Building a Multi-Billion Dollar Platform with Michael Maturo, Managing Partner and President at RXR Realty

On this episode, managing partner Aaron Y. Strauss is joined by Michael Maturo, founding Managing Partner and President at RXR Realty (“RXR”), a multi-billion-dollar private real estate company, headquartered in New York. The RXR platform manages 84 commercial real estate properties and investments with an aggregate gross asset value of $21 billion. Prior to becoming President of RXR, Mr. Maturo served as President and Board member at Reckson Associates Realty Corporation (“Reckson”). To date, Michael has been involved in capital markets transactions that have totaled over $37 billion.  

Mr. Maturo also serves on several outside Boards and Committees, serving as First Vice Chairman of the Board of Directors of the Long Island Association, as well as a Member of its Executive Committee and Chairman of its Exonomic Development Committee. In December of 2012, Mr. Maturo was appointed by Governor Cuomo to the Board of Trustees of the Long Island Power Authority where he served as a Chairman of the Personnel and Compensation Committee until January 2014. 

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Transcript

A.Y. Strauss: Hello everyone. Welcome to The Dealmakers Edge. Today we're very excited to be joined by Michael Maturo, founding managing partner and president at RXR Realty, a multi-billion-dollar private real estate company headquartered in New York. The RXR platform manages 84 commercial real estate properties and investments with an aggregate gross asset value of $21 billion. Prior to becoming president of RXR, Michael served as president and board member at Rex and Associates Realty Corporation. And to date, Michael's been involved in capital markets transactions that have totaled over $37 billion. Michael also serves on several outside boards and committees serving as First Vice Chairman of the Board of Directors of the Long Island Association, as well as a member of its executive committee and chairman of its economic development committee. In 2012, Michael was appointed by Governor Cuomo to the board of Trustees of the Long Island Power Authority, where he served as chairman of the Personnel and Compensation Committee until January 2014. That is just a really small snippet. Your bio could just read for pages and pages, but we want to get to the conversation itself. So, Michael, welcome, [we’re] really pumped you here, and we cannot wait to tell your exciting story to all of our listeners today. 

Michael Maturo: Well, thank you Aaron. It's so nice of you to have me on. It was great meeting you a few weeks ago and [I’m] honored to have been invited.

A.Y. Strauss: Of course. And there's so much to unpack. I mean, there's your personal story, and there's the RXR story. There are so many mega, mega projects. We'll never get through all of it, but I guess the goal is just to try to get… this is sort of a framing conversation, right? For people who are starting out or maybe in the middle point of their career, they look at you as somebody who's really done some tremendous projects, iconic projects. And I think when you go back to the roots, it always frames it really well. Maybe you could talk about where you grew up, and how you got started in the business. And I know the RXR relationship goes back to Reckson a long time. 

Michael Maturo: Yeah, I appreciate it. Yeah. So, I'm a Bronx boy. I was born in the Bronx but I moved to New Jersey actually when I was young. I grew up in the Montclair area and went to Seton Hall University. [I] graduated there, and I guess, you know, the first turning point for me when I was interviewing, I had an accounting and finance degree, and back then getting into a Big Eight firm was kind of the thing to do. I was interviewing with a couple of the Big Eight firms, and I got an offer from Pricewaterhouse, which is actually still around, but I was actually dating a girl at the time and her father was a CEO. And actually [I] didn't have a great relationship with him. But one day I happened to be at the house and he sat down. He was asking me what I was going to do, so I told him about that. But I also told him I had an interview and a job offer from a firm called Kenneth Leventhal and Company. And he says, "Oh, what did they do?" I say, "Well, they're a specialty firm. They do a lot of consulting work in the real estate industry". And he says, "Well, what did you think?" I said, "Well, I found it really interesting. Very different than the Big Eight firms, which would probably offer me some ability to spend some time in different industries and then pick there. And he said something, he said, "My view is you're better at being a master of a trade than a jack of all trades." And, for some reason, it was a very profound statement for me. And I wound up taking the job with Kenneth Leventhal Company and not Pricewaterhouse and decided at that point to kind of specialize in real estate. It was, I guess, the first career decision for me that really turned out to be you know, put me on the path to starting a real estate career. I spent about 10-12 years there. And I learned a lot about real estate and a lot of different areas of real estate. And it was really a specialty firm and we did a lot of specialty projects. It was a tremendous experience. And then I left there. Interestingly enough, before I left, the firm merged with ENY. So I eventually got into a Big Eight firm. But, right about that same time, I was nominated to become a partner. I had been introduced to Scott Rechler at Reckson which was—at that time—a Long Island firm that was looking to expand outside of Long Island. And it was led by Scott. It was a family business and I guess my second major career decision was whether to become a partner in a Big Eight firm or launch into the private side. I think I was about 30 or 31 years old at that time. And Scott, I think was 25. So, I met this 25-year-old guy and I had to make this decision to go onto the team as being the first non-family member into the family organization in terms of executive. And I took the job. I wound up taking the job as the CFO for the public company—we had just gone public. And at that time it was a $300 million company. And then over the ensuing 10 or 12 years, we grew the company pretty dramatically in Manhattan [and] around the tri-state area. We actually had invested in or started a student housing company. A lot of people don't realize that. We found a company called American Campus Communities. It turned into the largest public owner of student housing facilities in the country. And Blackstone actually bought the business last year for $16 billion. So we grew Reckson pretty aggressively and in 2007, [we] sold the business for $6.5 billion dollars. We gave our IPO investors an over 700% return on their investment. And we formed immediately thereafter RXR, which is a private company. And we fund ourselves with institutional capital from large sovereign wealth funds around the world, pension funds, and where we’re on the retail platforms with Morgan Stanley, UBS, Deutsche Bank, and firms like that. So we've really expanded our investor base. We've raised during that period of time about $12 or $13 billion of that institutional and high networth capital and a $30 billion platform which is about four times the size of our public company. And we have a national platform right now. It's been done by partners who have been together for 30 years and I think that's been a big plus. And we all have our kind of area of the firm that we manage and lead and together, you know, we make the decisions that we need to make to grow the business. I think the overall arching philosophy is we do business in terms of a win-win situation. We don't try to squeeze the last dollar out of any transaction. We try to understand the counterparty and try to make things a win-win situation. That doesn't mean that there are times when we need to be a little bit more forceful and work through friction and whatnot, but I think we do it in a manner that is fair-minded. And I think over the course of now 30 years, we've built a pretty good brand, [and] a pretty good reputation for being able to execute, again, to be fair-minded and empathetic for our counterparties. And [], you know, have a reputation for doing large complex transactions and developments that not many people do. And it's a function of building a very large, sophisticated, well-organized, efficient team that allows us to do things in a very coordinated manner with a lot of collaboration and with strong leadership. That's 30 years I just gave you. 

A.Y. Strauss: Yeah. And I guess we'll conclude on that. Right? (laughs) No way. We’ve got to get more out of you. That's an incredible background. And to that end, I was reading an article on you before, I think you have a good relationship with Andy Jonas, who's in real estate at Goldman Sachs, he said, "You know, you really have an amazing ability to understand all the details of a deal, the deep knowledge of legal, tax, accounting, and financial issues.” It’s very hard to bring that all together. You know, the financial products, your ability to interact with the investors, rating agencies, lenders, and other owners—[it’s very] hard to blend that talent into one individual. A lot of times people are just very, very myopic. And I guess you started in a niche of commercial real estate, but you've expanded as almost a generalist because so many people are reporting to you. And maybe that's a good segue into my next question, which is, you had enormous growth from those early days when you got that call back in 1994 to now. And I guess one thing you've been consistent about has been the people. You know, building your brand around great people. So you've had to nurture tremendous careers. You probably have personally an alumni network like no other of people who have worked with you and careers you've helped blossom under you. Maybe you could talk about how you've grown your team to keep up with the massive pipeline. Because people will read about the deals. Those are just for public consumption. But behind the scenes, if you're listening to this and you're scaling a real estate development firm or existing asset, buyer, whatnot. A lot of it just gets lost. But maybe you could talk about how you scaled the infrastructure that's needed for all the massive deals you're doing today. 

Michael Maturo: Yeah, it's a really good question. And, when I started at Reckson, we had 42 people. And we grew that to over 300 people. When we sold our public company to SL Green, we had 315 people and we sold the entire business. We sold the entire company. And then when we started RXR, we kept about 125 of our key execution people. And then we had to obviously go out and raise some money and start buying some assets. And the partners had to carry that load for a while. But even from the beginnings of the company and even prior to the family business, it was always an interdisciplinary approach, right? To have expertise in property management, leasing, finance, capital markets, development, and construction. I mean, that's how the company was founded. And by having all those skillset sets, it really adds vision. On top of that, it allowed the company to create something out of nothing. Right? So, we did it many times where we would buy an old industrial building and create an office building on the west side of Manhattan here, where we bought a vacated Pier 57, which was an old shipping depot that was vacated for 50 years in a blight on the Hudson River. And we created an incredible facility that Google now occupies that has a full-acre park on top of it and has over 100,000 square feet of food and entertainment amenities at the base. And all of it sits on the Hudson River. And the complexity of working with the city and the Hudson Park Trust, to go through the ownership complexities to be able to develop the physical complexities of redeveloping on the site, which is interesting. It is built on caissons that are big concrete boxes that literally sit on the bottom of the Hudson River. And kind of float. And the structure is built on top of it. So it's not built on a pier. It's built on these giant caissons, which were—from a historical standpoint—designed and built by an engineer that designed the same caissons that were used to land the troops in D-Day in France. [It’s] an incredible, incredible history. So to be able to build a project like that, you need really, really, sophisticated team of people. And we've continued to build that team. And now we have over 550 people. And there's a large allocation of time to managing those people not only in the sense of creating a culture and, in the case of getting people to join the firm and making sure that we have the right expertise and skill sets and whatnot, but also having the right organizational structure. And we spend a lot of time doing that in terms of making sure that there's a significant collaboration of efforts, right? Because when you build or redevelop these types of buildings or take on these types of projects, it is a massive coordination effort. There's a lot of leadership and organizational structure that needs to be put in place in order for it to be effective and work properly. 

A.Y. Strauss: For sure. And even just on your, I don't want to say “typical” deals because I don't think you do any typical deals. They require a lot of brain damage on purpose because that's your expertise. But I mean, [] it's rare to find people who embrace those public-private partnerships. And I know you've talked about them in the past that it's about cooperation, buy-in from the neighbors, the citizens, municipalities, chamber of commerce, religious leaders [and] schools, the police. Everyone needs to have this sort of collective desire to develop. But I mean, whoever thought being a psychologist was part of your business arc. But it seems like that's probably a large part of it; just understanding all the stakeholders and figuring out exactly where they all have to land and just…I mean that alone, forget the bricks. That alone is a massive undertaking. 

Michael Maturo: Yeah, no, it's a big undertaking. And again, I think one thing we've done well again is matching up the skill sets with what the task at hand is. So for instance, you mentioned the public-private partnerships. We did that with the pier in our development in New Rochelle. We helped the city do an entire zoning overlay for the entire downtown. And one thing we did there was we brought on a team, and a number of those people had come out of New York City Economic Development Corporation. And they had the very unique skillset to understand how government works and what that, you know, bureaucracy entails and how to manage through that. So we've done a good job over the years in terms of hiring very specific talent that takes on these very specific tasks and development. When you look at it from a high level, it sounds like, “how could you have done that? How did you do that?” We've had some good foresight in that respect and understanding what the tasks are and building teams around that even on the residential side where we got into residential, I'd say about 10 years ago now. [We] didn't have much of a team back then, but [we] hired some really good people up front and now have a team of about 100 people on the residential side that's done some really interesting projects not only in the New York Tri-state area, but we've expanded out to places like Raleigh, North Carolina, Tampa, Dallas, Denver, Phoenix—just building out the team [and] making sure we have the resources. We've never been shy about hiring and never been shy about realizing that we need to build a team. So, you know, as I said, we have 550 people and that's a large team. I think, you know, generally speaking, most real estate companies tend to be lean. We tend to go the other way on that.

A.Y. Strauss: Right? I mean, you're doing some really complicated deals that require vast resources, so that makes sense. And besides the private partnerships. You've done some very fantastic private partnerships too. I know, TF Cornerstone, and you've got 175 Park Avenue and, (right), a $3 billion mixed-use tower next to Grand Central Terminal. That's huge. And North Carolina… 

Michael Maturo: Yeah, that's [] a really interesting deal. You're right. We're working with TF [Cornerstone], which are great people and great partners, and the complexity of developing a building essentially above Grand Central train station and subway system; it’s going to be pretty complex. And it's going to be a 2.8 million square foot office tower with a hotel on top. That's going to have a budget of roughly $5 billion. We're hoping to draft off the success of One Vanderbilt, which has done sensationally well. And we're very—obviously—bullish on that area and new product in general; particularly well-located new product in general has done well. And we're excited about that prospect. In fact, we actually—it’s an interesting story—we are touring One Vanderbilt because we're obviously friends with the folks at SL Green who bought Reckson. And we toured some vacant space where there's not much to add, but it was actually a block of space that overlooked the site that we're going to be building on. So, it looks at the Hyatt Hotel and we said, "Wow, this would be a great spot to have a marketing center". So, we actually lease space in One Vanderbilt that overlooks the site. And we built out this incredible marketing center where we have a 20’ x 40’ screen with amazing technology that allows us to literally build the building on the video screen with such clarity that you feel you can walk into the wall, [and] right into the office space. And just to the point of demand in New York and obviously, there's a lot of discussion about where office space in general is going in New York City. Since we opened up that marketing center in December, we've had over 15 million square feet of users, serious users, come to the marketing center and explore [] options to occupy the building. So, we're pretty excited about that. And again, the engineering feat of building the building at that site will include $250 million of public approved improvements to the space below the building in terms of wider corridors for the subway access into Grand Central and so forth—we think—will be an amazing addition to the city. So (absolutely) we're excited about that. I just need to find $5 billion to build it. So... 

A.Y. Strauss: You know what, I'm sure it'll find you just fine. And hopefully, you know, I've been to the top of One Vanderbilt, and [it’s] super cool. Hopefully you'll do something that rivals the space that they have at the top. But you also touched on the technology. And I know you've been involved with PropTech for a while and you've been an evangelist for it, I should say. You've had tech funds, that you've launched. It's a weird time, right? Because the VC market is down, and these opportunities could potentially be gamechangers for your portfolio. Maybe you could talk about what you're most excited about for the future; how you've implemented things in the past; and sort of where we are today in the current state of PropTech. 

Michael Maturo: Yeah, yeah, sure. You know, it's certainly interesting. I think everybody's general knowledge is that real estate is kind of lightyears behind in general [] in terms of incorporating technology into the business. But I think we're catching up and we're doing a good job. You know, one thing we did, which was interesting albeit costly, and we're finally starting to see the payoff is, we partnered with McKinsey and Microsoft about—it actually started pre-COVID and we developed our internal innovation technology center. And what we did was we hired a number of data scientists, data engineers, and product development people to really understand our consumers. And how do we do that? By putting in our own internal systems that [] track data. And over the years, that team—which has become smaller now and more compact—has done some really interesting things in terms of understanding our tenant base, understanding our resident base, and putting in AI systems to extract data and really understand our consumer to the extent that we can provide and design services based on what we're reading from that data to understand sentiment analysis and allow us to [] design services to put in place to service the customer and understand what they like [and] what they don't like. It helped us on the asset management side in terms of response times in offering new services in retention and expanding our offerings to our tenant base, and our response times, and it's been a tremendous help. So I think technology continues to work its way into the real estate business. Yeah, we had a lot of money that went into ProTech. I think you're right. That's backed off in today's economy in terms of being able to raise capital into it. But it's certainly here to stay. And the software that's going to help real estate be more efficient [and] provide a greater level of hospitality [] services to the consumers is going to continue to expand out. And I think the future is really exciting and really bright in terms of continued integration of technology into the real estate industry and providing opportunities for young folks, entrepreneurial folks, and teams to further penetrate the real estate market and its customer base. 

A.Y. Strauss: Amazing. And another great segue. You're practically doing my job for me. I appreciate it. We talked about the younger generation coming up with technology. I'm sure every day someone wants to get on your calendar, you know, to meet you for lunch or coffee or something. And you only have so many hours in your day. But, you're sitting with somebody who's maybe five years out of school, 10 years out of school, a few years out of school, and they want to get into development. They want to be their own boss. They want to start scaling a real estate business. Obviously, it always looks beautiful to the external observer. And internally, it's an enormous, enormous lift on a thousand levels. But maybe you could talk about just a couple of things. You try to drill into that person's head. If they manage to squeeze into your schedule, how should they think about the arc of their career if they want to get into the ownership side? 

Michael Maturo: Yeah, it's funny. We have an internship program that we do every summer. And right before this call, I had one of the interns come in for a little bit of a session and, you know, listen. It's like any other part of success because he asked me kind of the same question, [] “what should I do? What have you done personally? What have you done as a company?” And, you know, the answer is kind of consistent, right? You build a brand. You're fair-minded. You develop your network, [and] you develop your personal portfolio. Whether that's your personal experience, what you learned, [] building out your network, your contacts, your portfolio, what you've accomplished. And you build that brand, right? And we've done that as individuals. And we've done that as a company. And you know, when you build those things, when you build your brand, when you build your skills, your knowledge, [and] you build your network, you push that all along and opportunities come. And your point at that segment is to make good decisions…and to try to make the right decisions. I made the decision to take that job at Leventhal instead of Pricewaterhouse. I made the job, the decision. The opportunity came my way. You know, with Rex and as opposed to becoming a partner at EY at that time. So the opportunities come because you make yourself attractive. You build a brand, you build credibility, you build integrity, [and] you build that network. You build your skillsets. You have your personal portfolio, and whether it's personal or your company, you move all those things along and you build them up and you're very cognizant, of all those things. And making sure that you are advancing each of them an opportunity comes your way. And then the decision points, you gotta make the decisions. And again, that same group of people, that same body of knowledge, that same experience, your credibility, your integrity, help you make those decisions, right? So, you know, I always say don't worry about it, ‘cause if you do the fundamentals right, the clouds will clear, they'll be clear sky, and you'll be able to make the right decisions. I've done that personally. And I think we've done that at a company and listen, along the way, there'll be stress points, right? We all have them. And it's another thing along the way that you have to learn, how to deal with. One thing I've always lived by is, you know when you haven't asked me the question, but everybody gets the question, what keeps you up at night? Right? And I have a little bit of a strange answer, which is nothing because my philosophy has always been, I generally go to sleep at midnight and I generally get up between five and six o'clock. And my philosophy is there's nothing I can do between that period of time that's going to change anything. So I might as well sleep. 

A.Y. Strauss: That's very good. Although I do know you have a lot of

Michael Maturo: And everybody, a lot of people, [will] say how that's so hard to do. Well, you know, it's like anything else; you train yourself to do. So I don't take my phone to my bedroom. I shut it down at 12. I go to sleep, I pick it up at six and I sleep well because I don't let...you know, this is the next day. And then the other thing I've really learned when you get to that real stress point is that after doing it for 40 years, you're gonna get to the other side. You know, there is a very smart man that said to me once, when I was relatively young in my career, he said 99% of the things you worry about don't happen. Right? Bad things generally are a surprise, so, don't worry. And the other thing is, we'll always get through it. You know, there's going to be the other side and you'll get through it. At RXR, we have this, once a month we do what we call "One RXR" and we get the entire company on Zoom. And we go through kind of, you know...Scott and Neil give an update of the things that are going on at a high level. We try to bring in either a guest speaker or a lot of times we'll have somebody within the company talk about what they're working on, and pick a project and educate the whole company on how a project's going. And, you know, lately, we've been having to deal with the realities of the economy and the real estate industry. And on the last call I said, listen, "We've been together for 30 years, and I've been in business for 40 years. We've seen a few of these cycles and you gotta' work your way through them and you gotta' prepare yourself for the other side", right? So right now, we're preparing ourselves to be acquisitive and looking for opportunities and be positioned for it, because we're gonna get to the other side of this and we'll work through whatever issues we have right now, and there'll be some challenges and we'll get through them. We've done it before and don't worry.

A.Y. Strauss: I love it. And Michael, the last few minutes of you speaking just really encapsulated some of the best ideas I've heard from talking to many folks about the industry. But I know...I really personally appreciate it. I know our listeners really appreciate it. And keep doing the amazing work you're doing that's inspiring a lot in the community and the deal-making. It's super exciting to watch. So I guess with that, we'll wrap unless there's anything else you want to add, but…

Michael Maturo: Oh, just, you know, thank you so much for the opportunity and great job. I hope somebody gets something out of it. And if anybody has a question, you know, gimme a call or send me an email.

A.Y. Strauss: That'd be amazing. So I guess we'll stop recording here. And again, Michael, really, really appreciate you taking the time outta your super busy schedule and to be continued. We'll watch your career continue to inspire others. 

Michael Maturo: Thank you. Thank you so much.