The Turnaround Playbook: How Sandeep Mathrani Saved General Growth Properties and WeWork

I'm doing great. How you doing?

Yeah, thank you for hosting me. I really appreciate it. I'm always happy to learn and to, you know, I learned a long time ago that as you get older you listen, learn, and advise. So I'm going to listen to your questions. I'm going to learn what the answers are and hopefully I can provide some advice.

I grew up in Mumbai, or what was called Bombay and now it's called Mumbai. I was there till I was 16 when I finished my 10th grade and then I came to the United States as a Rotary exchange student to a small town outside Philadelphia called Phoenixville where I went from actually I skipped 11th grade, I went from 10th to 12th. But I grew up in Mumbai and it was a great city.

Yeah, you actually did the, you know, I call it the first time India tour which is generally you land in Delhi and then you do Agra then you do Jaipur. You obviously would do Udaipur for a wedding but then most people go to look at the tigers in Ranthambore, which is also another city in Rajasthan. But I'm glad you had a great trip. If you stayed at any of the villas, you must have gotten seven-star treatment. If you went to Udaipur you definitely were in one of the palaces and so it's a different way of life and that's how we grew up actually. The irony is most people think of people who come from India to America, they come for bettering their lives and their careers. There's a whole slew of us who are here who went to the best private schools in India and went to the best colleges in this country. We just ended up staying here. But we were very blessed to grow up the way you went on the vacations. I'm glad you had a good time. The warmth of the people, welcoming us, the wedding that we went to was similar to what you just indicated, YPO family, the hospitality, the level of service, just the colors, the attire. And you would be proud that my wife and I, we dress the part. So we've got our formal Indian attire, about four or five outfits for every different occasion. The partying went until 6:00, 7:00 in the morning each night. I don't know how, I literally wouldn't have a liver if I lived in India and continued that path and attended weddings like it seemed like all of these people did.

Yeah.

Sandeep, you're using the singular word of outfit. I've got outfits. I've got five of them. I've got a bar mitzvah this weekend and next weekend. I think I may wear my formal Indian attire to these bar mitzvahs.

You know, I did a year of high school here. And I then went to university. I went to study to be an engineer, to be a civil engineer to be specific. My father owned two companies in India. One that manufactured ventilation equipment and one that was a construction company. And the goal was for my older brother to be a mechanical engineer and go home and take over the manufacturing company. For me to be a civil engineer and go home and take over the construction company. My brother did become a mechanical engineer. I did become a civil engineer but neither one of us went home. So they were well-laid plans. So I did a bachelor's of engineering, a masters in management, both in four years. So I was quite at a young age of 20, I graduated with two degrees and then I did actually go home at that stage for one year to work for my father in the construction business and he convinced me to come back and study some more. So I came back to do a masters of engineering after which I never went home. So I don't know whether I made a mistake coming back or whether that was fate but you know, basically I have two master's degrees, one in engineering, one in business.

So you know, I then went to follow my dream to be in the construction business actually. So I went to work for a construction management company and we did projects where there was public housing in Washington DC to the wastewater treatment plant in Washington DC called Blue Plains to the Big Dig in Boston to Preservation Park in San Francisco and Oakland actually. So I actually went and pursued the aspect of getting good training in construction because at that stage still my intent was to go back home and work for my dad. So the intent was to get US experience and then head back home. And then in 1986 when I graduated from college with my second master's degree, you know, you do what a lot of kids do. You buy your first car. So I bought a used Nissan Sentra. You know, I think in those days it was called Datsun even.

And so I bought it for $3,500 and you know, living outside Washington DC in Alexandria, I wanted to buy an apartment for $55,000 and in those days you can get an FHA loan which was 95% financing. So you needed $2,750. So I actually sold my car, which I had bought for $3,500. You know, got the same $3,500. I had money for the down payment. I borrowed a little bit on my credit card at 18% to pay for some closing costs. But at any rate, I was into the deal for $55,000. I had an apartment. And about 18 months or so later, with two master's degrees, I was making $25,000 a year. And you know, literally 18, 20 months later, I was able to sell it for $75,000. I made a $20,000 profit. And I said, 'Wow, this real estate stuff's pretty good.' When you're making $25,000 a year to make a $20,000 profit means, you know, changes your life.

And so I decided to look for a job in real estate and a company out of Staten Island, New York hired me to design shopping centers. So I moved to Staten Island to design shopping centers and I say small company but in those days it was a $400 million company ironically the same size as Kimco was in 1989. And so I got my start in '89 by designing shopping centers and again, whether it was wanting to do more than just being an engineer I can't tell you what the rationale was or maybe it was just a desire to learn more, I decided to learn the leasing, the property management, the capital markets, because I knew when I made that small apartment deal, the buy and the sell was key. So that I registered that. And by 1992, very short time, I became president of this company. I was 30 years old. And I became president of this company called Sanford Nallet which like I said owned open-air shopping centers and by then I obviously knew a little bit about finance, I knew a little bit about leasing, a little bit about management and we were in a recession which is actually the best time to learn. You don't learn much when there's tailwinds behind you, you learn a lot when there's headwinds. And I spent a year or so restructuring all the debt of the company and then of course by 1994 the economy had changed. So I got my start really from hands-on, being an engineer, learning it from the operations, design, development, construction side of the business.

Well, you know, you better be lucky than good.

It boils down to what got me to that position really was, you know, it's an interesting... So, there was a piece of land that the company wanted to build a supermarket-anchored shopping center. It's called the Weissglass dairy factory on Staten Island and you know there was obviously a supermarket lease done and the question became how do you finance it? It was 1991, '92 and I sort of put my hand up and said look I know I'm an engineer, I know I've been pivoting a little bit to do management, a little bit to be leasing, let me try my hands at the capital markets thing. And of course the owner of the company, Sandy Nallet, said what do you know about capital markets and I said not a lot but I can be resourceful. And I made this ridiculous comment that my brother was a banker and that should give me some advantage. But my brother was a wealth manager. He wasn't really a banker to do capital markets but he worked at Chase and in fairness to my brother he did introduce me to a gentleman who was in the real estate sector and ironically he left Chase. His name was David RZ and David went to work for a company called Helix Financial. And ironically with the help of Union Labor Life because Staten Island was a union city and there was a recession and so Union Labor Life wanted to put their people to work and so they were making construction loans and so the combination of Union Labor Life and Helix Financial we were able to secure enough financing to pull the project off which gave me credibility that I was more than an engineer. But it was my tenacity I think to even have the gumption or the guts to ask. And that allowed me by then to start working on figuring out restructuring the entire debt stack against the company because it was in recession. It was a bad time. And having done that successfully gave me that visibility to be president I believe.

Yeah. So, you know, it's a really super question. Because when people come to ask me for advice, the young people, I always tell them that you have to start out either in the leasing, the design, development, construction or the asset management or the property management arms. I never tell them to go into capital markets. Never tell them to go into M&A. And I said because if you do that you're just an order taker because you need the information from the guys who operate the business. And so in my case I found that coming from that background, one, told me how, literally and figuratively, how a shopping center is built. So I understood all the components of it. I understood how to buy the land. I understood how to take it through an approval process, how to go through a design process, how to go to zoning meetings, what does it all entail. It wasn't foreign to me. It wasn't someone putting it on a schedule and me looking at it and learning. I was doing it myself. Then I knew how to get an anchor tenant lease done. I knew how to go get it financed because now I had all the tenancies. I knew what the occupancies were. So I understood that fundamental aspect of it. So as my career progressed, I was always able to get my hands dirty and understand the process. You know, just fast forward to GGP, we had 200 malls, we did a quarterly review on every mall and we probably renovated over a hundred of them. But I was able to sort of sit back and say hey guys that's not possible. We can accelerate the schedule. We can do this. Hey, why can't we do this? Why can't we sequence it in this way? Hey, why can't this be the value engineering method? I had that background to ask those questions versus barking an order saying, you know what, that's really expensive. Go figure out a way to go save me 10%. What does that mean? But I could literally talk about materials, methods, and even today, where I'm now an entrepreneur, I own two malls. I sit on design meetings and we were sitting on a design meeting earlier today talking about sequencing of construction. And I was able to digest it very quickly and say, 'Look, if you're going to deliver this to this tenant by this date, this is what needs to happen, right?' And everyone else on the phone is generally on the finance, capital markets, legal side of the profession. And they were just watching how one of the owners was interacting with the entire design team because I've been to that movie. So, I can't tell you how important it is. You need to, it's important to have that background because it comes into play. I understand costs. I can sit back and say, 'Guys, it doesn't work, or tell me the components of why it's so expensive, so I can make a decision on what materials to change, what to do.' And so you're right, there are not that many people with that sort of early background, but I think it's been invaluable in my life to the extent I don't know how people operate without that background.

Well, you know, at that age, I really tried to buy that company and unfortunately the founder passed away and the estate did not want to sell. And at that stage I thought I might be an entrepreneur in 1994. I actually formed the company, bought a piece of land and developed it which I still own to date. And it is on Staten Island. And I was going to go down the path of being an entrepreneur. And through mutual friends I was introduced to Bruce Ratner who I like to say is the father of downtown Brooklyn. Without him there would be no downtown Brooklyn. And Bruce Ratner had a company called Forest City Ratner where the public company for the Ratner family owned a portion of it and Bruce himself owned the remainder. But Bruce was responsible for creating downtown Brooklyn, which is MetroTech, responsible for buying the Nets, bringing Barclays Center. And so he created what today is the foundation of Brooklyn. And he had approached me through mutual friends and said look you've done a lot of development in the boroughs of New York City, urban development, I want to really build shopping centers in the five boroughs of New York City and he gave me his rational reason why and the main reason besides, I coined what he was trying to do as conscious capitalism which is to bring the conscious into the community, do the right by them, but do it by making a reasonable profit. And so his whole goal was how do I bring supermarkets? How do I bring Home Depot? How do I bring these stores into the boroughs of New York City so that people can buy affordable groceries? Because before that, they were buying it from bodegas where it was very, very expensive. And just to imagine so many years later that we're still talking about affordability, right? It's the same conversation we had in 1994.

'94, yeah.

So he said look would you come and work with me for a year and help me get this retail business off the ground, do a startup. I really enjoyed being with Bruce and he was a fantastic guy. We had a lot of fun. I remember stories where he and I would go into the borough president's office and he would say look I want to put a Costco and he would slam a piece of meat on the table and said look at the price of the meat at Costco and look at the bodega. It was just, he was passionate about doing right by the community. So we had a lot of fun. We built I don't know 20 or so more shopping centers in the boroughs of New York City over an 8-year period. And that led to moving to Vornado. And there, you know, so my first job I restructured debt, got me to a position. My second job with Forest City I did a startup. My third, I landed up becoming a turnaround unbeknownst to me because I was handed over the shopping center portfolio which at the time was I don't know 40% or so vacant. And with great real estate, Steve had amazing real estate but he had moved on to buying real estate and becoming an owner of office buildings and somehow the shopping center portfolio had been neglected. And the irony was that it was great real estate and so I had the opportunity of bringing it back to its original glory and growing it at the time 6x from where it was over the next 8 years. So I was president of his retail division. And thereafter, I guess I read my name in the Wall Street Journal of being one of five participants or one of five candidates for the CEO job at GGP. And the funny story is the headhunter hadn't called me yet. And four out of five of the candidates I knew quite well and as a matter of fact four out of five of us are very close friends to date. And so that started the process of the selection process to become CEO of GGP.

November of 2010. I actually did two jobs at the same time. I continued working at Vornado till January 31st and I was CEO of GGP. And I took GGP through the road show to get it out of bankruptcy with new ownership of Brookfield, Blackstone, Pershing Square which is Bill Ackman of Fairholme and Texas Teachers. And we took it public in January of 2011.