When Jessie B. Henry, managing director for Mill Creek Residential Trust, left the finance industry to begin a career in multifamily housing 12 years ago, she was surprised by the lack of conversation around gender and racial diversity in her new industry. Bear Stearns and Goldman Sachs were hardly paragons of pluralism, but they had at least started developing affinity groups addressing the issue.
About four years later, a handful of top executives within the National Multifamily Housing Council (NMHC) noticed the same dearth of formal dialogue about the industry’s gender and racial disparity, especially among the top echelons. NMHC president Doug Bibby, CBRE executive managing director Peter Donovan, and Camden Property Trust chairman and CEO Ric Campo, who was NMHC chairman at the time, recruited Bozzuto Group chairman Tom Bozzuto and Avanath Capital Management chairman and CEO Daryl Carter to get the ball rolling.
In 2010, the group launched the NMHC Diversity Committee, with Carter and Moran & Co. co-chairperson Mary Ann King as its first leaders, to reflect the importance of inclusion in leveraging diversity. The body, renamed the Diversity & Inclusion Committee in 2017, provides guidance and resources for diversifying the multifamily housing industry.
Every NMHC chairman since Campo has made diversity a major initiative. In addition to its regular committee meetings, the NMHC has held two leadership forums within the past 12 months solely dedicated to advancing diversity and inclusion.
Henry joined the committee two years ago and is vice chair. “Diversity and inclusion are extremely important topics that will play big roles in the future of our industry,” she says. “It starts with consciousness, and that can be really powerful across the whole industry.”
Has this commitment to heightened awareness made a difference? Yes, but not enough, says Carter, who was one of very few people of color when he started in real estate banking in 1981.
“In some respects we’re better off than we were 37 years ago, and, in some ways, we haven’t made a lot of progress,” he says.
Though the number of women and minorities in leadership roles at multifamily and commercial real estate companies remains stubbornly low—well below 20% for women and in the single digits for minorities—diversity and inclusion initiatives are now a hot topic within the industry, Carter says. He was pleased when more than 60 executives packed the room to hear a Diversity & Inclusion Committee presentation during this year’s NMHC annual meeting.
“When we started the diversity initiative,” he says, “if you were even ranking that among issues, it was way down the list.”
In the midst of the #metoo movement, companies across a range of industries are taking a hard look at their track record with women and minorities. While women’s workplace issues are now in the media spotlight, global financiers have been aware of and taking action on gender and racial diversity for several years.
For instance, BlackRock, the world’s biggest asset manager, now requires the companies it funds to have at least two female directors on their boards. Last year, $2.5 trillion asset manager State Street Global Advisors launched a viral storm with its statue of a young girl standing up to the Wall Street bull, unveiled during the same week the company committed to voting against directors if companies don’t adequately seek to improve boardroom diversity. Retirement funds in New York, California, Connecticut, and Rhode Island consider gender equity in their investment decisions.
Commercial real estate companies are responding, albeit more slowly. The percentage of female directors on boards at equity REITs has risen from 8.5% to 15.5% in the past decade, according to a Wells Fargo report. The bad news is that REITs lag the 22% female representation on the boards of S&P 500 companies, and 34 of the REITs Wells Fargo studied had no women on their boards.
—Betsy Feigin Befus, general counsel, NMHC
In a study commissioned by MFE, executive compensation research firm Equilar found that women are shut out of the boards of directors of four of the country’s top 16 multifamily REITs: Blue Rock, BRT Apartments, NexPoint Residential Trust, and Preferred Apartment Communities. The analysis also found that women account for 17.2% of all board members, slightly below the Equilar 500 average of 20.9% female and just above the Russell 3000 average of 16%.
A dive into the 16 REITs’ SEC filings reveals that females are more sparsely represented as named executive officers (NEOs), or the companies’ most highly compensated officers—11 of the 16 had no female NEOs. The same four REITs that have no women on their boards also have no female NEOs.
Studies show that lack of diversity on boards gets reflected in the companies they govern. CREW Network, the industry’s only networking organization dedicated to advancing women in commercial real estate globally, surveyed 212 commercial real estate professionals and found that 65% have personally experienced or observed gender bias in the workplace—even though 91% of respondents say they have never displayed it themselves. CREW also found that women age 60 and older represent 12% of the workforce, compared with 22% of men 60 and older, suggesting ageism hits females harder.
In addition, while women make almost as much as men when they start out in commercial real estate, their compensation falls well below their peers once they hit 40 and approach the C-suite. Overall, the industry median annual compensation is $115,000 for women and $150,000 for men, CREW found.
“We’ve made a modicum of progress,” says CREW CEO Wendy Mann. “And we still have a long way to go. Really.” She believes transformation is imminent, however, as baby boomers retire in the next five to 10 years, creating “a great departure in male leadership.” She predicts “a huge groundswell of women now in their late 40s and early 50s” will step into the void, pushing companies closer to parity. “Do I think it will be 50–50?” she says. “Maybe not. But I think we’ll see a difference.”
As for now, “it’s still pretty bleak,” says Bozzuto Group chief administrative officer Julie Smith, who chairs the NMHC Diversity & Inclusion Committee. “When I look around at [Urban Land Institute] and NMHC board meetings, the number of women and minorities is a very small—very small—group. We have a lot of work to do.”
‘The Best Way to Run Our Business’
It’s particularly important that leadership reflect the diversity in gender, race, and sexual orientation in the multifamily industry, Henry says, because “the people who live in our homes reflect every bit of the population. From a pure economic and business perspective, we can be that much more equipped to serve our clientele if we look a bit more like them.”
Carter believes that’s why Avanath Capital operates at 98% occupancy—because its diverse leadership and employee base are more culturally sensitive to the African-American and Latino communities it serves. “People have all these stereotypes,” Carter says. “We’ll walk through a neighborhood with investors, and they’ll see young men, and they’ll say, ‘Are those gang members?’ Probably not.”
One reason Avanath has been successful, Carter says, is that “if they are gang members, we get their input and make them part of the process.”
Avanath is something of an anomaly. Most everyone agrees with Smith, who says, “Certainly in the multifamily industry, we don’t represent the communities we serve.” The problem, as Smith sees it, is that “companies are not thinking enough about their diversity.”
Company leadership needs to recognize and nurture female and minority leaders early on, then help them manage life and work responsibilities so they’ll stay in the game as their careers unfold, Smith says.
Sponsorship and mentoring are important parts of an initiative to build and maintain diversity at Bozzuto, which was recognized earlier this year by the National Association for Female Executives (NAFE) as a Top Company for Executive Women “for disrupting the multifamily industry, not through quotas or metrics, but by fostering a company culture that values diversity.”
NAFE noted that 15% of Bozzuto’s construction operations positions are held by women, exceeding the national average of 9%, and that women, people of color, and veterans hold key leadership positions in every line business across the entire organization.
In a CREW Network white paper, CEO Toby Bozzuto says 2016 was one of Bozzuto’s most profitable years, and he attributes that to the company’s great diversity. “While having a diverse workforce is the right thing to do from a cultural perspective,” he states, “I believe it’s the best way to run our business.”
Smith attributes Bozzuto’s success to a “fun, collegial culture.” Employee initiatives such as the Women at Bozzuto Network and the Bozzuto Experience Exchange get people to interact and learn about each other’s cultures.
Staff from all walks of life attend Women at Bozzuto events, on everything from sleep and nutrition to financial planning, and Experience Exchange celebrations of African-American, Asian-American, and Latino food, literature, music, and culture.
“I learn so much at those events,” Smith says. “They’re small things you do to really promote an inclusive culture so people feel like they belong. Building community is the most important thing a company can do.”
That community must include everyone, Smith is quick to point out.
“There’s this sense that white men are the enemy, and they’re really not,” she says. “They’re part of the solution. It’s not their fault, but it’s their responsibility to be aware. And once they know, it’s their responsibility to do something about it. It happens one hire at a time.”
Beyond the Comfort Zone
Industry experts say company leaders must be willing to look beyond their own personal and professional networks to build diversity on their boards—but that’s easier said than done, particularly in a relationship-based business like real estate.
“One of the challenges,” says NMHC general counsel Betsy Feigin Befus, who leads the NMHC's Diversity & Inclusion Initiative, “is developing a genuine willingness to go beyond their comfort zone—to get comfortable with the idea that a successful candidate doesn’t necessarily fit a certain profile and challenge assumptions about the best schools and where the best talent resides.”
Demonstrating inclusive leadership from the top and having organizational practices in place to account for bias are essential, Befus says.
Regulatory measures—such as an SEC requirement that companies state why directors were selected in the press releases announcing their appointments—are bringing accountability, says Patricia Lenkov, founder and president of Agility Executive Search. “There is at least some focus on qualifications other than, ‘Oh, I know John; he plays golf with me,’ ” Lenkov says.
N.K. Chidambaran, associate professor of finance at Fordham University’s Gabelli School of Business, says companies are addressing their own insularity by implementing formal nominating and governance committees that consider diversity throughout the search process. “We’re getting to a more professional way of thinking about boards,” he says. “That should be encouraged.”
Target: Gender Parity
To be fair, commercial real estate and multifamily developers aren’t that far behind the rest of the world when it comes to gender and racial diversity. Research and analytics company MSCI reports that women held 17.3% of board seats at MSCI ACWI (All Country World Index) companies in 2017, most of them in the consumer, industrial, and banking sectors. The exact percentage of women represented on boards and in C-suites varies from study to study, but it generally hovers below or around 20%.
Los Angeles–based 2020 Women on Boards, a national campaign to increase the number of women on corporate boards to 20% or greater by 2020, tracks progress through the Equilar Gender Diversity Index (GDI) of Fortune 1000 companies. In 2017, the GDI found that women hold 20.8% of board seats, prompting the group to cautiously celebrate reaching its goal. But, 2020 Women on Boards points out, percentages are much lower outside of the Fortune 1000 and “smaller and newer companies continue to lag larger companies in finding women to serve on their boards.”
The general consensus is that Fortune 100 companies have moved more quickly toward gender and racial parity than Fortune 500 ones and that large-cap companies are miles ahead of small-caps in diversity building. A 2016 Deloitte study found that 65% of Fortune 100 and just under 50% of Fortune 500 boards had greater than 30% diversity. According to the GDI, Fortune 1000 companies have far more women on boards than those on the Russell 3000, which tracks the largest publicly held companies in the United States.
Heidrick & Struggles’ Board Monitor, which examines how Fortune 500 board appointments are shifting, found that the share of seats that went to women in 2016 fell by 2%, to 27.8%, after having increased year over year since 2009, forcing the firm to amend its 2015 prediction that female appointments would reach parity with that of males by 2026. The new target date is 2032.
“U.S. companies have a long way to go to achieve diversity in their boardrooms and their executive ranks,” says Deborah Gillis, president and CEO of Catalyst, a global nonprofit that provides research and tools to advance women into leadership positions. “Progress is glacially slow and boardrooms don’t look anything like the customers and stakeholders they serve and represent. It takes intentional, bold action to accelerate meaningful change.”
At the very least, American companies are aware they need to diversify their boards, says Kansas City, Mo.–based CBIZ Talent & Compensation Solutions senior vice president Angie Salmon, who has completed more than 100 senior-level search assignments. Salmon can’t remember the last time a client said they didn’t care about diversity—but that doesn’t necessarily translate into female or minority board members.
“The overall consensus is that we’re making baby steps but we’re not there yet,” Salmon says.