Ep. 31 Ann Hambly

About Ann Hambly

Ann is the Founder and CEO of 1st Service Solutions, the industry’s first company dedicated to CMBS borrowers/owners. Ann spent her 35 year career prior to creating 1st Service Solutions in 2005, working in and leading some of the nation’s largest servicing organizations, including Prudential, GE, Nomura, and Bank of America. 

Ann is a sought after speaker, author, teacher, expert witness and advisor in the CMBS industry. She has received the following significant awards and designations: 

  • 2018 – Received prestigious CRE (Counselor of Real Estate) designation

  • 2018 –  1st Service Solutions was featured in William Shatner’s TV show “Moving America Forward” which features entrepreneurs who have helped shape America

  • 2015 – Inducted into Commercial Real Estate’s Hall of Fame by Real Estate Forum

  • 2015 – Named a Legend and Woman of Influence in Commercial Real Estate by Real Estate Forum

  • 2014 – Advisor for Real Estate Forum Ask the Advisors

  • 2013– Named Top 10 Most Distinguished Women in Commercial Real Estate by the Mortgage Bankers Association

  • 2013– Named a Legend and Woman of Influence in Commercial Real Estate by Real Estate Forum

  • 2010 – Named a Woman of Influence in Commercial Real Estate by Real Estate Forum

She has also served on the following boards: CREF C, MBA – Chair in 2003, ALM Editorial Advisory Board.

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01:25 CR: Welcome to the Real Market with Chris Rising. I'm really pleased to have Ann Hambly with me today. Ann is the founder and CEO of 1st Service Solutions, so welcome to the podcast, Ann.

01:36 Ann Hambly: Thank you, Chris. Thanks for having me.

01:37 CR: Well, I'm excited to have you because I have a period of my life where I spent hours upon hours talking to special servicers. I was unfortunately in the position at Maguire Properties in 2008 to 2010, when the properties were all, finance was all CMBS, and all over-levered, and I spent hours trying to get solutions to which we never got them. So I am so excited to talk to someone who deals with this on a daily basis, has built a company around it, and so I'm looking forward to our conversation.

02:13 AH: Great, thank you. Me too.

02:14 CR: So tells us a little bit about what 1st Service Solutions does.

02:17 AH: Sure, and it will lead right into the trouble that you were experiencing during that time. I actually spent my whole career in the servicer shop, so I was a servicer for my entire career, 35 years of it, all in commercial real estate. Happened to be involved in CMBS from the inception of CMBS in the late '80s actually. And after watching what owners went through in CMBS servicing, it dawned on me by about 2003 maybe, that somebody ought to take that knowledge and go out and start a business where you help owners maneuver through the process. And so, by 2005, I did just that. I left my corporate career and started this new niche in the marketplace, which is a borrower advocate, and what I do really in a nutshell, is find out what a borrower has as a current issue or need in their property, and try to get that approved or figure out a slight alternative that can be approved in a CMBS structure. That's what 1st Service Solutions really does.

03:25 CR: Well, for anybody in our audience who's been in the position where the property was not performing and you needed to call a special servicer, it's a really helpless feeling and it's a very scary feeling. So I have to imagine that part of what you do today is not just working on financial solutions, but it's gonna have a psychological kind of component to it where you're providing counsel to people who are afraid that their properties are gonna be pulled away from them.

03:51 AH: Absolutely right. That's probably just as important as any other thing I do. And it's not just people that are in trouble, but even if you have a well-performing property, and you just need, I don't know, a lease approved, or you need money out of reserves. All of that can take on sort of a life of its own when you're in a highly-structured environment, like CMBS. And so, it's very panicky and frustrating for an owner, but if you know the process, it's actually very easy. I always say, it would almost be like if the IRS didn't have a website and/or didn't have forms, and it's April 15th and you gotta submit your taxes, but you don't have a form.

04:33 AH: You don't know exactly how it's supposed to be done, but you know you have to do it, it would be really hard to accommodate the needs of the IRS and not get penalized if I didn't have that website to go to or people that I could hire to help me. The same kind of thing here, and I use that as an example because CMBS is governed by IRS regulations, so a lot of it is form over substance, and where do I send something, and how do I ask for it? Anyway, so I could go on and on but basically, yeah. That's it.

05:03 CR: Well, your experience in the business is really a differentiator. You started in the CMBS business and worked at some of the most legendary shops, Nomura, and GE, and Prudential. You've seen this business evolve. Can you talk a little bit about your educational background and how'd you get your foot in the door, in the CMBS world, originally?

05:29 AH: Sure. Well, yeah, it has evolved tremendously. A couple of examples is in '89 when I worked in servicing and I worked for a savings loan, I remember I was in my, gosh, maybe I was 30, not quite but at that point. So very young in my career, I looked out the window of my office, and all of these black cars pulled up in the parking lot. People got out of the cars, and I'm like, "What the heck is going on?" And come to find out, we were being taken over by, what was then the RTC.

06:01 AH: And at that moment, what happened is the RTC, of course, became in control of everything we did, and our loans got put into, what became one of the very first, like the first, CMBS structure. And I was head of servicing, so it got done. And six months later, I got a phone call from an investor, barely knew what the word meant, but I got a call from someone saying, "I'm an investor in this pool, and I wanna know, how... I don't know, Ann Hambly's loan is performing." And I thought, "Well, I can't tell you that."

06:34 CR: Mm-hmm.

06:35 AH: And so, in the industry, a bunch of us in servicing, Stacy Berger at Midland and I often would talk and we said, "What do we do?" I mean, what do you do when you get those calls? And that's how we started developing procedures and a process for what is now well-known as CMBS. So, but at the beginning, we had to create it all from scratch. So I was there from day one when it was horse and buggy, and eventually got to cars, and now it's very, very different, but a lot of people can't appreciate how structured it is. They just, a borrower often thinks it's just like getting a regular loan with my bank, and I just, it's no different, and it's way different so...

07:18 CR: It certainly is. I think that's that. I think from a developer point of view, and a borrower point of view, I think it's very hard to change your mindset that this isn't your banker who financed the loan originally with you and you went through everything. This is somebody that's getting a new set of documents that really has no history, and really has very little latitude on things that they can do. So it's a complete mindset shift if you're a borrower when you're in the CMBS world.

07:53 AH: That's exactly right. And I don't think anyone, probably rightly so, but that's fully explained to that going in. And in fact, sometimes you might not even know your loan is gonna be put into a securitization day one. So you get your loan through the same banker you've been getting loans through, and only, and by the way, if everything goes exactly as planned for the whole 10 years. Nothing's different, then you may never have to know any different 'cause you just keep talking to that same company that you send your payments to and so on. But it's when anything doesn't happen exactly as you planned over the term of the loan, or you need their approval, that's when you all of a sudden realize, "Wait a second, I can't just call my friendly banker and have a discussion." It's all different. So yeah, it is definitely a different world.

08:43 CR: Well, let's talk a little bit about, so you talked about being in your early 30s or late 20s. What was it when you came out of college, was your goal in life to get into the CMBS world, or did it just evolve? Tell us a little about that.

08:57 AH: Yeah. Well, actually, I don't think even the acronym existed back then. Yeah, no, I actually... I took a different kind of path. I was back in the era where I got married right out of high school, actually, believe it or not. I went to night school for college. I had my kids young, I really enjoyed... I had a career but I always really enjoyed spending time with my kids and I figured that's what I would mostly do during my career. I had a job, a part-time job, as a cashier in a, actually a director's mortgage, it was a mortgage company. So that's my first entree into loan servicing.

09:40 AH: And then I'm a diligent worker, I'm a quick learner. I mean, I do have some good traits in that regard and I just kept getting promoted and pretty soon before I knew it, I was like running the servicing. And then I found, you know what, I really, really liked it. I love it, actually, and it's because it's a little bit like a, like you said, almost a counselor, a nurse, a teacher. I mean, there's a whole bunch of parts to it that just kind of cater with my core nature anyway. That's how I got into it. It was really just having to take one step after the next, and pretty soon, here I was. And then I couldn't kind of change, if that makes any sense.

10:19 CR: But I'd have to imagine that there were some challenges, I mean we're talking, were you living in Texas at this time? In 1980's real estate, there was the savings and loan up and down, and all of that. But just being a mother, and raising your kids working, eventually working full-time. What was it like? And how did those promotions go? Were they, were you taking the old 1950's-era saying you're taking a job away from a man and they provide for the family? I mean, did you deal with any of those kinds of issues in the early '80s?

10:56 AH: Yeah, I definitely did. I got to a certain level in my career and I looked around, I mean it was funny, I looked around and all of a sudden, I thought, "Hmm." Actually, let me back up. I have all brothers. I was not raised with a sister or any other female other than my mother, of course. And I had all boys, and I have a grown up in a household, always, of all men, all boys. And one day, I was in one of my early, corporate jobs, and I don't think I was a C-level or anything, but I was in one of my management roles early in my career and I was sitting around the table and someone asked me, one of the guys in the meeting said, "What is it like to be the only female in this group?" And I had to stop and look around and realize, "Oh, yeah, I am."

11:43 AH: I didn't realize that, because that wasn't an uncomfortable setting for me. I was kind of more what I was used to. I probably wouldn't have known how to act if I was in a room full of women. That's a little out of my norm for me. So it worked well, it served me well in my career, because I've often been... Like, at that stage, I was many times, the first woman who did something. I was the first woman chair of the Mortgage Bankers Association on the commercial board. And so I often was in environments where I was the only woman in the whole group, and again, that felt very comfortable for me. But it is very different. It was a very different world back then.

12:20 CR: And was there any stories or anything you can relate to our audience about things you had to overcome or just situations that would just blow our mind if they happened in 2019?

12:34 AH: Anything that I can talk about publicly, let's think...

[chuckle]

12:38 AH: Well, I think the funniest story that always comes to mind and I'm gonna have to redact a few parts for the public audience. But when I was the first chair. I was chair of the NDA Commercial Board. I was the only female. I have all, a board full of men. And as I was being inducted in as the chair, we had our board meeting, and there was a ritual that apparently had been done. And I'll leave out the specifics about the ritual [chuckle] but just suffice it to say that it's not something a woman would normally do. Okay, so it was this ritual that these guys all did every year. And as the new chair, I was expected to just follow that ritual. And of course, I saw it starting and they went around the room and I thought, "Oh my God." I remember feeling the internal panic about, "Okay, okay, this is a critical moment in my career. What am I gonna do?"

13:32 AH: So I thought, "Alright I got a couple of choices." One is say, "Oh no, thanks, not for me," and then all of a sudden be different in that group or follow suit as if I did it every day, that was no different and then no one would know or pop every day and think, "Oh, that's a female, not a male." And so I just made that instantaneous decision to follow suit, blend in, become one of the guys, in essence, and yet still, of course remain female. So that, to me, was super important. And if I could tell you the details of the ritual, you would really be laughing. [chuckle] But that was probably the biggest pivotal moment in my career where I thought, "Okay, this is it. I can either follow suit, sort of blend in, or I can really stick out and make everyone uncomfortable including myself." And so I chose to blend in, and I think that's been partly the key to how this has worked for me over my career.

14:35 CR: So let me ask you this. If that happened to you today with your experience and everything today, do you think you'd handle it differently?

14:45 AH: No, but I can assure you it wouldn't happen today. [laughter] It was in 2003. But today, unfortunately, in our environment today, I don't think anybody would feel like you could do that and there would certainly be someone who would leave, and there will be some woman who would leave and say, "Oh my God, I need to go tell someone." I'm not... I don't mean to make this at all like... I hate even to go down this road one bit. But there are a lot of things we don't do today that we did back then 'cause we didn't know. It wasn't as frowned upon or I don't know. I don't know that I'm being clear at all there, but...

15:29 CR: No, but I think the reality is when you look around a room today, it is so much different than the world that when I got in the real estate business in the early '90s. I mean, I still remember going to meetings where there were ashtrays there and people... I remember very clearly, when cigar smoking was banned before cigarettes on airplane. I mean, it was a very different world.

15:56 AH: Yeah, it was.

15:57 CR: And I think we are dictated a lot by... Social norms are dictated a lot by the group that is around. I think those things have evolved because we just are much more diverse working... The demographics in the working world are much different. But did you ever feel that, because you were a woman or a mother, that you had less opportunities to grow, and therefore, you were always fighting to make a stand for yourself or did you find that within the particular world of special servicing and CMBS, that was not an issue?

16:40 AH: It's interesting. I've been asked that question a lot in my career and a lot in my life, and I did not feel that way. I did not feel that I had any less opportunities. I did not feel... I think it's partly because I don't think about it daily. I don't... Again, growing up with being in a world full of men my entire life, I don't sit there and think, "Oh boy, I'm a woman. I better approach this differently." I just sort of plow ahead and the best way to motivate me ever is to say I can't... Someone to tell you you can't do that or something and I think, "Oh, yeah well, now I really will." [chuckle]

17:19 AH: I think if I ever was challenged, I think that would have made me do it all the more. So I did not feel that way. In hindsight, if I look back and I really think about it, were there potential limitations put on my future advancement because of the fact that I was female earlier in my career? Probably, but I didn't feel a thing. So I don't think so. Nor do I think it would exist today. I think we're pretty fairly represented. Women are, in today's commercial real estate and in any industry.

17:57 AH: Another funny story to do the reverse of this is when I used to go to early NDA and other trade association events. If they have a retreat and spouses could go, my husband would come and that they even... So the spouses would be knitting and shopping, and all that. [chuckle] It wasn't ever expected that there would be a man as the spouse. Now, it's very different, and you see that. The spouses are just this kind of evenly dispersed.

18:23 CR: Yep. Well, I think the banking industry has done a much better job in real estate of being inclusive of women. I do think on the operator/developer side, there's a real gap that still needs to be filled. And I don't think there is... I think there was a period of time when there was a lot of intentional elbowing out. Now. I think it's not so much as that. It's that other industries like technology and legal, they recruit so heavily to bring women in. And I think on the developer side, we just need to do a better job.

19:00 CR: Because our companies need to reflect our clients, and our clients are very diverse. And so just having four or five white men in a room deciding what we're gonna do in a build-out for a building is not good business. [chuckle] It's just not very smart.

19:15 AH: Yeah.

19:16 CR: But I think the lending industry has done a lot better job, and hopefully on our side of it, my side of it, we're getting better. I care not only because I have two daughters who I hope will have these kind of opportunities, but my wife is a professional as well, she's in the hotel interior design business and I've watched her go through over the last 25 years, a very successful career, but always working hard to be taken... Treated with respect as a professional, so...

19:50 CR: Well, let me ask you this. So here we are in 2019, and we are at the other end of the spectrum and we're seeing young people come into the business, today. What are you seeing in terms of this millennial generation that pretty much spans right now between coming right out of college and being in their mid-30s? What are you seeing in terms of opportunities for men and women in CMBS world, and what's your take on where we sit today with the workforce that you interact with all the time?

20:22 AH: Yeah, I think there are for CMBS and servicing and borrower advocates and all the stuff in our space in commercial real estate, I think there's equally endless opportunities for men or women. Now, I'm not speaking about the developers, and to some degree, that maybe we'll always be more of a male-driven field like football players, and other... I think there just could be some natural physical tendencies that help you with one career or another sometimes. But that aside, I think you could do almost anything you wanna do in commercial real estate on the lending side, being male or female.

21:03 AH: I think people, younger generation coming into the workforce that I see, I like a lot of things that they bring. I mean they bring a little more flexibility and less rigidness and all that. But I think they sometimes are not not... They don't understand maybe, and maybe you just don't early in life, we probably were the same way, but how much work and effort years and diligence it takes to get to positions where you feel successful. It does not happen overnight. It's not being in the right place at the right time, wind blew in your sail and you got lucky, you win the lottery. It doesn't happen like that. At least, yes, on a rare occasion you find someone who built a business, sold it and make billions of billions and now they're great, but that doesn't happen very often, 99% of us have to work hard diligently for a long, long time, and then maybe you'll look back one day and go, "Well, okay, I've come pretty far," but it just takes time. So that's probably what I see, I think.

22:05 CR: Yeah, and similar to what you just said, I think I'm inspired everyday by so many of the millennials who work at our company and other companies, but I do also think that there is a less of a willingness to say, "I'm gonna put in the hours and I'm gonna work my way up." And in some ways, that's a very good thing, but I also notice in other ways, people make life decisions that perplex me at times like, "Well, I'm just gonna quit. I'll go somewhere for three months to go travel and come back and... " It's just a different mentality that I've seen out there.

22:42 CR: But I don't wanna brand a whole generation, but one of the advantages that this generation brings is their use of technology and the ability to work really hard but be mobile. Are you seeing that within the lender CMBS side, that effect of technology? How has it changed your business over the last 20 years?

23:02 AH: Yeah, 100%. That is the difference and we've all heard all the stories about both sides of that equation; one is you never get away and the other is you're always available everywhere you go. So I think the biggest thing I think technology... And you're 100% right, I don't think I, being in my early 60s, will probably ever be able to function on technology as... Oh, heck, my grandson... I mean you could be three and you... That's not the grandson I'm referring to, but I have one that's three. I bet you he knows more about technology sometimes than I do because they're born, I think, just knowing all the stuff I don't know.

23:42 AH: So, I think I'm gonna have a gap. I just know that the biggest thing I see is that the whole world seems now expect you to always be available all time, and if you don't answer something in, gosh, an hour, you must... Something must be wrong. So, our customers, and I think that's what drives our business, our customers demand really, and I can understand why, all 24/7 access at a moment's notice. And if you happen to be... Like right now I'm with you, I probably have someone calling upset that I'm not available to take their call at the moment. Well, gosh, we need to get a grip. I mean we can't be that on 24/7. I think that's the biggest thing about the technology that I... [chuckle]

24:31 CR: Well, I think about it too. I joke often with our team, I'm like, "Can you imagine what urgent meant in 1800?" [chuckle] You'd get a letter across from England and you had to urgently reply and the amount of thought and detail you could put in. And then I say, even... It all probably started going downhill with the Teletype, but even with fax machines and everything, the expectation was not an immediate response. And now, we can have the most complex problem we can imagine, it gets put into an email, sent to us, and people don't understand why you haven't immediately responded. And I often counsel our team on that you gotta set boundaries because part of being a professional in all of this is you gotta be able to think about problems and you can't do that if it's a crack addict and you have to respond all the time.

25:27 AH: Yes, that's right. Yeah, that's right.

25:30 CR: So let me ask you this. Outside of technology, and... What are some of the changes that you've seen since the global recession that we had in 2007 to 2011 or so? How have you seen your business change? How have you seen the CMBS business change? And what would you say about where we are here in 2019?

25:53 AH: Okay, so I'd say it's a little bit of what we all are doing now with our technology. I know you said, outside of technology, but technology in essence, I think, causes us all as humans to think, is we can find the answer to anything we want by Googling it, or we can search on the internet, or find the answer to everything we need, right? But there still are things that I personally wouldn't want to do myself, like perform surgery on myself. I wouldn't wanna watch a YouTube video and then learn how to surgically operate on myself.

26:25 AH: I don't want to read a TurboTax and understand all the tax law and do my own taxes. There's still an advantage to having someone who's an expert at something who does this everyday, everyday, and have for many, many years, do things for you and not have to go learn it all. And I think the big disadvantage back in the recession, in a way... I think I remember people calling and saying, "Oh my God, who do I talk to? I've heard this word "special servicer", who are they? Where did they come from?" It was a real unknown back then. Now, borrowers sometimes call and say, "No, I don't really need help. I did this once before in 2010. I've worked at one other loan one time. I don't really need help." And I think, "Wow." Well, I could probably learn how to fill up a tax form also, but I'm quite sure I get a much better outcome unbiased and positive, without any question, that I get a much better outcome by having the tax group that I have do this for me.

27:25 AH: This is what they do. They know a lot of things I don't know about it. And it's okay to not know everything about everything, right? And you can't find everything out on the internet. There are some things, you still need experience in. And you asked me earlier about my education, I kinda skipped over that, but really I think the best way to summarize it is it was so [27:46] __. You just learned it all the hard way, made a mistake, figured out not to do it again like that and that's kind of how I learned all this. There was no manual, or no career you could... No degree you could get in CMBS back then. So I think that's the biggest change. I think people have a false sense of, "Okay, I got this now. I don't need any more help." It's like I'm like a two-year-old. "I can do it myself now, I'm good." Yeah, you can, it's not rocket science, but you probably won't get the outcome you need or looking for without someone who knows really how to do this and does it everyday.

28:22 CR: Well, to go a little bit further on what you're talking about, one of the frustrations that I had in dealing with, and I've had with dealing with special servicers, is I've never really felt that there was any sense of urgency or important to push things along, because the servicer is getting fees and there's... But I also have never really felt confident that a servicer actually has a lot of power to make changes or modifications. So someone with your experience who's done a lot of these things, can you talk a little bit about how you see the role of the servicer when there is a property that's in distress? What do you see is the opportunity to work with a servicer, and what motivations are you always trying to meet that a servicer is gonna have?

29:11 AH: Yeah, no, that's a very simple answer. The special servicers are paid a fee. You're right, they earn their fees. They're paid a fee for one thing, and that is to get the most amount of money they can for those bond holders. They're to maximize the recovery to the bond holders, point-blank. And I think everybody probably knows that intuitively, but what that means is, if you're gonna make an offer to them for something, whatever it is, it has to be better than what they think they can do on their own or they're gonna go do what they want to do because that to them is a better outcome. So the first thing you have to be able to do in order to win or present something that's better than what they think they can do is to know what they think they can do. Now that sounds a little convoluted, but they have a model that they run and they have to assume certain things and look out in the future and add present value with that, and that arrives at some number, and what you as a borrower, in theory, has to offer is something that's better than that, and if not, you'll never win.

30:16 AH: And so you have to first know, what are they likely coming out with? I know exactly what five or six things go into the formula. I know the model. Now, I don't know every assumption, but I can get pretty close. And if we aren't gonna offer something that's better than that, I can give 100%, 99% assurance it's gonna be rejected. If we can get something that's better and I can argue that and explain it and they believe it, we're gonna get something done.

30:44 AH: So it's really that simple. But without knowing what they're thinking or what they're doing, that's the missing piece. It's almost like trying to... Actually, the better way to word it is whenever... Any successful negotiation requires knowledge of what the other person's objective is, right? You're never gonna win in a negotiation unless you can address the other person's objective.

31:11 CR: And do you think that servicers... Can you play chicken with them? Do you think they're really afraid to get a property back? Or as we've got so much time and so much history, servicers are okay if they get it back and they can do the process, or can you really play chicken with them?

31:30 AH: You can, but yeah, you play chicken with them a lot, every borrower does, but you... I'll tell you, they're not afraid ever, ever, ever to foreclose. Well, there's no reason they would be, 'cause they have access to endless amounts of money. The master servicers make advances whenever they want, and the master servicers are all banks, there's a reason for that, and they get that money out first. So they have endless amounts of money to put into the property if they want to, to turn it around or whatever they want. They get a fee the whole time, like you said, they're sitting there, and they get a fee when it's resolved, and it doesn't matter what the losses were. At the end of the day, they could sell this and often they do have 100% loss, but that's not a measurement or anything that matters. So why would I not be, as a servicer, ever be afraid to foreclose? So yeah, no, they don't mind at all.

32:27 CR: How tight a community is the CMBS world on the servicing side? Is it a really tight environment out there?

32:39 AH: Yes, I was trying to think of a word other than tight. Yeah, it's a tiny, tiny... There's probably... And there's no one, I don't think, that I ever run across in CMBS that doesn't... That we haven't run across each other at some point in our career. It's a small, small, small industry. Everybody knows everybody. There's a handful of special servicers at best that control 90% of this business. There's a few controlling class holders that control it all. It's... That's why it's easier sometimes to understand how to resolve a CMBS loan issue than it is a bank loan issue, because you've got... That's up to an individual's decision, right? And there's how many banks and how many managers there that you have to talk to. You can never get your arms around what they will and won't do in any given situation 'cause it just depends on what they wanna do at that day. CMBS is very different. So it's very, very clear and it's very few people control all this, so it's... Anyway, well I could go on, but I won't. [chuckle]

33:48 CR: Is there any interaction between the servicing side of the business and the originators side? There's a period of time when there were some really big name originators out there. I think of Nomura and Ethan Penner and Mark Finerman. Is there ever interaction between the two, or is the origination side just almost a different business than the servicing side?

34:10 AH: Oh yeah, no, I think there's interaction. The thing to keep in mind always is the origination company itself, once you securitize something, they're in essence, gone. They're not there, of course anymore. So even if it's all the same company, what you're obligated to do as a servicer... You can't... An originator can't call you and force you or insist you do something that's outside of your requirements. You just wouldn't do that because you'd lose your rating and all that. So, yeah, I think they all communicate. I have a funny story, when I was at Nomura, and I won't mention the name of who, it was not Ethan Penner, but it was someone else. I worked with them and I was just creating the servicing shop and I said, "Oh, by the way, I need to develop a process, but I need to get loan documents from you when you make a new loan." And this person at a pretty senior level said, "What do you need the loan documents for?" And I said, "Well, you know, everything you write in them, I have to go do that now for 10 years." [chuckle] So that was the interaction between servicing and origination back then. Yeah, I think they all talk, but very different worlds though.

35:18 CR: So we've spent a lot of time now just talking about the business in general, but we haven't really talked about creating your business and what it's like to be a CEO who has to worry about revenue and expenses. Tell our audience a little bit about... You've got this... You got to a point in your career where you said, "I wanna start a business." What was the a-ha moment and what have been some of the struggles?

35:45 AH: That's a great question. The a-ha moment for me was actually very, very personal, and I don't wanna say selfish, but it was very personal. I had given my entire, almost to some degree, my entire life and my career at some point to... No, sorry, my entire life and everything I had in my career, I almost... That almost became synonymous with who I was with my own career. And then one day, it wasn't there, and I remember vividly thinking, "I do not wanna leave my future in anyone's control again." I wanna be in control of my own future because I wasn't getting younger of course, and I thought at some point if I ever wanna be able to retire or just really do what I love and only what I love, then I better own it, I better do it myself. I better not let it be in someone else's hands. And that's really what led me to create this firm, and once I got into it... I think the best thing to say is, yes, it is... There are different set of issues and problems and highlights, but the thing I thought the best news is I can never get fired.

[chuckle]

37:01 AH: And there is some comfort in that. Everyday, all day, always and I know the next day... It is what I want, and I love what I do, so I feel really good about that. The thing that you have to struggle with, like you said, is, "Are you for sure you're gonna get a paycheck, every two weeks?" And it's, "Well, no, not unless you go earn it." I brought someone in from corporate to work with me one year, and he looked at the pipeline and he said, "Where is everything else?" Like after next year, where is all the other projected income? And I said, "Well, there isn't any, we have to go make it. We have to go earn it. And you could tell the panic in his face, and I thought, "Okay." So it's not for everyone, but I really love being able to create. I've always been a creator and I always like to think outside the four corners of something, and so anyway, just really suited me. I don't know if I fully answered your question but...

37:55 CR: No, but it is something that I think there's a lot of glorification of entrepreneurship and there's a lot of hero worship in it, and I think...

38:07 AH: Oh yeah.

38:07 CR: Some people miss that, if you don't get that new business, someone isn't getting paid.

38:16 AH: Oh yeah.

38:17 CR: And the owner of the business is probably the last person to... To get paid in certain circumstance. I gotta get... Make sure, everybody else is. And that causes a lot of additional stress and I think there's a lot of glorification out there of the people who raise all this money and do this, but most businesses aren't that way. Most businesses are, "I've gotta have a pipeline, I've gotta go work that pipeline and I have to have team members who help me do it." I think it's something that it should always be acknowledged. And now, do you find any benefits or any negatives to being a woman CEO? Or do you see that as... Have you had any experiences where you found it more difficult, easier, or is it not even something you think about?

39:04 AH: Yeah, again, actually it's funny. I'm glad you ended it with that because it is really not something I think about. On a rare occasion, I can tell you very rare occasion. I'll get a new client that might be wanting to talk to us and I have someone who works with me who has almost as much experience as I do, 25 years in CMBS, and he's of course, a man. And sometimes we'll be on a joint call and I can tell that from... Usually, it's older thinking kind of male tends to listen more when he talks than when I do. And so what we do as a team... It doesn't hurt his feelings at all. The key is to match someone up here with us on our team that they feel most comfortable with. He's very detailed, I'm a lot more... I don't know, I'm half-full, he's half-empty. We like to talk about yin and yang of our relationship. And some clients feel better with him. And some clients feel better with me. And so, it does on a rare occasion, I do see something, but it's easy to resolve around. On day-to-day basis, I don't think about it.

40:11 CR: Well, it's interesting 'cause I think it goes to where we are today with a very diverse workforce. A company needs to reflects to its clients and people relate in all different ways and I think you've highlighted that there's just... We see it in my business too. There's just some equity partners, there are some brokers that I do well with, and my partners in our business do better with others, and I think that's... It's just part of doing business. So, that's cool.

40:37 AH: I think something that someone told me early in my career and I really, really stick to it is, "Communication is about what the other person is left with, not what you deliver." And I like that because I think, okay, as much as I might think I'm communicating well or I'm the best person for this person, if that's not how they take it, then it's not gonna work. I'm just agreeing with you, that you do have to find a good match to every client. There's no right or wrong. And some styles work better with others and that is a key to success, I think.

41:06 CR: So let me ask you. As you look back over your career, you've raised kids. You got grandchildren, and you've been involved in the community. Talk a little bit outside of what your work life is and it sounds like you're a little more... I don't mean this in a bad way, but, well-rounded about your life. Because I think we all go through periods where our business is everything. Tell me a little bit about what you do just to keep life fun and exciting.

41:36 AH: What makes life exciting for me is when I can combine sun, sand, and water. [chuckle] And so my favorite away from the office activities are boating, we do have a boat. We take it, we live close to many, many lakes. Take it out all the time. I love doing and going to the beach, but that's pretty far from Texas. But there's so many things I love doing, like that. I'll tell you though, with... Out of six grandkids and two of which I'm raising actually, right now. And so, having two teenagers in the house and owning this company, and all that, there is very, very little time for fun and recreation. But I try to build it in every now and then, and that's what I would like doing when I'm not here. I also love writing and I just wrote a book, and it's gonna be published pretty soon. Actually, it's in print right now. And so, I'm very excited about that chapter of my life.

42:29 CR: Well, what's the name of the book?

42:32 AH: Well, of course, it's called CMBS 911. And I'll just make a plug, so if anybody's listening, you can go to CMBS911.com, and you can see the book and order it and all that there. I describe, really, the process from an owner's standpoint, of when you first get into an accident or you have a retail center and retailers move out. It's like an accident in your car, you're all of a sudden going, "Oh my gosh, what do I do now?" And it walks you through kind of a parallel of a real-life emergency. You call 911, you get transported, and all that. And how that's similar... How the process is similar in CMBS, and how that feels to an owner. And so anyway, I'm pretty excited. I think I took the complexities of CMBS, and displayed it in a way that's not boring, that's worth reading. Anyway, I'm excited about that.

43:25 CR: Now do you know something that we don't know that we're about to walk into this massive repeat of 2008 or you're just saying, "Hey, just in case."

43:34 AH: Well, there's 10 year cycles in commercial real estate, so we're due for one. '19, '20, I don't know. I can tell you, retail has to be shake-up and there is shake-up in retail. So, I'm not thinking there's some big crash coming. But if you're the owner of that mall or that retail center and you just got notified that three of your tenants are moving out and you owe more now than it's worth and you want to keep it, it can feel the same to you, right? That's really what the book is for.

44:05 CR: And as you look at what we went through a few years ago, was there any canary or were there canaries in the coal mine that you saw a few years ago that you're seeing now? Obviously, you just mentioned about retail. There are certainly some things that we're seeing like a massive transformation in what people expect out of a retail experience. But from the office or the multi-family side, is there anything that you're seeing that is... You're going, "I think I've seen this before."

44:32 AH: No, not as much. And I'll... I think a lot of what led to the big crash, and... No, no, I shouldn't word it that way. But a lot of what we saw as a result of a big crash in '08, '09 and '10, really, was the over-leverage situation from '05, '06 and '07. All the properties that you could get almost 100% financing on back in CMBS in those early days. But we haven't gone back to that in any way, shape or form. So I don't think we're... We've repeated the ills of '05, '06 and '07, but I've been around long enough to know that eventually, we probably will again.

45:09 AH: We don't really learn, it doesn't seem like, from what happened in the past. Even if you think about it, as your kids are growing up and they become teenagers, and they go through the same thing. You'd love to say, "Wait, don't do that, because here's what will happen," but what do they think? "Well, that won't happen to me. I'm not gonna do that." And yet, they do. So it's the same. I think we're gonna get back to those teenage years at some point again, but we haven't done it yet, I don't think.

45:38 CR: I agree. I think we are gonna get back to it, but I just don't see it now. It's hard for me as I look out there and see tea leaves. The economy is as strong as I've ever seen it in my career. The technological changes that have forced changes in the use of space, meaning, that law firms getting smaller and using less of a footprint, and those things have all been absorbed over the last 10 years. And what we're seeing now is real genuine expansion in the markets we're in on the West Coast. So it feels pretty good, but then as I say to my team all the time, if this is the best I've ever seen it in my career. It's not the 1950s, but it's as good as I've seen it." That means it can only go one way, so we gotta get ready.

46:25 AH: Right. And we know that now, but there is a time and at least, there was in my life, and there's a time it seems like, I bet, when our younger generation of this commercial real estate business, don't know that means there's only one way to go. I firmly believed at one point that there was only... Real estate only went up. I don't know about you, but I really thought that was the case...

46:46 CR: Yup. Well, if you got...

46:47 AH: At one point.

46:48 CR: If you got in the business in say, '10, 2010, you've only seen it go up.

46:52 AH: Yeah. Right.

46:54 CR: So, it's easy to make yourself believe that. This has been a terrific conversation, Ann. I really appreciate it, your honesty about the challenges and all. I'll tell you that what I found with our audience, people really like to hear those kind of stories. But before we finish, I'd love for you, if you could just... If you were gonna have a 22-year-old person in front of you today who's graduating from school, and... What would be a few of the pointers you would wanna make sure that that person knew about being a professional, about being a woman in business, and about being in real estate?

47:27 AH: Oh, thanks. Yeah. I think about that question often. I do get asked, and that's when you know you're probably starting to look your age when people say that.

47:38 AH: I know you were only on the phone, but I do. I think it's simple. I would say. Well, my ultimate takeaway of all the years in my career, and if I were imparting that on someone young and I have tried to, I would say it's simply, and I firmly believe this one. If you learn nothing else, this is it. Don't burn a bridge. And I had heard that before and I had believed it, and I will tell you, I've had so many instances in my life where that absolutely came to just be the absolute saving grace. As an example, an employee of mine at one of the... At GE, in fact, is now one of the head people at one of the rating agencies. Well, when she first left GE, and I went to Nomura and I was starting up a servicing shop, and I needed to to get rated, I called Fitch to get rated, and lo and behold, this employee of mine came into rate me, and I thought, "Okay, that's why you never burn a bridge!"

48:36 AH: And the thing I think, and we touched on it earlier, but it's, don't be afraid to admit that you don't know something. No one will ever know it all. I've had people here in my company come to me and say, "I feel sometimes like we have to make stuff up," and I said, "Sometimes we do. There is no absolute manual, a place you can go like, "Here's all the answers." Sometimes you have to figure it out, right? And I think you have to, I believe, do something almost every day that scares you. I've seen those expressions and I just love that, because if you don't, you're too complacent and you'll never advance. And most importantly of all, don't be afraid to fail. Because my brother is a major league baseball player and he actually hit a home run in '89 World Series.

[laughter]

49:21 CR: Oh, wow! I just watched it on ESPN. It was on the A's versus the Giants?

49:28 AH: Yeah, my brother was a Giants catcher. His name's Bill Bathe. He hit home run run first at-bat in that World Series.

49:35 CR: That's amazing!

49:36 AH: So if you watched it... And actually, there's a link to it on my website, my company website. But I'll tell you, he and I have talked about this many times because in his profession, how many times do you fail and strike out, and go, you only have to hit it this one time and it can make a difference. And that's the way we all should be approaching life. You get up there and you swing and you're probably gonna strike out a few times and you're gonna miss it, and you're gonna get out. But that doesn't mean, "Oh my God, I better quit doing this. I failed." No, just keep on doing it. Eventually you hit it, right?

50:07 AH: And the sad thing is, I think corporate America doesn't necessarily teach you those traits, because in some corporations, it isn't okay to fail. It isn't okay to admit that you don't know everything, so that's why I would say that's my counsel, is somehow build that in even though, even if it's not necessarily the environment that you're in. Those are my four net-net advices, [chuckle] advice I would give to anybody new starting out in this career, or anywhere, any career probably, but...

50:38 CR: I think they're very valuable, and I think when you're young, they sound a little cliche, and as you start to get into business, you start to go, you look back at those and say, "That's what's getting me through it," so I really appreciate you sharing those, and I really appreciate the conversation. It's been really wonderful. Thank you so much for being on the podcast. I hope to connect with you again down the road, but I hope it's not because I need help with a servicer, but I...

51:05 CR: But I know who I'm calling if I do.

51:09 AH: Thank you, Chris. I really appreciate you again, including me on this and I hope that this is helpful to somebody listening to it, so thank you for including me.

51:19 CR: And thank you so much. That was a really engaging conversation. I hope our audience will go to your website for your book, cmbs911.com, and please don't forget to subscribe to my podcast. Please go to my website at www.chrisrising.com, and also follow me on Twitter @ChrisRising. Thanks so much.