Episode Transcript
Speaker 0 00:01 <inaudible>.
Speaker 1 00:09 Hi, I'm John Cohen. Welcome to icons at DC area real estate, a one on one interview show I lighting we backgrounds and career trajectory of leading luminaries in the Washington DC area real estate market. The purpose of the show is to, I liked their backgrounds and their experiences and some interesting stories about their current business as well as their past and to cite some things that you might take away both from educational standpoint as well as lessons learned in the industry and some amusing and sometimes interesting background stories. So I'm hoping that you will enjoy the show. I guess today is Kathy bonafide <inaudible>, the former CEO of combined properties and now CEO of combined creative, a new venture formed to manage the family office of Ron Haft combined creative does both financial planning and management as well as looks at other ventures for mr Haft. We'll talk a little bit about that.
Speaker 1 01:13 We go back then into her childhood background. She grew up in Northern Virginia and had a rather challenging family life growing up and she realized she had to really support herself on her own. She paid through. So with sell through a James Madison and GWS MBA program, working throughout those times learned about internship. That combined property's one grad school. She's been in essence with them ever since through many challenges including bankruptcy, the family disputed the company and also learning how to adapt to leadership once she took over the company. She talks also about women in business and in real estate sector being a male oriented dominated business and how women distinguish themselves today in industry. So it's a very broad ranging conversation and I hope you enjoy it. So here's Kathy benefit.
Speaker 2 02:06 Hi Kathy, welcome to the show.
Speaker 3 02:09 Thank you.
Speaker 2 02:10 Tell me a little bit about what you're doing now. I understand you had left CEO's decision to combine properties about last year and could you tell me a little bit about what your new role is, where you are now and what you're doing?
Speaker 3 02:24 Absolutely. So first, thanks for having me, John. This is a lot of fun, so appreciate it. I'll go back a little bit to two and a half years ago is actually when I made the decision to transition out of combined combined. At that time, Ron and I, Ron, the owner of combined and I had decided that we were really taking the company on a new trajectory which was to move into mixed use and multifamily along with retail and in order to do that, made the decision to bring on board new leadership that had some multifamily and a little bit more development experience. My background was a hundred percent retail. I was really at a point in my career where I knew I was ready to do something different and worked with Ron on what is now a five year transition plan and I'm in year two and a half, so I have about two and a half years left and then I'll be actually transitioning out even from this role I'm in now.
Speaker 3 03:31 So as part of that transition plan, I hired my successor and promoted him to CEO of combined this past February and I moved into a new role as CEO of a newly formed, we'll call it an investment and family office arm of Ronald hats businesses. So the company's called combined creative. I now oversee his family office operations at a very high level CPI, which is run by my successor and we are starting up a new business out in California associated with one of our development projects and I hired a head for that new business who also reports through to me. I combined creative, we're seeking investment opportunities that combine real estate, community and lifestyle. It's an investment vehicle for Ronald Haft and ultimately I will on my exit, which is the end of 2021 hire my successor at combined creative because this company's going to continue again as Ron's investment vehicle for the businesses that he's celebrating.
Speaker 3 04:46 His idea to make this move or was this your idea or kind of combination of both? It was a combination. Ron and I, we've been together a really long time, so I have four for combined properties before I made this move for 28 years and we had talked, Oh my goodness, over the last 1518 years, about some day creating this. We would refer to it as a holding company, which would allow for alternative investments and again, be that investment and oversight vehicle and the timing was just perfect to do it because one I was ready to transition to. It really didn't make sense to bring somebody in at combined that had the multifamily experience given the transition we're making as a company. Thirdly, we were starting this new business out in California, so it really no longer could one person run combined oversee this startup with this new business runs Ron's family office. It just became too big, so it was time, so it was a joint decision. Let's turn the wheel back. Okay. A long way. Okay,
Speaker 2 06:00 so let's go back to your childhood. Grew up in Northern.
Speaker 3 06:05 I did. I'm a Vienna native. Grew up in Vienna, Virginia.
Speaker 2 06:09 Tell me a little bit about your family background.
Speaker 3 06:12 My parents were depression era. They both born in 1925 and my dad was a world war two that my mother, she's an interesting story because she was what would have been classified back in the forties as a spinster. She hit the ripe old age of 28 and she wasn't married and this was post world war two and most women her age at that time would move back with their family. But my mom decided, you know, well forget that she decided to join the foreign service and go overseas. So she picked up and moved to Germany and took a job over there. This was during the reunification, the reconstruction of Germany after world war two and that's where she met my dad. My dad was over there with the predecessor to the CIA. They met over there and married over there and came back to this area, the Washington area, and both took jobs with the CIA.
Speaker 3 07:24 So my dad was undercover, which is really interesting. He was covert and he was covert CIA during the cold war. So you can imagine he was a communications officer, so he was doing all sorts of really cool. We didn't know it, but you know, as kids we didn't know. We knew, we knew he worked for the CIA. We really didn't know what he did. We didn't know where he went. He was doing all sorts of, he would travel a lot and again we wouldn't know what he was doing and where he was going. He was doing that really cool stuff that you see in the movies. Literally, you know, going to Russia and planting communication devices and we heard stories after he passed away from one of his really good friends. Once they did the freedom of information act where a lot of the secret information was allowed to be released.
Speaker 3 08:18 And we heard stories that were just mind blowing in terms of what he did during that time. And my mom stayed also with the CIA. She was overt, so she was not under cover. She worked in logistics and was one of the people that moved CIA families around the world. Long history of CIA, you know, affiliation. So very, very cool. In that regard. But with that, you know, there's a, you hear this stories of a lot of drinking and alcoholism and whatnot. My father was an alcoholic and my dad had a really sad history. His dad basically left his mother when she had three young children. So my dad was the oldest of three children. He had a brother and a sister and his dad was an alcoholic and left his mother raising three children. She had no money. So she actually put my dad in an orphanage and I think, you know, between the stress of the job and then unresolved issues from childhood, you know, my dad was just messed up and drank and we ended up, my mom and I turning him out of the house when I was in high school and basically I had new relationship with my father, so I didn't realize how abnormal that was until I became an adult and realized that most fathers, even if they drink or you know, parents get divorced, they still stay in the picture.
Speaker 3 09:54 My dad did not, which was probably for the best in, in any regard. He died when I was 26 and it was alcoholism that killed him. So it's a sad story. But your mother was my mother, very strong woman. I'm the youngest of four girls. And by the time I hit high school, I think my mom was done. The divorce, the living with an alcoholic had been really hard on her. So she pretty much checked out and believe you me in lots of therapy and work on myself as an adult. But I'm actually, I look back now on having to kind of raise myself and put myself through school. And I got my first job at 14 and had not stopped working since I tell my kids that although my childhood was not ideal and that my parents were less than perfect as are we all, that I actually have a lot of gratitude now.
Speaker 3 10:58 And I developed this gratitude as an adult for always being able to take care of myself. So the one thing that having to take care of yourself at a very young age teaches you is that you're capable of a lot. And I think it made me very strong and able to accomplish a lot of things. So I look back on it with more gratitude than sadness at this point. But there were a lot of years of therapy, John. Anyways, you're the youngest of four. Yup. Your relationship with your sisters is very, very close with my sisters. Yeah. We're all very good friends. And that happened as we became adults as well. Younger, not so much when I was younger. Again, they were struggling with their own ramifications of having two not ideal parents. So we kind of reconnected and became friends later in life as we became adults.
Speaker 3 12:04 So this experience was to be a little bit more of a backbone. They did. Again, I realize now that I have had to figure, I call it figure things out for myself throughout my life. And I really do believe it was that background that made me capable of doing so. So in my career, I'm first year of gen X, so I remember I was born in 1965 which is the first year of gen X. And I can remember when they named our generation. I really do. I remember the news came out and <inaudible> Polly, cause it was the boomers, you know, everything was about the boomers. All the news was about the boomers. You know, the boomers are, um, it was yuppies for sure, you know, young, unmarried professionals. And then they became Danks the dual income, no kids. And you know, it was all about the boomers, you know, everything.
Speaker 3 13:05 And they were sweeping, you know, sweeping changes and women were hitting the workforce and you know, the free love of the 60s. And I mean just on and on about the boomers. And then they named my generation and they called us gen X, the last generation. And I remember thinking that's it, that describes us. And the description back then, I think it's changed over time. But when they first came out with gen X, they said latch key kids. So we were kids where moms worked and we were, you know, coming home to an empty house and that fit me to a tee. They described us as fiercely independent so that we really did know how to take care of ourselves. And when we went into the workforce, we didn't want to be micromanaged. And then, you know, kind of forgotten because they also, one of them was kind of cruel, it said, yeah, this is the generation of the mistakes.
Speaker 3 14:04 So all it was the land of the big families. Remember all the families, you know, three kids, four kids, five kids, the gen X parents were the kids that were, had, that weren't planned for. And I thought, well wow, that's kind of harsh. Then I actually think it kind of defined our generation, you know, and those, those behind me and that we were very small generation. Again, we had the boomers blazing the trail, taking the jobs, earning the money. They were networked and cohesive. And then you had the people following and the generation was half the size. And you know, I'll get into real estate and you know what, I entered real estate. Nobody was entering real estate. So you know, again, my generation was not represented real estate and large numbers. So it wa it felt very isolating and that's where, again, I really called on my background.
Speaker 3 15:03 I'm figuring things out, you know, and doing it on my own because I knew how to do it and I never felt defeated, you know, or you know, gosh, there weren't going to be opportunities and all that stuff. I just knew I had to do it myself. So you really have a mentor per se when you were young? Not at all. Nope. Figure it out myself, you know? Yeah. And I always have man. Just always, well, I mean, I have friends and my sisters and things like that, you know, I wasn't, not at all. It was totally just sharing it out myself. You know? I ended up going to JMU. My three sisters went to JMU ahead of me by the time I started the last one had graduated and I put myself through school. I chose business. I knew I wanted to go into business.
Speaker 3 15:55 I also knew that the day after I graduated I had to have a job because there was no going home. So I chose marketing and management not knowing any better. I did marketing and management with the econ of undergraduate thinking that maybe I would go into sales or something of that regard because at the, at when I was in college, honestly it was where did I think I could get a job? How do I get a job? Um, and business to me seemed like the right way to go. And I was never good in science, didn't have any interest in, you know, other things. So business made sense. And you worked in retail a little bit then summers didn't know actually this is where the CIA legacy was prayed because if you had parents that worked for the CIA, you could work for the CIA during the summers.
Speaker 3 16:48 And it was really fun. I, so I did my summers in different divisions of the CIA to get a secret. I had to get, I never at Langley. I, um, was in other offices. Yeah, it was fun. It was great during college. Then business started in consulting. I did, I, um, landed a job with Arthur Anderson while I was a senior. So I knew I had employment coming out of school. It was in their consulting groups. It's, it's now Accenture back then it was, are there any part of the, yeah, I was, I'm downtown, so 1666 K street. I still remember the address. I started in their it consulting group and they send you to a boot camp right out of school to teach you to code. Um, I hadn't taken a single to code. I learned how to code in COBOL. Then went out to with my first client sites where I was a coder, literally this would have been 1987 to 1989 so I stayed two years fax machines, which is coming out.
Speaker 3 17:59 Oh my gosh. Everything was still being done on the big mainframe, you know, in midsize computers with the giant console, but very few wide-scale PC installations. It was still really the mainframes and mini computers. So I did that for two years and I absolutely hated it. Oh my God. I stayed the two years because I needed to stay two years for my resume. Oh my gosh. No. And then really it was also the politics. So to be, you know, successful in the, back then it was the big eight accounting firms. You had to play the game, you know, you had to fit the mold and kind of Brown knows the partners and do and that just was not my personality. You know, I've even, back then I was a little bit of a rebel. So I did my, um, two years, got my promotion and then decided to leave.
Speaker 3 18:57 That's when I decided I wanted to get into commercial real estate. I had always been interested in real estate. I had met a shoe, young professionals in real estate, just in my bar hopping days and you know, out in the world of, you know, young singles and whatnot and was really fascinated by the careers and you know, what they were talking about that they were doing. I'd always loved real estate. I used to go look at houses with my mom, you know, on the resi side. So I decided I would get a job in commercial real estate. And I landed a job with a company at that time called Omni offices. It was the predecessor to all that. We were sent everything that we have now. And I was hired as a co manager and my job was to go around to all of the big brokerage houses and residential real estate offices and market our office concept so they would refer their smaller users to us.
Speaker 3 19:59 And so it was really a marketing and sales job. And then I also showed the space to prospective tenants. And I did that for a year. It was great experience, but I hated it because I realized I have S I am an introvert. It was having to be extroverted every single day and it just tapped all my energy and sapped the life out of me cause I was exhausted every night. And that's when I decided I really wanted to get into the finance side of commercial real estate. And I knew enough at that point, I had been in the industry for a year that I really needed an MBA because remember I'm five years behind all the boomers, boomers at all the jobs they all had, you know, their Wharton and it was a very competitive and incestuous industry in this area because everybody knew each other and they all went to school together and they were all in the room clubs together.
Speaker 3 20:55 And again, I'm nobody, I'm JMU. Brad doesn't really know anybody in the industry. So I decided at least I get my MBA so that I could be competitive in that front and also focus on finance cause that's where I wanted to focus in real estate. And while I was at grad school at GW, one of my real estate professors said that he had a company that was looking for MBA interns, second year MBA in germs. I remember walking out of the class without taking the information because I was thinking to myself, I'm a first year MBA. They want second year MBAs, but something in that hallway. As I was walking down the hallway, there's a little voice that said, nah, just go back and grab it. So I did. I went back, grabbed it and I applied. Lo and behold, they um, called me in for an interview because of my it experience.
Speaker 3 21:52 They were looking for somebody to help them put in a land base, a PC system. And because I had worked for Arthur Anderson and had the it background, I landed the internship at combined properties. So that's how I ended up at combined led to another opportunity. Right? Yeah, the internship was fantastic. I did, this is again classic Kathy, the then person running the company. I'm not the owner, Ronald, but the, at that time we didn't have a president or CEO other than one of the half family members. So it was the top level position was called the executive vice president. He called me into his office after he hired me and he said, okay, Kathy, I want you to go out and select a software application system to run, you know, our, our company's accounting systems and lease management systems and everything on the new PCs.
Speaker 3 22:50 And I remember that. I'm thinking, I don't know the first thing about retail real estate. I don't know the first thing about commercial real estate. I don't know the first thing about PC systems, but I looked him in the eye and I said, okay, we'll do it. You know, to feel when you asked that question too terrified man, I spent, I've spent most of my career being terrified because I have no clue what I'm doing, but I've just got to figure it out. And so I did. And you know, back then we didn't have the internet to research things. Remember everything was just coming online, you know? So you had to do things the old fashioned way. I ended up choosing seen a software system that was just coming out. There were others that had been out for a long time and were kind of the standards in the industry.
Speaker 3 23:42 But there was this new one that was coming out called the, and I really liked it. I liked the functionality. I thought it was really great for retail. Well, I learned, what I did is I learned at the root of the business, which was, I trained myself on the retail lease. So I had the attorneys teach me how to read a lease and what all the provisions of the lease mean. Because once you understood the lease you could understand some of the needs of what the software had to do. Right. Um, come up with that idea. So we hope, recommend it. No, I came up with that again. No help. It's like, you know, again, so, so I picked MRI and as an intern led the implementation and we went from a, people aren't even gonna know we're talking about, I went from a mini system to a PC based land and it turned out that MRI did eventually become one of the leading software application packages for retail.
Speaker 3 24:44 It was right because of the functionality of the system, it was much more capable. Retail leases are more much more complicated than a lot of other leases in the industry. So you need something that has a lot of functionality. So having successfully lent that project at the time, I finished my second year of my MBA and I was my second year combined as an intern. I was leading an internship program of about 15 interns to abstract all the leases and do this giant system conversion and whatnot. And then combined offered me the job as a financial analyst right after I graduated, which is what I wanted. That's why I went back to grad school for so all worked out. I got my finance job in commercial real estate and it was really funny because I was only gonna stay here two years. I was going to be a combined for two years and then go somewhere else and 29 years later I thought I'd get bored and just want to be doing something else. So yeah, if you aren't picking this up, I kinda had this add, but just constantly seeking the next challenge. You know, what, what can I learn next? What can I do next? You know, that type of thing.
Speaker 2 26:01 So on, into an analyst position, sounds like you were voracious as far as gaining insights into things and learning. So I guess is constantly asked questions. You would pigging mining for information because becoming go and moving from an analyst to becoming CEO had to been an interesting climb.
Speaker 3 26:24 Indeed. It was
Speaker 2 26:27 how this all evolved step-by-step here.
Speaker 3 26:30 Well I think as an analyst, again, everyone ahead of me, I keep saying ahead of me cause I keep referring to the rumors, you know, again, I'm not a lot of peers. I have a lot of people that were my age in this industry, you know, so when I started as an analyst and I think I was 26 and lot of other folks in the organization were 30 35 and older. And I recognized early that in order to be competitive and to, you know, make my Mark and to compete with people with far more experience and likely much more networked than I was, I needed to make myself indispensable. So I set out early in my career to basically be the person that was willing to do whatever needed to be done. If somebody asked me to work on a project, even though it might not have been in my position description, I did it because I got to learn and I got to work with different people and basically I think I became somewhat indispensable.
Speaker 3 27:44 A lot of people started. I was kind of the GoTo person. People would come to me, would you help, you know, work on this project, would you help work on this project? So you built your circle of competence more and more every year. That's right. That's right. And because I was willing to do whatever needed to be done, I worked whatever hours needed to be worked and I did it willingly. That led to other opportunities. As you know, different organizational needs became open. I moved from financial analyst to acquisitions director. So I got the opportunity to go over into acquisitions where in that role I bought two shopping centers were combined. And so I learned that side of the business. So on the analyst side, where you working with the acquisitions people you working with? I worked with both. So I was doing financial analysis for the acquisitions people and I was doing financial analysis and due diligence for the capital markets folks.
Speaker 3 28:50 So the people on the financing side back then combined didn't have a lot of debt. A lot of our assets were unencumbered, and that actually led to a big opportunity for me. So after I moved from acquisitions, there was an opportunity to move over to capital markets. And so I moved over there and that's where I started helping the company finance a lot of their assets. So put that on the assets. And then we took the capital that we placed and we started rowing the company. We started buying new assets or renovating and redeveloping and developing other assets. So similarly, I didn't know anything about capital markets, but I started calling people cold calling. The good thing about capital markets when you're a borrower is when you're calling, they want to take your call. So it's not hard cold calling. It's not like say a traditional sales as well.
Speaker 3 29:48 And that's right when I was at capital breakouts, that was a great job. I was in that position and had worked my way up to vice president of capital markets when the company went into bankruptcy and we had the family break up and affect you personally in your career. Well, that was fascinating. It was some of the best and darkest times I had in my career. I was, again, I was vice president of capital markets and I spent my 30th birthday on the, in the bankruptcy court at up in Greenbelt filing all of our bankruptcy papers. And I'll never forget that, you know, it was May 25th of 1995. Yep. 1995. Me and the general counsel combined, we were the two people that were running the bankruptcy, so combined properties inc the management company as well as 14 of the partnership that owned most of the portfolio went into bankruptcy.
Speaker 3 30:55 And there was a big family dispute going on among the members of the half family that was being kind of managed else by other folks. But Alex and I were in charge of the bankruptcy. So again, very, very stressful because we had trustees being appointed and it is right. Right. And, um, so we were kind of working with our outside counsel trying to keep everything together and keep the trustees out and try to come up with a reorganization plan and lots of trips up to New York meeting with lenders with lots of scripts. You've driven by little street markets or was it family issues? Unfortunately, yeah that that just viewed as what kind of brought the real estate in. The real estate was actually cash flowing and it was so once we filed for bankruptcy and we were able to kind of turn the cashflow back on, we were able to make our debt service payments and run the portfolio.
Speaker 3 31:56 We just had to do it with all these lenders and attorneys. And it was pretty crazy. I was the person, I always say this cause it's so funny. So you know, the the family members were litigating, but because I was the capital markets person, I was the person that was the most deposed and on the witness stand the most out of everybody because I had all the lenders wanting me in depositions and when we did the bank final hearing to come out of bankruptcy, I had all the lender's counsel asking me questions. I was on the witness stand, so I became an expert, deponent and an witness, which is not skills I have had to use ever again. But it was interesting. But we did emerge from bankruptcy and we resolved the family dispute. Basically Ronald Haft bought the other family members out of the real estate was a highly leveraged buy out and we laughed because we came out of bankruptcy.
Speaker 3 33:02 It was a a hundred percent consensual plan for reorganization and we paid everybody 100 cents on the dollar, but we were highly leveraged. We had very low occupancy because during the bankruptcy we didn't have money to read tenants and we were at about 82% occupancy. We had no cash because all the cash was used in the buyout and we had very few employees. We had a really lean workforce because a lot of people left during the bankruptcy. Yet you would think we had won the lottery. We were so excited to have the business kind of in our control and now we were able to really start creating, looking back on it now it is funny cause we, it was a highly risky proposition.
Speaker 2 33:46 The process was initial filing through.
Speaker 3 33:49 Um, it was about three and a half years. Yeah. Of crazy. Yup.
Speaker 2 33:59 Emerging from that, I assume that you got some accolades from mr Haft.
Speaker 3 34:04 Yeah, I mean we really had bonded as a team and had worked really, really well together. So again, it was kind of exciting for all of us because now we weren't going to be in litigation or bankruptcy and we had this really great portfolio. It just, we needed to fix it and move things forward. So it was an exciting time. You know, at that point I had been promoted to senior vice president of patio market, so I was still running the financing for the company and shortly thereafter the CFO left. So I got promoted to David, actually got promoted to the executive vice president position, you know their most senior position under Ron Haft. I then became the CFO and was running the whole financial operations for the company.
Speaker 2 34:51 And that was shortly after the bankruptcy situation. Yeah. So who were your champions at the firm other than a suit? Ron was having see a champion of yours.
Speaker 3 35:03 Ron was always great. I will tell a couple of stories about him that let you know just you know what a great owner and boss he's been. One was when David Rood burger left the executive vice president position, so it was open. I went to Ron and asked him if he would give me a shot at it, you know, I sat down with them and I told them that I really felt like I knew what needed to be done. Again, we were still in that highly leveraged, needing to lease up the and kind of re retool and restaff the organization. And I really did have a plan. I really felt like I knew what needed to be done and you know, God bless I man, he gave me the opportunity. So at that point I was 35 years old. I had just turned 35 and here I am asking to run the company forum and he gave me the shot.
Speaker 3 35:59 So I think, you know, having gone through the bankruptcy together and everything, you know, there was a lot of trust there. The thing I tell people, especially some of my female mentees is what I did that a lot of women don't do is I asked the firing line if she were the most opposed versus the company. You had incredible pressures, right? Right. Age, right. No, it was, it was um, stress like we've rarely experience, I mean, Oh my goodness. There were days where we literally, I remember I've told this story before where Alex and I, trustee had gotten appointed for combined. We literally packed up our offices into boxes, prop them down to our cars because we didn't know if the next day we were going to get fired. And then we again, somehow we were successful in getting the judge to stay his own order. And we stopped the trustee from coming in and we lived another day. But Alexson I never unpack the boxes. So we emerged from bankruptcy. Yeah, we, it was a really stressful, but also, boy did we learn a lot. And what, what great experience, you know, actual issues primarily driven by personality more than anything else. Right? Right. It really wasn't, you know, it w this was solely due to the fight between the family members.
Speaker 2 37:32 How do you mitigate the family reputation of providing properties in the marketplace after this, in the news constantly battle and all that. Oh, so they're all battling over this company and how do we, how do we deal with lenders, equity investors and everything else? What story did you,
Speaker 3 37:54 so what I did is I told the truth. I think the thing that you can do best in any situation is be honest. And when we were going out and I'll never forget JMac remember the lender and I remember the person you know, they financed five loans out of bankruptcy, so they closed those five loans on the confirmation date and that was a relationship that got us out of the bankruptcy and there were other lenders that that did the same thing. They believed in the team, you know, they believed in Ron, they believed in me, they believed in others on the team that you know, we were people of our word. We, when we were going through the bankruptcy, when I was dealing with these lenders, I told them the truth. I told them what we could do and what we couldn't do. I told them what was going on and you know, we were full communication. We weren't trying to hide the ball and I really think, you know, that integrity piece is worth its weight in gold because we had many lenders that financed us out of the bankruptcy and then financed us right after the bankruptcy, which was just incredible. It was incredible.
Speaker 2 39:14 How did you keep your portfolio at least during this time? Because of, you know, you'd have a liquidity due to help with tenant improvements or any kind of incentives or keep the shopping centers maintained. If the properties when cashflow going up to do that and or if you're have properties in transition, how you are, how are you managing those? During that period of time
Speaker 3 39:34 we became the as is deal companies. You know, we were telling our leasing people, you can lease it, you just have to do as his deals. So we were taking lower rent deals and we were giving away free rents and whatnot, but we really did not have a lot of money for recapitalizing. We were also trying to do a little bit shorter term deals because we knew if we came out of bankruptcy that we would get the spickets turned back on for, for cash and we would be able to start using money the way we need to to,
Speaker 2 40:06 well, as you know, retailers are relationship business and if your tenants start to get a feeling like wonder about these guys, they're gonna make it or not. And they say, well, we're probably not. At least there. We're going to go to their competition. So how do you keep them interested in the company? And you know that w
Speaker 3 40:24 it was not easy, especially because, you know, again, a lot of our tenants were initially brought in to this dispute. You know, they, they got letters saying don't pay rent to combine properties and they, you know, they wanted to pay rent but they didn't know who to pay rent to. So they inner pled their rents with the courts. That's why we went into bankruptcy cause a lot of our rents were stuck at the courts versus coming to us. But you know, I'm not going to say it was easy. We had years of rebuilding our reputation but it was building the new combines. I always called it the new combined. And especially when I started running the company for Ron, I developed, it was a new culture in this company. We, we, you know, prior to the bankruptcy we had always been super cash flush. We had run it like a small, small kind of family run business even though it was a pretty sizable company and we always had tons of cash.
Speaker 3 41:25 And lots of capital to do things with. And we came out of bankruptcy and again, we were highly leveraged and we had huge capital needs and not a lot of rent coming in because we had lost a lot of tenants. And so I had to put, you know, budgeting and controls and cash management and we were really disciplined and focusing on pain or that down, you know, so we could increase our cash flow and a lot, you know, some of the people that were here, they were really excited about the new way we were operating, you know, much more goals and performance and budget based and whatnot. Much more like a real company. So a lot of people saw selected out and then, you know, some people weren't excited about working for 35 year old and back then I was pretty single focused and a little tough around the edges and I knew what needed to be done and I ended up having to actually let go a lot of people in the three years after I started running a company and I turned over 75% of the workforce fall.
Speaker 3 42:36 Yeah. Cause I really, it was a new day and we needed to define a new culture. So I hired people that bought into the new paradigm and where we were going and the excitement program. So how did you, did you and Ron sit down and just trying to figure out this rollout, try to get buy in from your employees to time? You know, it was interesting because Ron and I, even from the very beginning, always had a really good dynamic. I mean figured it out early and that was Ron. Ron is brilliant, super, super smart. I always say he can do financial numbers in his head faster than I can do it on the calculator. And I'm pretty good with finance. He is visionary, creative. And so Ron was always about kind of where do we want to take the company and creating the vision.
Speaker 3 43:34 I was always the execution, so on the culture building and that was all me in terms of, I was always letting them know here's what I'm doing, you know, and all of that. But the dynamic was always really good because he always let me do what I did best, which was she was not a micromanager. She again, in on all the major decisions, strategy, big picture, where are we going call him? You know, still to this day calls the big anchor deals, weighs in on all the financing, very intimately involved in the company. But as far as like culture and operations and you know, policies, procedures, all that was me that played to my strength over time. I had to learn a lot of it. The tone that you were settings, your tone wasn't necessarily his
Speaker 2 44:32 per se.
Speaker 3 44:32 That's right. That's right. Yeah. Yeah. I said <inaudible> the Ron was the vision. I was the culture.
Speaker 2 44:39 You lay off 75% of the company at the time. So what, what was kind of your decision tree people at that time and what in this goes much broader to more or less your, your style as a manager?
Speaker 3 44:53 I'm a completely different leader today than I was when I started out. When I started out, I didn't really know what it meant to lead. I knew what it meant to implement, execute and manage, but the leadership was new for me and a lot of what I did over those three years was make a lot of mistakes. You know, if I could go back, if I knew then what I know now, I would've done it totally differently. And what I mean by that is I didn't realize that if people aren't going to get on your program, you know there is no convincing them or you know that they're going to be okay even though they're not on your program. So I kept people in place longer than I should have even though they were in some cases working directly against what I was trying to accomplish and I was just too naive thinking, ah, you know, they'll come on board and all that.
Speaker 3 45:54 And also scared. It's really hard to let people go. Hardest thing you can do in leadership is to recognize that some people just aren't the right culture fit. They may be super, super technically competent and that's what I had really technically competent people, but they were not going to bet on my program and buying to where we were going to take the company. So I took too long. And the way that I did it in terms of letting people go wasn't always done the way I would do it now. So it was three years of not fun making those changes. I'd love to tell you it was just this beautiful smooth transition, but I made a lot of mistakes and it was during that that I actually knew that I needed some executive coaching because I didn't have mentors, I didn't have people giving me guidance and telling me how to do this. And again, I'm a 35 year old effective CEO and you know, I knew I needed some help on the leaders. I was self aware enough to know that I needed some, some help in that regard. So I did, I hired an executive coach and that was really transformative for me in my leadership. And therefore I think the company in terms of where I'm Ron and I have been able to take it
Speaker 2 47:11 so that that coach helped you with culture building that the firm or was that just more of an inspiration? She was a sounding board for you basically.
Speaker 3 47:20 Well I think, you know, executive coaches, they're really business therapists so they shine if you get a good one. And it was, I'll tell this story cause it's funny cause again I was, I was a pretty tough cookie back then. And I remember interviewing three different coaches and I had two coaches that sat down with me and they were all female and two of the coaches sat down and during the interviews they kept telling me how fabulous I was and like how amazing it was that I was running this company at this age and that I was fantastic. And you know, they were telling me things that they thought that I wanted to hear, but I'm looking at them thinking, if I was so fantastic you wouldn't be sitting here. You know, why would I be hiring a coach? And then I brought Alicia in and I'll never forget this because she kind of leaned in, she was mirroring me and kind of pushing back on some of the things I was saying and you know very much more in terms of how she could help me and where she could identify him. There might be some weaknesses. She wasn't playing to my ego at all and I remember looking at her thinking, that's my girl. You got it right. Somebody I wanted to hire somebody who's going to push me outside my comfort zone and that's what good coaches do and if you're going to ever do it, don't.
Speaker 2 48:47 What about internal like your chief reports, people that you had a lot of faith in trust? They did. You have a three 60 review process here.
Speaker 3 48:58 Slide it. That's what I did. I had been working with Elisia for about two years and she's just super, super are helpful in helping me again move from manager to leader and she decided it was time, time to do this three 60 for me. I had never done it before and I was game because again I was all about self improvement and trying to be better and I was learning and wanting to do this. Wow. So I did this tool, the leadership circle profile. I did trusted employees, so a three 60 you get your subordinates, your peers and your boss. So I really didn't have any peers, so I did subordinates and like one level down. So I did my executives and then some of my trusted other employees at the VP level that were one level down that had worked with me for a long time and I knew it would do it the right way.
Speaker 3 49:58 They would give me honest, well intentioned feedback back. And then I had Ron take it and then I had a few people blend the outside of the company, take it. That works closely with me. One of our attorneys that we worked with a lot, so they kind of were operating as my peers I guess. I remember Alicia came into download the results and this tool, this three 60 tool is a picture. So it shows you this circle. And she started with the circle showing me what an ideal leader looks like. So in the ideal leader scenario, they're shading on the circle that looks like a mushroom. So lots of shading at the top and very little shading at the bottom. And that's kind of the, there's all these little, um, characteristics of a leader around the circle. And she said, so this is what a, you know, ideal leader looks like.
Speaker 3 50:53 And uh, and then she pulls out my circle and my circle was an upside down Russ mushroom. So it was the complete opposite of an ideal leader. And I just cried. I broke into tears that I was just like, Oh my God, I saw, you know. But once I got over the shock of what people, how people were experiencing me, it's not who I am, but it's how people were experiencing me, I was able to really hone in on a couple of those characteristics that I realize people were experiencing me totally different than who I really am.
Speaker 2 51:33 Did Alicia give you insights into that? Before this test? Did you have a sense that this was going to be the result or was she just waiting to have you look do this before she said, you know, I have this idea
Speaker 3 51:46 if I think she knew. And I think the shock factor is actually good because it's like, you know the alcoholic hitting rock bottom right where you, you need that self awareness. And she also knew that one, I was strong enough to do it and two, that I was open to do it. Meaning that I would take the results and change, I would do meaningful work on what it was telling me. And, and I did, I really picked a couple of areas when I started working with them. Alicia, and this is my, my background, you know, adult child of an alcoholic and again, a mother who was a narcissist and all this stuff. I had built up a lot of walls and were, I walked around with this giant facade every day. This facade of perfection, everything's fine. In fact, my sisters and I used to joke and say that we were the looking good family. So my sisters and I all, you know, super successful in school, we super successful in sports, music, grades, you know, just the, when our home life was a disaster, you know, my dad was killing himself and a raging alcoholic and my mother was a mess and everything but you would never know it because we looked perfect, you know, we were always put together and, and I had carried that into my mind.
Speaker 2 53:10 There's influence that with you. I mean,
Speaker 3 53:14 what do you, it was really my mom, it was my mom, but we, you know, your, your parents are so influential on your formation as an adult, right? So, you know, we all, we all joke, we were like, yeah, we're probably looking good family and we all made mistakes, you know, married people that maybe were not the right people to marry and all sorts of stuff. But our journeys not going to go on that. But I was doing it in business. You know I was wearing this facade of strong and capable and perfect and all that stuff when actually I'm a super sensitive, vulnerable person and Alisia through this three 60 and her coaching work just really helped me tap into more of the person I really am and start leading from a place of authenticity. This is a funny story, so one of my first goals after I got the three 60 was that I want, I knew that I will have made progress on connecting with people, really connecting with my employees and my peer group and whatnot.
Speaker 3 54:23 If when I pulled into the garage at work and an employee was getting on the elevator instead of hitting the door close furiously so they don't have to ride up the elevator with me, that they would hold the elevator door for me. That's when I would know that I had broken that facade and where people felt connected to me and it did. It took about probably two years of work, but I'll never forget they were afraid of me because I was really, I was tough. I was high, high expectations for affection, not a lot of room for error, kind of my way or the highway. It's hard to believe, right? But it really was man. That's how I was and that's how, and that's how I thought I had to be. Again, I thought, you know, again, you know I was, there weren't peers. I didn't have a lot of women running companies that I could tap into some of the women ahead of me.
Speaker 3 55:26 God blessing man, because all women ahead of me blaze the trail and you know, they were in the generation of having to be men. They had to, you know, be like men in the workforce. I didn't know how to be. So once I finally just started to be who I really am, let some of my softer side come out, let people know that I didn't have all the answers. If I made a mistake, own it, apologize for it. Let myself be vulnerable. It's completely a game changer. Super, super fun. When I started with Alicia, I could not even say the word vulnerable. I literally couldn't even, the word could not even come out of my mouth. That's how walled up I was in terms of defenses and professional my entire life. That's why I say it was transformational completely. Yeah. Pretty cool.
Speaker 2 56:24 So let's expand on the subject of women in business.
Speaker 3 56:29 Absolutely.
Speaker 2 56:30 One of your passions.
Speaker 3 56:32 Yes, it is.
Speaker 2 56:33 Talk about what separates men and women in a leadership role. In your mind, how do you see that?
Speaker 3 56:40 Actually not much. There's a lot of, um, just great similarities. I will say in general, this rod generalization, I tend to see women as a little more collaborative, um, in their leadership where they tend to share the limelight more readily, maybe bring more people into decision making and whatnot. Just as a natural philosophical way of being. I, I don't actually don't feel a lot of differences. There are perceived differences though. There are a lot of biases. You know, gender bias is alive and well, and it's gender bias, by the way, is not just men with a gender bias towards women. Women have it too. So that's what a bias is, right? It's not discrimination. It's not intentional. It just is. So
Speaker 2 57:45 sometimes it's unrecognized by the person.
Speaker 3 57:48 It's mostly unrecognized. Right. Again, most people don't even know that I did it. I did it. I'll never forget last year because I've done a lot of research on it and, and I've experienced it. And I remember I was in a meeting with a group of my employees and I had two financial analysts in the room. One was a senior financial analyst and one was a financial analyst, one was a woman and one was a man. And I started the meeting and there was somebody missing. And I looked at the woman financial analyst and I said, can you go see if so and so what's keeping so and so even though both the woman and the man worked for this person and she was more senior and I looked at her to do it. And after the fact, I didn't catch myself till after the fact.
Speaker 3 58:46 And I thought, I just did it. I just did it. And I talk on this subject. Yeah, yeah. And, and I had, um, an experience once, so many examples I can give where one of my, um, always one of my senior level employees, he was holding a meeting, a development meeting and his development project managers, a woman, and he sat everyone around the table and there wasn't a lot of room left. And so asked her go sit kind of in the corner in the back. And I walked into the meeting and I saw that and I immediately I gave her my seat. I said, you, you take my seat and you know, I'm just going to, I'll stand. And I did it really overtly and intentionally because I wanted him to see he got it. He got it. Because there were more junior level people sitting around the table. So again, I don't, I don't see it a lot of differences between men and women and leadership. I do see a lot of difference in perceptions of men and women in leadership.
Speaker 2 00:02 However, we are different. Absolutely. And so there are qualities that women bring to the job that a man can't and vice versa. So what qualities in your mind do you think established women is more effective leaders in certain circumstances than men?
Speaker 3 00:19 Again, I think because of that kind of innate nurture and collaboration that I think sometimes we can get more fully informed decisions because we're potentially more open to seeking advice and counsel, listening to advice and counsel and giving people a more open environment to express opinions and whatnot. So that's something that I think is a real strength that women have, whereas some people might perceive that as weakness.
Speaker 2 01:04 Today's society though seems to open-mindedness more and more critical to leadership. We aren't as rigid as we were, say a hundred years ago.
Speaker 3 01:14 I have such incredible hope for the generations coming behind us in terms of that alignness to gender, race, sexual orientation, religious affiliation, and you know, I'm hoping particularly in the real estate industry, because this generation coming, I'm stereotyping, you know, but I do think these generations coming behind us are just much more utilitarian across the board that we're gonna see more, you know, leaders of color and women leaders. And I'm really excited about that because I think diversity across the word just makes for everything being better. I love male leaders. I love women leaders. I, you know, I'm not in any way saying that I think it should replace me leaders. I would just like to see more of the diversified leadership is specially in our industry because we still tend to be fairly white, male dominated.
Speaker 2 02:25 Let's explore that a little bit. Why is real estate industry kind of lagged other industries? Fine. I mean retail, certainly in the retail sector, women or other than entertainment, I can't think of another sector where women have more influence than retail. And that's predominantly because going back to caveman days, women gathered and shopped and collected where men were out hunting.
Speaker 3 02:51 Right, right, right, right, right. No, and the data suggests that you know, that the decision makers on purchasing in the United States are predominantly women. So that is true. You know, I think it's changing, but just, I mean, John, you grew up in the industry, you know, it was a lot of men, right? A lot of deal making, a lot of men, women really didn't come into the industry and it was, you know, I hate to use that old boy network, but it was a boys network and the jobs were who do you know and how do you, what school did you go to? And women weren't a part of that club. So you had that in the boomer generation and then as I said, the X generation that followed, not only it was half the size, but again, when I joined real estate, it was during the, that large recession of 1990 nobody was in, my generation was coming into commercial real estate.
Speaker 3 03:56 So then you had this whole generation that's half the size and then people weren't entering the industry. Right. But now we have a new chance with the gen Ys and then the gen Z's after them. And that's where I think we will see more women and more diversity in terms of again, race, sexual orientation, religious affiliation. And that Rose me. I'm super excited about that. I see it coming. I am a huge supporter of women in the industry. I want to keep mentoring and coaching and supporting women so that they do stick with it. You know, the earnings parody needs to be there. You know, the women need to earn the money so that they don't drop out of the workforce in order to take care of kids because, you know, it's expensive. Childcare. I was blessed to be able to afford nannies and all that stuff while I had my family. It's challenging, you know, we have to make work environments that are conducive to keep women in the industry and I see it coming. So super excited about that.
Speaker 2 05:06 There's an other side of the argument to that. What we've seen is a dearth of births out there. So that's fine. We're not reproducing ourselves.
Speaker 3 05:17 We are not, we
Speaker 2 05:17 are at 1.8 now and we're now restricting immigration. So yeah, there's problems right. At the same time allowing women the opportunity to continue to grow in the workforce. It's an interesting challenge.
Speaker 3 05:31 Yup. Yup. I think so. Again, a lot of it is, you know, work flexibility and um, we, we do it here at combined where we've got the flexible work schedules. We allow people to telecommute you. For me it's always been about get the job done. I don't really care where and how, you know, as long as you're producing, I don't care if you need to leave at five in order to go pick up a child and then you get back online at seven to finish something off. That's fine.
Speaker 2 06:03 Don't you think that's going gonna affect the real estate industry? What, what you just said?
Speaker 3 06:07 I think we have to do it. So
Speaker 2 06:10 I mean as far as growth in the industry and what happens physically to the real estate and what impacts that you just said about society and,
Speaker 3 06:18 well, we're already seeing it. I mean we're seeing the, you know, shrinkage of the office note world. We're seeing so many of the living environments now have the ability to work, you know, in the living environments and that is the future. Reinvent. That is totally the future. And I think a lot of real estate companies are embracing it and really trying to move more towards this lifestyle community work, play live environments. And I think it's exciting. It's the future.
Speaker 2 06:55 How does it affect the economics of the industry in your mind as far as you know, signing leases and being able to sustain revenue through these transitional changes in industry?
Speaker 3 07:06 It's challenging, really challenging. You know, we, we've been doing it with some of our retail portfolio, but we've been planning for it for well over a decades. So where we looked at shopping centers that we said, you know, we could see this being something higher and better use. We started planning some of these redevelopments 15 years ago in that we needed to stop signing leases that have lease expirations beyond a certain date so that we can get control of the real estate. But in order to do that, you're in a, when you run up to those lease expiration dates, you can't lease, say you start experiencing vacancy and lost cashflow. So it's not every company that can do it because you have to have strong hash to invest. You have to have a little bit of a longer term horizon because these things can't be flipped overnight. Again, we have two projects that are, they were retail strip centers and now they are retail and multifamily.
Speaker 3 08:15 But literally the life cycle from start to finish will be 10 years from master plan change, zoning change. And then the ability to capture the shopping center and knock it down and then build and lease out what we're doing as a 10 year horizon. And if we were to sell right away, our IRR on the project would not be great. But because we're a longterm holder, you know, we're, we're able to sustain the, the years of very low returns. So it's not easy and not everybody can do it. So, you know, some folks are going to be better served to sell and flip into other, other things and let other people that maybe are more well capitalized and have the patience and capital to do it. But it is a long time term issue that needs to be addressed. And um, people that are not looking at it honestly, um, are gonna get left behind.
Speaker 2 09:11 So put yourself in your 25 year old shoes.
Speaker 3 09:16 I really don't want to get back there.
Speaker 2 09:18 What would you tell yourself today knowing what you know now to your 25 year old self?
Speaker 3 09:24 I would say be who you really are. Just be who you really are. Let the facade down and just be ready
Speaker 2 09:32 to you even know who you were that day or not at that point.
Speaker 3 09:36 I think we always know who we really are. We just are afraid. You know? We just get so beat up in this world sometimes that we are afraid, right? We're afraid of being <inaudible> the vulnerable cause being who you really are as allowing yourself to be vulnerable in a world that's not always very kind. So
Speaker 2 09:56 this is my favorite are my favorite questions. I'm going to go ahead and ask it. So if you could put a billboard and say on the capital beltway for millions to see, what would it say, Kathy?
Speaker 3 10:07 It would say.
Speaker 4 10:13 That's Kathy. Thank you for your time today. It is very thought provoking, entertaining. Thanks John. I appreciate that very much.
"Be Who You Really Are" Kathy Bonnafe
