Stepping Up: A NAREIM Godfather Dinner with Steve Steppe
On a beautiful warm night in San Francisco this October, NAREIM hosted a “Godfather Dinner” to honor Steve Steppe of Coldwell Banker, RREEF and Stockbridge – and to share some of his lessons learned with investment management’s rising leaders. NAREIM member Matthew Reidy of Fremont Realty Capital provided a very special venue for the dinner: his Bluxome Street Winery. 40 young leaders enjoyed outstanding wines and beautiful food surrounded by oak barrels and Edison bulbs in the only working winery in San Francisco.
NAREIM Board Member and Bailard Private Equity Real Estate CEO Preston Sargent interviewed Mr. Steppe, and reviewed a fascinating career in real estate investing. The theme of the discussion was simple, yet profound. Life is a series of accidents. You may profit and you may fail, but you must not give up. Trust yourself, and step up when no one else will – that’s how a leader’s career is built.
Mr. Steppe’s path to real estate investing wasn’t exactly direct. After receiving a degree in political science from the University of Arizona his first job was as a salesman for a startup in Columbus called CompuServe. Wanting something different, however, he moved out to Los Angeles, where he started as a broker for Coldwell Banker in 1972. Beginning as a broker was an excellent start because it gave him leasing experience which, “everyone should get at some point in their career,” and taught him “what tenants look for when they choose between buildings.”
In 1986 Steve joined RREEF, perhaps the only privately owned real estate investment management firm in the US at that time. In accepting a partnership position with the company Steve took a significant cut in pay, but “I knew it was the opportunity of a lifetime and I wasn’t going to let it pass me by.” In 20 years with the company he helped their portfolio grow from $2.5B to $45B. “It was the best time of my life, working with the best people.”
It wasn’t always smooth going. “In the late 80’s we took a series of write downs and all the consultants thought we were going to fail.” The company had no capital and they had just let go of the head of marketing. At that time, Steppe was part of the acquisitions team with no money to invest. He stepped up to the plate and told the partners that he could fix capital raising if allowed to lead it. “I had been a broker for 14 years so I knew how to sell. I didn’t believe that we couldn’t raise money with all the talent at our disposal.”
There was quite a bit he had to do, including letting go of staff who were not effectively raising capital. “I had never fired anybody in my life. I didn’t sleep for two days.” Steppe knew he needed to start over with professionals who really knew the asset class rather than just general capital experts. His strategy worked and RREEF was able to grow again with new capital. “If you can step up in times of turmoil, when no one else will, it creates huge opportunities. If you believe that you can do a job better than it is being done, don’t let inexperience stand in your way. Step up.” Steppe lovingly refers to this time as his “first near death experience.”
His second near death experience occurred when he joined Stockbridge in 2007 to launch a core and value business. The economy didn’t make that an easy thing to do. By 2008, the company had a lot of overhead and no income. Early in 2009, all senior management salaries had to be cut by roughly half. Fortunately, by the end of 2009, they closed on 11 million square feet of industrial space and today Stockbridge has nearly $10 billion in assets under management firm-wide.
The real estate business is about the long term. Where you went to college, or what kind of lucky break you get doesn’t define or sustain a career. It’s ultimately about who you are. According to Steppe, “Real estate is the most inefficient asset class there is. It always will be. No two parking lots are the same. But if you surround yourself with talented people and make good investment decisions it’s a great long term business.”
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