Show Notes
John Coe and Don Wood
Bio
Donald C. Wood
Chief Executive Officer
Don has been with Federal Realty since 1998, where he is a trustee and has served in positions from chief financial officer to chief operating officer to president before being named its chief executive in 2002. Prior to joining Federal, Don spent 8 years at New York-based ITT Corporation, where he served in various capacities, including deputy controller and chief financial officer of wholly-owned subsidiary Caesars World, Inc. The first 7 years of his career were spent at accounting firm Arthur Andersen, leaving in 1989 to work for client Donald Trump as the vice president of finance for the then newly acquired Trump Taj Mahal casino in Atlantic City, NJ.
Don is active charitably through his work with the Cystic Fibrosis Foundation (CFF) among others.
Don received his Bachelor of Science degree from Montclair State College in 1982, where he graduated with honors and subsequently received his CPA from the state of New Jersey. He is a past chair of the National Association of Real Estate Investment Trusts (NAREIT), has served as a member of the executive committee of the International Council of Shopping Centers (ICSC), and on the board of Quality Care Properties (NYSE:QCP), a Maryland healthcare REIT. He is also a member of the U.S. Capital Chapter of the World President’s Organization (WPO) and was previously named “Entrepreneur of the Year in Real Estate” by professional services firm Ernst and Young.
Show Notes
- Public company model contrasting to private ownership- REIT model democratized the ownership of real estate (5:00)
- Emergence of REITs really resurged in the early 1990s (5:40)
- In 1998 when he arrived the company was still “small” relative to other REITs and public companies in general (6:15)
- Came in as CFO to Federal (6:45)
- Marry left side of balance sheet with the right side (7:10)
- REIT is a tax entity- dividend is at least 90% of Net income, very little retained earnings (7:50)
- Best year ever was in 2019- single biggest premise that rules the company is an increasing stream of cash flows (9:15)
- How to make the lows a bit higher and the highs as high as they could be (10:10)
- Federal has been able to manage through all the cycles and keep a 54 year increasing dividend record (10:40)
- 18 months ago was the biggest challenge when earnings dropped off considerably when the pandemic began (11:00)
- Built the company to withstand disruptions even the most dramatic in the company’s history (11:50)
- Owners benefited through COVID (12:25)
Origin Story & Education
- One of four kids grew up in Clifton, NJ- 4 miles west of Meadowlands- Giant fan! (12:40)
- Loves baseball and football (13:35)
- Dad was an auto parts salesman and Mother was a legal secretary (13:50)
- Don Wood Lawn Care (14:10)
- Montclair St. College- Studied accounting (14:20)
- Did tax return for parents- $17,100 Net income in 1979…must report it all. This is best year his parents ever had (14:55)
- He learned that this was not the way he was going to live (15:50)
- Loved business and sold his landscaping company and realized that accounting was the “red thread” through business (16:40)
- Considered offers from large accounting firms and joined Arthur Anderson (17:25)
Career Trajectory
- Arthur Anderson was a great training ground (17:45)
- Created sense of pride (18:05)
- Anderson was the “haughtiest” of the firms and that was what attracted him (18:25)
- Forward, forward, forward (18:50)
- Was there 7-8 yrs. and decided not to get MBA (20:05)
- Largest client was Kidde, a conglomerate…did auditing for them (20:20)
- Anderson had casino clients in Atlantic City (20:10)
- Donald Trump was a client of Anderson in the casino business (20:20)
- He finds the casino business was fascinating (20:30)
- Joined Trump Organization through the Taj Mahal Hotel in Atlantic City as VP of Finance and found himself “over his head” there and the property was a disaster (22:20)
- Fired after a year and felt “relief” after leaving that job…knew he was out of his element there (23:20)
- Learned a lesson of realizing when a job is too much to handle (24:10)
- To promote people has to be proactive (24:40)
- Met his wife at the Taj Mahal job and asked her to come to NY only if he would marry her (25:20)
- Subsequently joined ITT in New York to get back to a “bigger economy” than Atlantic City (26:35)
- Leaned on Anderson connections to get the opportunity (27:20)
- ITT was a “grown up” company- one of the first conglomerates (27:40)
- Acquired Caesar’s World (28:00)
- Then there was a reason to unwind the conglomerate (28:15)
- Hartford Insurance
- Manufacturing
- Gaming business expanded and he became CFO of Caesars World (29:00)
- Began traveling weekly to Las Vegas with four kids at home and the youngest one had Cystic Fibrosis for two years (32:10)
- Starwood then acquired ITT including casino business along with Sheraton Hotels (32:40)
- Don left them upon that acquisition (33:10)
Federal Realty
- Headhunter called him to meet with Federal Realty and was hired as CFO (33:40)
- Hates the idea of “chasing yield” and loves long term focus (34:20)
- Quality snob- with high quality real estate one has more cushion for problems (34:50)
- When he joined Federal the shareholder performance was “lagging” a bit (35:40)
- Steve Guttman was CEO and hired him (36:25)
- Had an eye for real estate, retail and design (36:40)
- Began to disagree with him about several strategies (37:10)
- Steve became enamored with large mixed use projects (37:50)
- The key is to keep cash flows running smoothly with the shopping centers
- Federal tried to spin off shopping center portfolio (38:00)
- “Marrying up the left side and right side of the balance sheet” (38:50)
- No more than 10% of portfolio will be in development at any one time (39:10)
- Santana Row– Steve’s vision and an amazing project (40:00)
- Bethesda Row had begun already (40:40)
- It was a “big old bet” (41:00)
- Grown from first phase to bringing in a partner to do the entire project all at once (41:20)
- Company not big enough to take that kind of risk (41:50)
- Project was built with strong economics (42:20)
- Scale was out of whack (42:40)
- Fire in 2002 right before it opened and it caused turmoil (43:20)
- Steve wanted to fire him, but the Board intervened (43:40)
- When he sat down with Steve he told him he wanted alternatives (44:10)
- New Urbanism– Steve Guttman and others were “out front” on this product (45:45)
- Don tried to “simplify” things a bit more by defining markets for each property (46:30)
- Create a place that works well for the community (47:05)
- Curbside pickup- he wants “it all” including curbside pickup, on site shopping and an online experience, as well. (47:40)
- Have to be the “extension” of the house and yard of customers and community (48:35)
- Place becomes more important (49:10)
- Wildwood S/C– First center acquired and then renovated to an upscale boutique shopping center (49:25)
- DNA of Federal- centers are not commodities. Only owns 100 assets…much fewer than direct competitors (50:10)
- Likes the idea of charging more because the center will attract the highest sales (51:30)
- All great real estate– must have quality locations with strong demographics (52:50)
- Barriers to entry (53:40)
- Didn’t do anything in Loudoun County because there is too much land (53:45)
- Mount Vernon Plaza (55:30)
- Inferior grocer that will probably change
- Ability to create a different style of customer (56:00)
- Get now a better demographic with its renovation (56:30)
- Expansion (57:30)
- First foray was portfolio in Philadelphia (57:40)
- Demographics and education were critical- all about jobs (58:00)
- California had similar patterns than the East Coast (59:00)
- Jeff Berkes moved to California to run the operations there (59:30)
- “We have a couple fishing holes around the country and wanted a few more fishing holes” (1:00:15)
- Look at markets with the right balance (1:01:15)
- First ring suburbs around major markets (1:01:30)
- Darien, CT example– NYC tenants coming out to their project there (1:02:00)
- Tenants from urban markets coming out to “first ring” suburbs (1:03:15)
- Public real estate is a different business (1:04:30)
- Long term steady income growth via real estate (1:05:00)
- Transparency is not a competitive disadvantage because low cost financing is so much more flexible and available (1:05:30)
- Big believer in public real estate (1:07:00)
- Business plan needs to be appropriate (1:08:00)
- REIT pluses and minuses (1:08:50)
- Track record gives better access to capital (1:09:00)
- One advantage of being at Federal is that you don’t need to raise capital (1:09:30)
- Quarterly increments (1:10:30)
- Vagaries of public markets (1:11:00)
- Sold stock every year he has had the options (1:11:35)
- Level of liquidity is important (1:11:00)
- Can’t do “opportunistic” deals in markets that do not fit into the realm of their business plan (1:12:00)
- Risk adjusted cost business (1:13:30)
- Building within an existing project has less risk (1:14:00)
- Acquisitions in “down” market where opportunities are strong (1:14:20)
- Business stronger post COVID than pre COVID (1:15:30)
- Biotech growth potential was spotlighted by pandemic (1:16:30)
- Retail space abundance (1:17:30)
- In many cases there are no solutions for an old mall so leave it alone (1:18:15)
- Best product gets redeveloped or repurposed (1:19:00)
- Quality real estate is critical (1:19:45)
- No commodity (1:20:45)
- Worry about theaters and gyms (1:21:15)
- Impact to restaurant business (1:21:45)
- Market adjustment occurred to bring the oversupply down (1:22:00)
- Grouping of food is important (1:23:00)
- Good operators are critical (1:23:15)
- Guys that started Cava wanted to do an upscale property (Julii) in Pike and Rose (1:24:15)
- Melina (new concept) (1:24:30)
- Servers need to make money (1:25:45)
- Cinepolis in Miami (1:26:50)
- Pinstripes (bowling venue) (1:27:35)
- Farmers Market and Bark Social (1:28:00)
- Best malls will succeed (1:28:40)
- Comes down to “two people fighting for space” (1:29:15)
- Demand at the property level (1:30:00)
- Customer Pickup- Federal policy (1:30:30)
- Biotechnology growth at Pike & Rose & Assembly Row in Massachusetts (1:31:30)
- Land to take advantage with a cost advantage (1:33:00)
- Adapted masterplan over decades (1:33:30)
- UPREIT structure (1:34:20)
- It is a tax structure that is a unit that allows for the entire portfolio as a security (1:34:50)
- Competitive advantage (1:35:30)
- Employees feel pride being part of the company (1:38:30)
- Wear what this company has on your sleeve (1:39:30)
- Wants the pride of being a Federal employee (1:40:00)
- If you make it here 3 years, you will probably stay (1:41:00)
Personal
- People that inspire him
- His parents (1:42:30)
- His daughter-tattoo “Forward” (1:42:45)
- ESG Focused naturally due to location and density (1:44:00)
- Dawn Becker leads communications for it (1:45:45)
- Raised $30MM for Cystic Fibrosis Foundation (1:46:40)
- Family is incredible for him (1:47:30)
- Wins- Working with a team (1:48:30)
- Derek Jeter consistency
- Family
- Struggles (1:50:00)
- Firing by Trump
- Cancer
- Daughter with CF
- Makes us better people
- Advice to 25 yr. old self (1:51:00)
- Individualistic approach
- Decentralization
- Balance
- Find right mentality
- Loves poker
- Find balance (1:55:30)
Postscript
- Colin Madden also an accountant
- Liked his approach to business
- Contrast Federal with Peterson Co.
- Wildwood S/C
- Mid Pike evolution to Pike and Rose
- Hates commodity level properties
- People will pay up for quality
- Poker analogy of long term thinking
- Rationalizing downside risk through a balanced mindset
- Long term thinking
- Calming influence at Federal by Don
- First ring suburbs
- Balance was the key to Don’s business strategy
- Antifragile, Nassim Taleb thinking- Barbell strategy
- Bridgewater analogy
