Industrial property leader advises students to learn Mandarin, Spanish, and "be nice"

Focus on people skills, not differential equations

By Roger Showley

Thursday, December 2, 2010 at noon

If you're an out-of-work developer or real estate graduate looking for a job, learn Mandarin and go to China. Focus on moving goods, not storing them. Spend extra time on people skills, not "third-order differential equations."

That was some of the advice from Hamid S. Moghadam, 54, CEO of AMB Property, an international, San Francisco-based industrial real estate investment trust, who addressed a University of San Diego breakfast last week, (11/30) sponsored by the Burnham-Moores Center for Real Estate.

Born in Iran, Moghadam, 54, was studying in U.S. when the shah was overthrown in 1978. He went on to earn engineering and business degrees at MIT and Stanford. He has served as chairman of the National Association of Real Estate Investment Trusts and trustee of Stanford, and received various honors from the City of Hope, Ernst & Young, the Ellis Island Medal of Honor and CEO of the year eight times from four industrial publications.

AMB, which he and his partners founded in 1983 and then went public in 1997, currently owns or manages 155.1 million square feet in 47 markets, including in San Diego, in 14 countries. At the end of last year, its real estate investments were valued at $6.3 billion and its 148.3 million shares were worth $3.3 billion.

John Ferber, director of USD's commercial real estate program, said Moghadam was invited to share his perspective on industrial real estate, the latest in breakfast speakers relatively new to the San Diego speaker circuit.

"I found him to be a very gregarious person," Ferber said. "He's a giant in the industry and gave a lot of credit to his partners."

Among the questions posed by members of the audience and Dennis Cruzan, principal and cofounder of Cruzan Monroe commercial property company who served as MC at the event, were these highlights:

Q: What are key emerging markets in industrial real estate?

A: I think there are two economies that stand out at the moment in terms of growth and scale. Brazil and China are obviously the two big giants. I'm excited about China and Brazil because of the scale and growth rate. (He said he looked into entering India and Russia but declined, and no longer considers Eastern Europe as an "exotic" emerging market. Africa remains a commodity-based market with a continental GDP that he said is less than Los Angeles.)

Q: What is your current thinking about the customer and end user?

A: When you and I got into the business, it was about 80 percent storage and 20 percent movement. Now, it's about 80 percent movement and 20 percent storage. Everything is going to all points of global trade – ports, airports, things that are about the movement of goods rather than sitting around… Nobody makes money with stuff sitting around in a warehouse collecting dust. People make money by moving goods rapidly through buildings. So think of a warehouse as a shopping center. It's all about turnover, throughput, and that's what makes a good industrial property.

Q: What buildings are you buying?

A: I think we went through a 15- to 20-year period in industrial, where having fewer really large buildings was important… One thing you sacrificed was transportation costs and fuel costs to move things back and forth, and the pollution that came out of the tailpipe. With fuel costs going up and the general threat of a carbon tax, I think we're going back to where warehouses will be a little smaller and a little closer to the customer. That's good for us because we're invested in markets that are close to the customer.

Q: What do you look for new employees, especially students just out of school?

A: There are a lot of smart, well educated, driven kids that come out of schools. They have to be reasonably bright. I don't think they need to be valedictorians of their class; being book smart and street smart are very different. They have to have good communication skills. They have to have an ability to really relate to people. They need to be ambitious, but they need to be "we" instead of "me." "Me" is my biggest turnoff in a prospective employee, because we're trying to build something together. It's not about "me"; it's about "we."

And they have to be nice. Bad apples really change the culture of an organization. It just takes one and it totally trashes your organization. It's important to have a strong culture so that you don't attract those people… I think hiring is an imperfect science. But usually people don't fail on smarts or energy or workability or enthusiasm or something like that. It's really attitude and people skills that really separate the good ones from the really great ones. If you have 10 percent more time, I'd work on people skills, not on solving third-order differential equations.

Q: What about midcareer real estate professionals?

A: I think the business does not need all the people that are in it. The truth is we have an overcapacity of talent in the real estate business… So my advice is to go overseas. If you're mid-career in real estate, go to where the demand for your product is. My advice to students is to learn Mandarin or Spanish or both. Between English, Spanish and Mandarin, you can speak to 95 percent of the world. And even if you don't speak Mandarin well, the fact that you're trying is really important in terms of your ability to do business locally, because people appreciate that you're trying.

Q: What do you think about Mexico?

A: Mexico is a very interesting market. Everybody knows about the drug wars, and you guys in San Diego, in particular, read about it everyday in the paper. Mexico includes two markets. It's border cities, of which Tijuana is the best and the rest I wouldn't touch – Tijuana because it does have hills and geographic barriers to development; the electronic guys need to be there, what with 3-D TV, and all that is going to be a whole new manufacturing cycle once the shooting subsides. So I think Tijuana is the only decent border city.

I think the real opportunity in Mexico is Mexico City, Monterrey and Guadalajara, which is where we have really focused our energy, because that's where the big population base is. That's where the big industrial base is. And we think that has legs. Mexico has 110 million people and this year its GDP is going to grow 4 or 5 percent. It's a pretty serious place. And I think they're attacking their problems. They're winning, just not yet, but it's only the second quarter, maybe the beginning of the third.