going to do a roadshow and raise equity. Right? So, and, and I think understanding the quality of real estate, understanding the sponsorship. The sponsorship was fantastic. Okay? I mean, their support was incredible to that period of time and understanding the ability that the, that, you know, you were, you were going to have headwinds because of, you know, what we took over was a company that had whatever, $350 million of equity but $20 billion of debt. So you had to restructure $20 billion of debt, and you had a short window to do it. And so, to be honest, I never really thought of it to be a headwind. I, I remember very clearly, Steve Ro,
- [29:01]
A
what you thought of it as an
- [29:02]
B
opportunity, I thought of as an opportunity. So I remember, you know, Mike Facadelli and Steve Roth coming to me and saying, what are you doing? You know, this is the mall. Business malls are going out of business. This is a headwind. You have a safe, secure job at Barnado. Why are you leaving? And my whole answer was, I want to be a CEO and this is my opportunity. And, you know, I'm young, I can give it a shot. And if I'm not successful, I'll come with a begging ball. But I never thought of looking backwards. And so I just looked forward. And from day one of getting the job, I focused back to my engineering background in the sense I focused back to looking at every mall as an individual asset. I looked at a complete sort analysis of the asset. How could you lease it? How could you develop it? How could you redevelop it? What capital needs do you need? You know, because I needed a story for every asset to be able to refinance or finance that asset. Okay? So I didn't come across, you know, and saying, I'm a bull in a china shop. And this is how I, you know, we're going to get it financed. I had a story for every mall. I had a plan for every mall, and I took that plan to each lender to get it financed. And so then it became a job of execution, asset by asset. Okay? Not. I didn't look at it company wide. I looked at all 200 assets individually. And I. And I learned a few things along the way, which is generally there are three things in a turnaround. One is that you have too much overhead, too much sga, okay, for whatever reason, you. You build that. The second is there's an 8020 rule. Maybe it's really a 50, 30, 20 rule. In my opinion, 20% of the assets are very low quality. Spend a lot of your time. You should not worry about them. You should offload them. 30% of your assets, okay, are great, and 50% are fine. But they give you scale. And scale is important at times. Okay? So people keep saying 80, 20, but it's a little bit. You gotta dissect that a little bit more. So I understood that 20% of the assets we had to do something with. Okay? And then I also understood that basically companies, you know, over time, start to become inefficient. They may be the most efficient company. You will become inefficient. I mean, when you look at, you know, look at these tech companies and they announce layoffs, they're growing. Why are they announcing layoffs? Because they realize during a period of time, they bulked up and maybe they have too many people. It's not that they can't afford them. It's not that they don't need them. They just realized we were after something. We continued to hire in that one category, and now it's too much. But that realization is rare. Okay? So I had to think of each asset, think about which assets I want to put in that 20% bucket. Think about how I wanted to streamline the SGA of the company, which we did. We took it from 4,000 people to 1600 people. So obviously, I don't know what 2,400 people were doing. And it gets worse in my wework story, but they got a lot. And then, of course, you can make a company more efficient from everything from, you know, the same guy's been picking up garbage. Have you done a garbage rfp? No. You know, the same guy's been doing cleaning security. I mean, just things that your people don't think about. You know, hey, let's go put it out to bid. And maybe if you put it out to bid, we'll get better pricing. You know, what's the structure in each shopping center? Why do we have six people? Why there's not three people? So things like that. But the most important thing was we treated each asset as a separate. As a separate company almost. And basically, you know. You know, and had a plan for each asset. What? Almost?
- [33:18]
A
It's like the old adage, how do you eat an elephant one bite at a time? And so you had this elephant of a company of what, 200 shopping centers. And as CEO, you became an expert of its cap stack, its operations, the real estate of each shopping center. That seems like a monumental task for a CEO who's parachuting in, who also has to make decisions of personnel and reducing headcount from. What did you say, 4,000 to 1,600. Did you. Most people have 24 hours in a day. Did you figure out a way to have more than 24 hours in a day? Because it seems like a monumental task.
- [34:05]
B
It was. No, no, no. I don't want to minimize this, okay? I worked, you know, 15, 16 hours a day, six days a week. I saw every asset every year. You know, I did something like 6 million miles of air travel in 10 years. But, you know, you, you just do it to be honest. And I, you know, I. I have a different phrase, okay. Busy people have all the time in the world. Okay?
- [34:39]
A
Yeah.
- [34:40]
B
People who are bored always seem to have no time in the world. And the word I detest the most is the word busy. Okay? No one is busy, Okay? I really don't like that word. Okay? Then someone I call someone says, I've been really busy. I said, come on, give me a break. Really. You know, I know that you can call some of the most senior people. You call Bruce Flack. He'll respond to you in five minutes. John Gray, respond to you in five, 10 minutes. The next break he gets, he'll respond to that text, okay, so how come all those people have the time, you know, to, To. To be responsive? And, and so you always. It's a question of how you allocate your time, okay? And. And, you know, whether it's right or wrong. I can't answer this question fully correctly. Obviously, I think it was more right than wrong because we came out okay. But I was very. I was. I. I went into every meeting to make a decision I didn't contemplate and say, let me think about this, and I'll come back to you tomorrow. I'll come back to you next week. I went in to make a decision. And you hope that you're directionally right,
- [35:54]
A
not exactly wrong, and you had the ability to make those decisions. You didn't have to go to a board to make these types of decisions?
- [36:05]
B
No, because once you give them an annual budget and a plan, you are managing it yourself. So I mean, obviously you have, you know, you have restrictions by the board. You know, you can spend ex capex or whatever the numbers are. But the numbers are big in a public company. They're quite large.
- [36:22]
A
So I want to get into WeWork and I want to get into what you're doing now. But before we do in today, many of my clients for the last several years have been negotiating with lenders. Whether it's in retail or multifamily, it doesn't matter the asset class, you know, there have been loan modifications, rent recapitalizing their transaction, their capital stack. And in your experience, what resonates to a lender when you are trying to restructure the debt or modify the loan? Are there certain aspects that resonate more to a lender? Because I get that question from clients and my answers, and I'm curious what your answer is. It's so case by case, it really depends on who the lender is and how deep your relationship is with that lender. Is it one asset, is it many assets? And what's the quality of the asset? And so you can't just say because the lender did XYZ on one particular asset, they're going to do the same thing for you. A different borrower, different asset class. So curious of what your thoughts are.
- [37:36]
B
I think that number 1, 2, 3, 4 is who is the borrower? The reputation of the borrower, the reputation of the person. There's a lot to be done on credibility, you know, in every aspect. That's first. Second is, what's the plan? Okay? And you know, have you done it before? Is it executionable? Okay. Do you have to understand, you know, in all fairness to the bankers and the capital markets people, they see a lot. So their judgment is based upon seeing a lot of information. Okay? They have a lot of consultants who can tell you whether that plan is, you know, directionally right or wrong. Right? But very few of them have actually done it themselves. So. So their knowledge is coming from different sources. So at the end of the day, they can do all their diligence, but they're going to look you in the eye and say, this is doable. Do I believe? Okay? And so the second is what's the plan? Then third is what's the exit? What's my exit? Okay, Is there an exit? Are we structuring it? Right? Or are we just doing this for a temporary lapse? Okay. And look, I had to restructure 20 billion of debt, okay, on 200 plus loans. And you know, and we had a plan for each one, okay. And they, and you had to execute. And once you execute, you build a reputation, okay, of putting forward a plan that, that works. So I think, you know, like I said, I think it's the person or the company, the reputation, the, you know, the, the second is the plan and the third is, is there a viable exit at the end of the day? So we're structuring something that actually does have an end date.
- [39:59]
A
Now it seems so simple, but yet so many people just seem to miss that concept. I. We got to get into we work how I could ask so many questions. We could have a whole podcast, I'm sure first talk about how you got the opportunity to be CEO.
- [40:16]
B
So you know, sort of November 2019, I'm sitting there, you know, watching WeWork implode. I'd met Adam Newman, you know, during my who's bet?
- [40:35]
A
Who's better looking, Adam Newman or Jared Leto?
- [40:40]
B
I'm gonna, I'm gonna pass on judgment on looks. I'm not an okay. You know, I often ask my children, I said, you know, or they said, oh, this is a, you know, he or she is not so good looking. And I always tell them, what do you think? Robert Redford?
- [40:55]
A
Yeah, fair enough.
- [40:56]
B
Who do you think you are? You know. But anyway, so I, you know, watched it, collabs. I'd met Adam Newman. I, you know, seen it and good battle indifferent. You know, I only did two very small deals with WeWork. One in San Francisco, one in. In. In. I don't even know what the second one was. I was going to say Portland, Oregon, but I could be wrong. And, and so what I didn't really. The reason I didn't do a lot of the business with them was because I'm a believer that you have to buy wholesale to sell retail. That's not what they were doing. They were buying retail to sell luxury. So they were not getting the real arbitrage. But I mean, anyway, when it collapsed, you know, I made this comment, wouldn't it be a great way to end my career by being CEO of rework? And then of course they announced these two co CEOs and I went on to say, ah, that opportunity's passed. And how I got a call from a headhunter end of December, beginning of January was that I would be interested in being on the board of WeWork. And I thought, okay, that sort of could be fun. And so I went and met Marcel Clor, who was going to be the CEO of WeWork. He was a guy from SoftBank. And we chatted for a couple of hours and I left the meeting and I said, oh my God, they don't know a damn thing. It was like an interview of Real Estate 101 to a company that had just committed $5 billion additional $5 billion, okay. To WeWork. And a couple of weeks later, he called me up and said, hey, do you want to have dinner? We had dinner. He said, look, very simply, I'm the wrong guy for the CEO. You're the guy for the CEO, Would you take the job?
- [43:16]
A
Wow. He recognized that.
- [43:18]
B
Yeah, I gave a lot of credit. And then I became CEO. I said, sure, I would do it. And I looked at the math. The math was unbelievable that anyone even thought of taking this company public, to be honest, thought of rescuing this company. Okay? The math was six billion of expenses, three and a half billion of revenue. I don't think anyone needs a calculator. That math doesn't work. Okay? I mean, that's what actually fascinated me, to be honest, and said, you guys think what? And their business plan was even crazier. Their business plan was to take the revenue to 7 billion, keep the expense at 6 billion and make a billion. Okay? If I rented every desk, I couldn't get to 7 billion.
- [44:20]
A
So what were. Well, what were they thinking?
- [44:23]
B
I have no idea. I literally, I asked the question, okay? I kept looking. So I made a decision to cut two and a half billion of expenses. I said, the only way we're moving forward is if we can cut two and a half billion of expenses, okay? So that we could be a break even company and then we can start to grow. So talk. You thought my GGP numbers were whacked. Okay, my WeWork numbers are even more whacked. We had 15,000 employees. I ended my tenure with three and a half thousand. We let go 11 and a half thousand people. And that act saved us $1.7 billion a year. Okay? And then of course, there was rationalizing the real estate and rationalizing opex, right? So my same three factors, sgna, OPEX and rationalization of real estate. And we got to save $2.7 billion a year. But then, unfortunately, the pandemic hit and our revenue went from three and a half billion to two and a half billion. So now we had to find another billion, okay? Or we had to wait for the pandemic to end. And the good news is the business is a great business.
- [45:42]
A
Because I was going to ask about that. Yeah. What do you think of that business?
- [45:46]
B
Yeah. Office wasn't leasing. Correct. So now this is 2020 is the pandemic. We are sort of coming out of it by 2021, middle of 2020, you know, and at the end of 2023, one year, 18 months, I'm back to three and a half billion of revenue. Right. So while no one was leasing office, we increased revenue by a billion dollars in the office business. That should tell you how good the business is. Okay. And we were EBITDA break even in December of 2023. Right. So all our activities and today it's so good to see. We will thrive. It's great to see Anand Yardi come in, you know, be the principal owner. Okay. You know, put together, you know, a team. And it is growing again, it's thriving, it's profitable. So the business always made sense to me. It was just the math.
- [46:52]
A
Why did you leave the company?
- [46:55]
B
You know, it was, it was time for me. You know, it was December 2023. You know, I had done what I promised to do, which is for myself, which was to make it EBITDA positive. And it was time to give it to the next person to take it to the next level. I figured I had brought it to a level of stabilization and, you know, I had different ideas than the board, to be honest. And if I, if I was really being honest, you know, I thought the board, you know, should have allowed me to do the three things I wanted to do, which is merge the company with my biggest competitor, consolidate the industry. Okay. And, and buy back the debt at a huge discount. And we had done such a good job of raising the revenue. And the board felt one, they didn't want to merge because they wanted to capitalize on our growth individually, which I thought was a mistake, that I could have saved another 300 million in cost. Two, consolidating the industry would have been amazing because you can buy smaller companies, increase top line revenue, keep the bottom line the same. And of course, turnaround 101 is buy your debt at a discount. If you don't do that, then you don't know how to play a turnaround game. The board, for whatever reason, felt that the brand was that powerful. I had done an amazing job cutting the cost. I'd done an amazing job increasing the revenue. Why could I not just keep going? And I knew that you just can't keep going. So I said, look, if I have to win under these parameters, I have to, in my mind Convince myself that this is something I wanted to do. I mean, I knew it would be a great company. I knew it would be profitable because we were profitable already. But did I think that we could grow to the levels we could? I wasn't certain. And, you know, when. When you don't fully align with the board as a CEO and you feel like you've accomplished what you wanted to accomplish, which is make a company EBITDA positive, it's time to go on to the next chapter.
- [49:30]
A
Yeah. Now, I made a joke about Jared Leto. Now, for those that don't know, there were. There was an Apple TV show show we crashed. Did that. When was that show? When did that show air? Was that after or while you were CEO?
- [49:45]
B
Oh, while I was CEO.
- [49:46]
A
Why? So what did you think of. Did you watch the show?
- [49:49]
B
Yeah, yeah, I watched the show.
- [49:50]
A
What did you think of it?
- [49:52]
B
We work was exactly like that. Carbon copy. There's no difference. When I took over wework, it was what you saw on the show. You know, those summer parties were real summer parties. You know, everything you saw, you know, I would. And again, you know, maybe that was the way to build culture. That was the way to build growth. That's the way to build loyalty. I'm not opining, okay, but it was certainly, you know, pretty, you know, representative of what I saw.
- [50:23]
A
Is there one story that you're able to share that maybe didn't get as much notoriety, but perhaps it should about the company, about Adam personally, that you're at liberty to. To talk about?
- [50:37]
B
No, I mean, all I would say is, look, you know, you know, you, you, you. I mean, Adam had a lot of tenacity. Right? I mean, you know, when you look at his history of, you know, how he started companies and, you know, there was high heel company which failed, you know, to. To starting, you know, we work with levels. You have to give the person courage for the tenacity that he had. I mean, my only comment would be, since this is a podcast, it'd be all about learning. I'm all about learning from these experiences, is that I wish I understood the sponsorship better. So to understand what their goals were. Okay. Like, I knew when Brookfield, Blackstone, Bill Ackman were the sponsors. We knew what we wanted to accomplish. And so when we were able to start turning the business around, one would need a lot more financial support. So my only question would be to really understand that everyone's interests are aligned again, no good, no bad. And there's not a. This is not, you know, I would, you Know, it's just that we have to make sure that my interests or the CEO's interests, the span, the financial sponsors interest, okay, are completely aligned and the goals are aligned again. And by the way, I'm sure it happens more often than not that they're not aligned, but, but my own, that would be my only, you know, and I'm still learning by the way on that. You know, I recently made another error which I, you know, I'm not paying for it per se, but I am paying, not benefiting from the ultimate gain because again, same thing, interests are not aligned. You know, I want to own something for a longer period of time to capitalize, capitalize on the true upside potential. And you know, a fund may want to, you know, recover their money, make their moic, make their returns and go on. Right. So, you know, and I'll keep learning, you know, but those are my things is just to focus as much of your energy, not at the price, but to make sure that when there is trouble, right, you know, that your interests are completely aligned so that you can see the light at the end of the tunnel, right. So very often people give up on that light at the end of the tunnel and so then they'll make different decisions because they can't see the same light at the end of the tunnel. So you have to really be completely aligned in turnarounds. And I've only done turnarounds, I've only, even the assets I buy today, they are high distress. So they're not like, you know, cookie cutter that can just go in and it's, you know, I'm cutting a, you know, I'm getting a dividend yield.
- [53:44]
A
But that's a great segue. I want to be respectful of your time. We're coming up close to an hour. Last your last words, please tell my audience. What are you doing today? Talk about the company. Go for it.
- [53:58]
B
Yeah. So, you know, in, in 2024, quite accidentally, you know, I was given an opportunity to buy a, a mall in Annapolis, Maryland. And so I chose to become an entrepreneur. Raised some debt in equity, bought them all, touch wood. It has been quite successful. It has accomplished what we wanted to accomplish. You know, it's 92% leased. It was in the 70s when we took over. We've increased the revenue by 30% and stabilized it. And last September we bought a second mall in Fort Lauderdale and we just recently announced an anchor tenant deal for it, a Wayfair for 94,000 square feet. So we feel we're on our way to stabilizing this asset. So I didn't know I'd be an entrepreneur at the age of 64, which is what I'll be this year. But I'm enjoying being an entrepreneur. I'm enjoying rolling up my sleeves. I'm enjoying doing the stuff with a very small team. I have a team of three people, Sumair, Stephanie and Melinda and myself. And we're rolling up our sleeves and doing stuff that we haven't done in 25, 30 years. And so it's a hoot. I'm having the best time of my life.
- [55:18]
A
Well, that says something. I mean, that's truly remarkable, given your career and your background. Sandeep, I am so appreciative that you came on, that you took the time to spend with me. I know my audience is going to absolutely love this podcast. I think you gave them, in one hour what they could learn in not just years of education, but literally decades of experience from you. So, Sandeep, thank you so much for coming onto the show.
- [55:48]
B
Thank you, Andrew. Have a great day. Appreciate it.
- [55:51]
A
I truly appreciate it. And that is another episode of the Kirsch Connection.