Whether it is with electronic equipment in his spare time or with the deal structure of a 500,000-square-foot office development, Randy Podolsky likes to take things apart, dissect them and figure out how they work. For 25 years he has been the head of Podolsky Northstar Corfac International in Riverwoods. His name carries weight in both industrial and office property sectors.
Mark Thomton, editor of Chicago Industrial Properties, recently sat down with Podolsky to discuss the state of the industry and to look back on his career. The following is a portion of their conversation.
Ultimately, what was it that drew you to commercial real estate as a profession?
I’ve been joking for years that I’ve been in real estate through osmosis my entire life. If you are familiar with our firm, or industrial real estate in Chicago, you know that my father Milton founded the company that bears our name in 1971. In 1976 I was finishing college and I was thinking about what I wanted to do. Real estate was probably not the highest on my list, but it was something that I felt comfortable with.
Marketing. I could have become involved in marketing. I also enjoy fixing things with my hands, like low-voltage electronics, but that wasn’t going to be a career path that would lead me to the lifestyle that I wanted. I’m a pretty handy guy. For a Jewish guy I’m really handy. I take things apart and put them back together. It does translate into one of the reasons why I love commercial real estate. I am passionate about how the nuts and bolts come together and not just the deals. I understand construction, property management, and tenant relations.
You wear a lot of different hats at your firm. You are involved with development, property management, leasing, investment sales…is there one aspect of the business you prefer to dedicate your time to?
I like the art of negotiation and the strategy of negotiation. I like solving problems. I like taking big issues and breaking them down into small, manageable components and helping both sides of the table figure out how they can get to common ground. I like that I get to do all the aspects of commercial real estate. I love development, property management, leasing, investment sales…I like it all. I’m a pretty unusual practitioner in that regard. Most people have a passion for one thing and that is what they are best at. I think I am good at a lot of what I do because I have built a really good team. I try to work with good people around me who get the numbers and physical aspects better than I do. I need my project experts, but I understand enough of it to know when deals make sense and when they don’t.
Who are some people who influenced your career?
My father is clearly an influence on me. Joe Krusinski. I had a lot of exposure to him over the years and he was instrumental in helping me understand the construction aspects of the business. Before that I worked for Joe Kammerman. My first job was as a laborer for Cable Kammerman Construction Company. They had a foreman named Wally, who’s (last) name I regretfully can’t remember now, but if he is still out there I’d be proud to say that he gave me a sense of work ethic. He told me that if I wanted to fit in with the crews, I had to work harder than them. That is how I started my career. There are some players along the way like Russ Novak, who has been our accountant for years. I find him to be one of the brightest real estate minds. From an accounting perspective and a deal perspective he understands real estate like nobody else. Sidney Saltz was a great influence on me over the years. I learned a lot from him. Lynn Reich. I have incredible regards for her expertise. Joe Dillon, rest his soul. Richard Levy, who was a partner here. These are all people who influenced my career.
How have you seen the market change in the last 12 months?
I think that many would argue that things have stabilized. I would argue that. The question is now will states and municipalities get into further financial trouble and cause additional disruption to the modicums of improvement we have seen? Everything you read says that there is tons of money on the sidelines and there is a pent up demand for investing in real estate.
We are seeing and hearing more orders for manufacturing equipment in the last year than we have in the last several years. That is an important aspect. I still believe that there is excess space out there that will need to be absorbed, but there will eventually be a need for additional space. I personally believe that we have scraped the bottom. In short of another shoe to drop in a global way that we don’t control, we are going to see some improvements. I believe that interest rates will start to rise in the first quarter of 2012. I believe that you could see a 200-300 basis point increase in interest rates over the next couple of years.
What do you see for the future of the industrial sector? Will increasing fuel costs help drive more companies back to the U.S.? Will we just be replacing jobs we lost, or do you see potential for more growth?
There has got to be a brighter future for industrial jobs in this country because we screwed it up before. We let everything we made go overseas over pennies and dimes, not dollars. We put ourselves out of business. That is no sustainable model. A lot of companies based in the U.S. have huge investments in other countries on manufacturing facilities. They are not walking away from it, but hopefully we will be smarter about developing more of them here moving forward. As long as there are imports and exports, then there is a balance. We can’t have everything that we want in this country imported. It is not sustainable.
How are your clients reacting to the new Illinois tax environment? Will this have a long-term affect on the state’s business vitality?
It makes it tougher to attract business. I think that company executives aren’t moving their companies unless they are willing to move too. I don’t see a mass exodus from Illinois, but we will have trouble attracting new businesses. We are not going to compete with Texas and not every company is going to move to Texas. Not everyone is going to New Jersey. I’m not moving my family to New Jersey. The Midwest is a great place to live. We are not just competing against tax issues.
When you look at your career, what are some of the things you are most proud of?
The number one thing that I have to be proud of, aside from my family and my children, is that we have provided consistent service for 40 years. I think I’ve run a relatively solid, level-headed firm since I took over. It’s 25 years now since I became the managing partner. It is time for me to move on and for someone else to step in. That undoubtedly should come in the next year or two…three at the most. We have a great team here, which tells me that we have a good firm. It’s not because I overpay everyone that they want to stay with us. It is because we have a great team of people who work together.
I’m proud of a few of my decisions along the way. Like, recommending that all our partners sell their real estate in 2006 and 2007. It impacted our services business, but it wasn’t selfish. Almost every asset we controlled, we told our partners to sell. I knew it was too good to be true. I thought there would be an adjustment. Did I know how long the correction would be? No. When I wrote a letter to 75 of our entrepreneurial partners I told them not to invest all of their earnings in the stock market and that we will be back to them in a couple of years to buy real estate for less than they just sold it for. I was right about most of it, but I was wrong about the couple of years. It is 2011 now.
Are you buying now?
We are buying now. If you believe that we have scratched the bottom, now is the perfect time to buy. I think those opportunities will exist for a short time. It’s a cycle. We will go into another upward trend and then another downward trend. It is bound to happen. I won’t work through another downward trend in real estate. This was my last.
When you talk to young professionals what is one piece of advice that you like to pass along?
If I had to pick one, it would be the thing that I live by. The people who do what they do for money make the wrong decisions along the way, as far as I am concerned. I was raised that if I work hard and smart and apply myself that I will figure out the right path and I will be rewarded for it. That is what I want young people to know. Work hard and keep your integrity. You get one integrity, use it wisely.
A lot of people might not know that you have dedicated a lot of your personal time to volunteer work with the Coast Guard. Can you tell me about your experiences and why you decided to invest your time in this practice?
I am the past Commodore of the 9th Western Region of the Coast Guard Auxiliary. That is the volunteer arm of the Coast Guard. We work like active duty Coast Guard, but we don’t get paid. There are 30,000 of us across the country. It is in my opinion the most productive public/private partnership in the country. I believe that our country has missed the boat on one thing. My son is a Marine and I support him in that. I never got to serve in the active duty, but if we lived in a society where you must give at least two years to public service, I’d be for it. I think we all get something back when we give something to society.
What is your idea of a perfect day?
I love two things when I am out of the office. I like to see the water in the foreground and the mountains in the background. I wake up happy every day. If the grass is green, it’s a great day. I love doing deals and I love hanging out on my boat.