Not long after Gilbert Winn learned to walk, he was visiting construction sites with his father, Arthur Winn. It was there that Gilbert’s interest in development originated, but it was at the kitchen table, hearing Arthur, who founded Boston-based WinnCompanies in 1971, discussing upcoming deals and projects, where his interest became a passion.
Now, Gilbert runs the company of 2,700 employees and its entities, which manage close to 100,000 multifamily units (fifth on the 2015 NMHC 50 Managers list) in 23 states and develop a wide-ranging selection of multifamily projects. But he didn’t become CEO overnight—he got his start in the firm in his teenage years as a painter, turning over units, and also worked on its development side for more than a decade.
When the CEO position needed filling, for Arthur, the choice was easy.
“It was always, forever on my wish list,” he says of having Gilbert become CEO. “But who was my son under pressure and in the business world? I didn’t know. In the last couple of years, though, it became clear the company needed its best person as the CEO.” That person, he says, was Gilbert.
For those who start a small business, like Arthur, the odds of enjoying lasting success can be daunting. A small number of people do overcome the obstacles to create vibrant companies. But then, years later, a new challenge can present itself as these leaders near the age of retirement or begin looking to scale down their workload: “I’m ready to step back, but who’s ready to step in?”
Christopher Lee, president of CEL & Associates, a Los Angeles–based firm that’s handled hundreds of company transitions, published a report in 2014 citing that nearly 60% of today’s real estate CEOs plan to retire or phase down by 2020.
Some company founders have children, like Gilbert, who have come to work for them and appear ready and qualified to take the steering wheel. Others may have under them trusted executives with years of experience and the ability to fill the role seamlessly. But what happens if there is no heir apparent? How can someone who’s spent decades building a company from scratch ensure that it will last beyond his or her tenure?
Passing the Torch
When Arthur Winn walks into his company’s headquarters in Boston or Tom Bozzuto does the same at The Bozzuto Group in Greenbelt, Md., the two executives are entering offices with their respective names on the door, years after founding and growing fruitful businesses.
Tom, along with his partners, John Slidell and Rick Mostyn, established the Bozzuto Group in 1988. He’s been developing, managing, and acquiring properties for the firm (21st among the 2015 NMHC 50 Managers, with more than 50,000 units) ever since. He was surprised when his son Toby, who worked in the music industry for a couple of years after graduating college, came to him and said he’d like to get into the real estate business.
But before Toby started at Bozzuto, Slidell recommended he get his first job elsewhere in the industry and obtain a graduate degree in the field. The thought process, Tom explains, was that when Toby was ready to work for Bozzuto, his résumé would look like every other person’s the company hired. “That, in retrospect, was absolutely brilliant advice and is a policy I would recommend to anybody in a family business,” Tom, now Bozzuto’s chairman, says.
Toby started his career at ColumbiaNational Real Estate Finance, a Washington, D.C.–based commercial banking firm, and then joined Bozzuto in 2001 as a development associate. Eventually, he headed up Bozzuto’s development business, before becoming the company’s first president, in 2013.
Years earlier, Tom and Toby had attended a weeklong seminar at Harvard University that focused on leadership transitions. What Tom took away from the event, he says, is that “the time for offspring to take over may be earlier than when the founder or CEO is ready to step aside.” With this in mind, Tom stepped down as CEO and Toby accepted the role last September.
“I didn’t have a desperate need to slow down—nor have I slowed down, nor did I have any interest in retiring—but Toby had run one of our operations extremely well,” Tom says. “He was clearly ready, and if he was going to run somebody’s company I wanted him running my company.”
Lee says succession planning takes years of coordination. “When you do succession planning,” he says, “you really have to begin with knowing when [the CEO] is targeting their retirement. Because once you’ve determined that, you really have to have a long-range plan in place to know exactly where the company is headed.”
That’s what the leadership team did at WinnCompanies.
When Gilbert finished his undergraduate degree, he, like Toby Bozzuto, wanted to get into real estate and started his career elsewhere (at Related Capital Co.), partially because he wanted to bring a unique experience to Winn and partially because he wanted to live in New York City and Winn didn’t have a presence there at the time.
He joined WinnCompanies in 2003, at WinnDevelopment. Arthur had stepped down as the company’s leader a few years earlier, in 2000, becoming its principal as Samuel Ross took over as CEO. As Gilbert accepted more responsibilities and Ross expressed his desire to retire, it became clear that new blood was needed at the top.
Becoming CEO was on Gilbert’s radar for a while, but seeing the company’s strong post-recession growth made it apparent to him that he needed to throw his hat in the CEO ring.
“If it had been a stable company,” he says, “it may not have been as important for me to assume the role of CEO, but with the dynamic change that was happening—we were growing leaps and bounds, entering into new regions, and our employee [count] had gone up—at that point, over the couple of years around Sam’s retirement, it became clear to me that an owner had to step in to see us through this growth and reinvention.”
Having a CEO with “skin in the game,” Arthur says, is key. “An owner with skills makes better choices than [a nonowner] with skills,” he says.
Looking Outside the Family
Steve Heimler, president of Cirrus Asset Management, based in Calabasas, Calif., has two college-age daughters, but neither has said she’s interested in working in the real estate industry. Heimler’s not eyeing retirement too closely right now, but he has started to think about who will keep his company running when it’s time for him to say goodbye.
Heimler founded Stratus Management in 1989 before selling it to Riverstone Residential in 2007. He later started Cirrus, which manages about 10,000 units in addition to specializing in property acquisitions, construction management, accounting, financial engineering, and dispositions. Heimler says it’s important to preserve the culture at Cirrus, one built on respect, and also to maintain his lifestyle. He takes off about 10 weeks a year and makes frequent trips to Cirrus’ office in Honolulu.
Ideally, Heimler is looking to have his next president identified in three to five years and make the official transition about 10 years from now. It’s crucial, he says, for whoever is tapped for the role to earn the respect of senior leadership; otherwise, the transition won’t work.
“Even if they’re the nation’s most confident property manager,” he says, “if they have the wrong personality, this company will crash and burn within two or three years.”
Although there aren’t any impending decisions on this front, Heimler says the next president won’t be a current employee. “We’ve got these senior leaders who are really awesome, but they like running a portfolio; they like having a business within a business, and none of our senior crew, do I believe, wants or would be ideal at stepping up to the leadership role,” he says. “It’s not that they’re not qualified; I just don’t think they’d want it.”
The attribute Heimler will key in on will be the candidate’s personality, in addition to his or her background and expertise. If the president-to-be comes in and immediately starts changing things, he adds, a good chunk of the senior leadership might jump ship and the company would suffer. “I don’t think you can hire someone, anoint them as the new king, and expect that everybody’s just going to get on board with it,” he says.
Carving a Niche
That’s a point Toby Bozzuto was cognizant of as he made his way up the ladder at The Bozzuto Group. On his journey to president and CEO, Toby didn’t report to his father and didn’t talk to him much during business hours.
“I don’t deserve a direct line to my father without earning it just because I’m his son,” Toby says. “I felt, like anyone, I should begin at an entry level and, to the degree I was successful, get promoted only if and when [it was deserved].”
Now, Toby and Tom talk daily about the inner workings of the company as Tom often heads out into the field to check out projects and properties. “It’s a luxury for me to have a chairman who is able to get into the trenches and report back,” Toby says.
But still, replacing a successful leader, even if it’s your father, can be tricky. Gilbert Winn says his father had a management style that was steeped in culture. He led by example, Gilbert adds, rather than setting specific goals for employees. That management style is something Gilbert has infused into the way he leads the company, too, but since it’s now much larger than when Arthur was at the helm, there are a lot of nuts and bolts to it also.
“He could have stayed in his first love, which is the development side of the business, and not have assumed the headaches of being the CEO,” Arthur says of his son. “The company is now at a size at which I don’t think I could run it.”
At Bozzuto, Toby says he’s not trying to fill his father’s shoes. “I’m just trying to be me and take all these incredible things that my father is and incorporate them into the way that I live and lead,” he says.
It can be tricky, Lee points out, when there’s a disconnect between company patriarchs and their children.
“You can’t force your kids into the business,” Lee says. “And many of those kids who are 20 or 30 years old are 10 or 12 years out, and who knows where they will be in their careers and personal lives in the future? If you want the business to go on beyond you, you have to find the best person. If you don’t care, then you could just appoint your next-door neighbor.”
Both Gilbert and Toby have young children of their own, but each man says there’s zero pressure for them to follow in their dad’s footsteps.
“If they want to be in the business, I’d love that,” Gilbert says; “that would be a thrill for me. But at the same time, as long as they’re happy, they could do whatever they want.”
For Toby, the real estate industry was something he simply wanted to be a part of, but it wasn’t the only reason for his career choice. “I began to see it as my obligation to carry on our family and our company into, hopefully, a third generation,” he says. “I really see myself as a steward of the company.”