February 6, 2019
Episode 13: Mallory Meehan
Mallory Meehan has a law and business background and teaches commercial real estate at Penn State.
I see real estate changing on a constant basis. Retail is really changing, really struggling, so people and companies are going to have to figure out how are they going to survive.
ABOUT THIS EPISODE
After flirting with a future in business and law, Mallory ended up settling in real estate at Penn State, where she teaches risk management courses. Commercial and residential real estate are very different beasts, and a person who excels in one may not necessarily enjoy the other.
In this episode, we discuss the changes to commercial real estate brought about by Amazon and the 2008 financial crisis, and what the future of corporate real estate might look like.
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JON: Hello and welcome to shoptalk the real estate show. I'm Jon Forisha and joining me this week is Mallory Meehan, who works as a Professor of Real Estate at Penn State. Hey Mallory, thank you for joining me.
MALLORY: Thank you Jon.
JON: Okay, so let's start with your background. How did you become a Professor of Real Estate at Penn State?
MALLORY: It was actually a very interesting kind of path that I took. I started out at Penn State with my Undergrad in Business focusing on Finance and Marketing, and when I graduated in 2010 the market was still recovering from the financial crisis and I thought my best bet was to stay in school. So what I decided to do was go to law school and I was fortunate enough to get into Penn State Law and I started there and they actually offered a program where I could also simultaneously get my MBA at the same time. So I actually conducted a joint program completing both my law and my MBA within four years.
MALLORY: I was fortunate enough to network with people within the university. I did leave and went out to the corporate world for about three years and when I came back to Penn State, they were going through a rash of retirements. And so a lot of their professors who were older actually were leaving and they were very short-handed on specifically business law and real estate and so I actually got contacted by one of my former professors, had lunch with him and sat down with him and he asked if that might be something I would be interested in doing since my background kind of lined up perfectly and I jumped on the opportunity and haven't stopped since. I love every minute of it.
JON: That is awesome. So what first brought you to real estate?
MALLORY: So real estate, ironically enough, I took my first real estate course my junior year in 2008, which, you know, we know about the financial crisis and the way that the markets were working, was probably the worst year to be in real estate. But I loved it. I loved how real estate kind of touched a little bit of everything within business. I didn't really think about it at that time, but when I got into law school I had to take property law, property law is one of those courses that your first year you have to take it and then my second year they offered an extended version of that for real estate specific law. Loved that. When I went back into the MBA program, I took a financial real estate course and I just really loved how the two blended and my background really matched up well with being the legal side as well as the business side. And so that's kind of how I got into real estate. My mom also owns some commercial and residential property that I helped her manage, so I kind of got a feel of what that was like on that end. But then also on the education side.
JON: Very cool. So we met through a mutual contact and he mentioned that you had once helped broker the sale of a cave.
MALLORY: I did.
JON: How did that happen?
MALLORY: So that was a very interesting sale. It was an Indian cavern that had been run as a commercial business for four years and the people who owned it wanted to retire, they wanted to step away. And so basically we kind of were at the point where either somebody wants to take it over and continue on what it is or they want to buy it for the stream frontage of what the cave offered. So where we are in central Pennsylvania, the waters here are some of the best waters to fly fish. And so where that cavern and those caves actually are, Jimmy Carter actually has a house that's not too far away from there. And so it was a very desirable area, especially those who are very big into fly fishing. So we kind of had to go at it two different angles. So we go after those very wealthy people who might want, you know, the stream frontage that this offers or do we go on another angle? People who might be able to run this on a commercial aspect. What ended up happening is we were able to get in contact with the state and the state wanted to actually save it as being a public, keeping it open to the public and the sale went forward with, you know, a government entity purchasing it and allowing the public to be able to embrace what this cave was and still be able to keep it open and not convert it to a private residence.
JON: Wow. That's really interesting.
MALLORY: Yeah. So it's kinda cool, you know, when you have these properties and you kind of have to figure out how you want to market it and fortunately you can kind of market it in two different atmospheres, you know, just to see what you get. We did end up putting some ads in some high level fly fishing magazines because we thought those might be the people who would be interested in that type of thing. But we also had some connections with the state and this state park entity and they wanted to jump on the opportunity. Now with state entities, you have to go through grant approval. You have to go through, you know, a lot of proposals. So that part was very time consuming. We weren't sure if it was going to break off at one point in time. It was a lot of contingencies. They might get the money, they might not. So working with the owners and having them kind of say, do you want to take this? You're going to have to take it off the market with the possibility that it might not go through. So you know, there are those risks when you come up with especially working with the government.
JON: Did you get any traction from having ads in fly fishing magazines?
MALLORY: Not as much as we would have thought. So because there was, there were two cabins that were there. It's not something that you can necessarily, you know, live in full time so that you can maybe live in part time. There was a little bit of interest, but the price point that the owners were looking at, we weren't getting the ads that we were thinking we would.
JON: Yeah. Wow. That's fascinating. So it seems like real estate for you pulls together, you said you had some marketing background, you have an MBA, and then also the financial and the law. It seems like it's kind of a perfect marriage of everything, right? I mean real estate encompasses a lot of different subjects. So where do you see the role of education in real estate?
MALLORY: So I see real estate changing on a constant basis. We're seeing how retail is really changing, really struggling, so people and companies are going to have to figure out how are they going to survive. So without having that component of education and kind of understanding the market research that is being done by outside companies or individuals, it's really hard to get a grasp on where do I go from here? Where are people who are trying to compete with the Amazons of the world, you know, where do they go? We've now seen that Amazon pretty much is dominating all of the retail business and you know, they're an online platform and now they're going brick and mortar. So they're being successful in both atmospheres. How can anybody else compete with that and that's sort of what we're seeing. What are the trends, what's moving forward and without that education piece, you're not going to be as successful.
JON: Yeah, and I mean Warby Parker, same story where they, you know, they started online, put a lot of glasses companies out of business and now they're opening stores. What do you think the future of commercial is? Because people still go places, but it just seems like more stores are closing every year.
MALLORY: No, I think in some aspects it's basically going to be when you're physically going into a store, those store footprints are going to shrink dramatically and wanting to get you in. If you ordered online and maybe you didn't want to pay shipping, but you want to have your order ready because everybody is really on the go. You know, they value their time. They don't want to be waiting around, but what they're going to do is they're also going to incentivize you to see these other things as you walk in. So you go into these stores and let's say it's like a Macy's. Macy's will basically cut their footprint to a quarter of the size, if not even smaller. You'll go and you'll pick up your merchandise that you ordered online for free, but it's going to be at the very back of the store, so you're going to be forced to walk through where they're going to have some other things that might catch your eye to incentivize you to purchase things in the store prior to you actually checking out for your online purchase. That might be one avenue. The other avenue is you've got to incentivize these people to want to actually come into the store, have them have an experience. People aren't going to go to a physical store when they can do the same exact thing online from the comfort of their own home, so what would they do differently in the store that they can't get online, so that's what they're going to have to really come up with as far as commercial goes. Creating these experiences, creating these interactions, because back in the day, going to the mall, used to be an activity for a date night. It used to be that's what you did for fun. They're going to have to put the fun back into going to malls or back into going to stores in order to incentivize people to actually get there.
JON: Yeah, absolutely. What part do you think Starbucks has played in the changing commercial culture? Because their big thing has always been they want to be your third place, you know, not home or work, but the other place you go to.
MALLORY: Sure. I mean, I love that Starbucks has that mentality because you think about how easy it is to just get a coffee and just leave, you know, they're offering you free Wifi, they're offering you free refills if you're sticking around, you know, they're giving you a comfortable place to kind of relax and maybe do work that you might not have done there. So that's more of what these retail stores are going to have to do. Incorporate things like that. I mean maybe you even have a Starbucks there, you know, that's going to help bring people into your store.
MALLORY: Well then I have to find reasons as to why people are coming there, you know, I find myself going out of my way to go to a Starbucks because that's where I enjoy getting my coffee from. Even if I have to physically go into the store, I'm still more likely to go there than I am in any other coffee place or even making my own coffee at home so they're doing something right and I think that's what people in the commercial real estate business have to think about. How can we remarket ourselves in ways that are going to help people or incentivize people to want to stay longer shop and actually physically come into our stores.
JON: Yeah, that's a big challenge. As more things become more convenient online. So I think most working residential agents, when they think of real estate education, they wouldn't necessarily picture a university setting. What is the scope of the program at Penn State?
MALLORY: So right now within Penn State we offer a specific degree in real estate so you can actually major in a degree in real estate. And what that means is we are preparing our students to enter a commercial or corporate real estate field, so we are teaching them about the laws. What aspects do you need to be aware of when it comes to real estate? We're teaching them about marketing. What does it mean to value property? How does property get value or teaching them about the financing, what mortgages look like, what are leads, you know, these entities that people invest from the stock market into. And so we're kind of bringing it full circle and then we're also exposing them to networking early because we're bringing in, we have a real estate board, high level individuals who are working in real estate who are Penn State graduates or have some sort of Penn State affiliation and we're introducing them to our students, helping to prepare them for the real world. We're doing mock interviews, we're doing resume reviews, you know, we're doing stock pitch competitions. We're doing all of these things to help them prepare themselves to enter a successful career in real estate.
JON: How many comparable programs are there in the universities?
MALLORY: Yeah, not every university is going to have this program. I would say that, you know, there's probably another five to 10 programs across the country that are comparable to ours at Penn State. Obviously we're trying to grow and continue growing right now. We just opened a one year masters program in real estate and so that's actually going to go live in fall of 2019 where you might have worked a couple of years and you've realized that real estate is really where you want to focus on. So now you want a more in depth financial preparation to really prepare you to enter a higher level corporate or commercial real estate career. You can get that done in one year. That's something that's separating us as well. The other thing is we're offering these training programs and so when I say that Argus, which is a software service that is used by a lot of commercial real estate companies, it's basically a property management tool. You can input all of your lease data from all of your tenants into one thing and it spits out numbers like pro formas or it tells you what your cash flows are. So we are teaching our students and we are preparing them to kind of make sure that they are entering this field and that's something that differentiates us from most other programs. I don't know that any other program in a college setting is actually offering that currently.
JON: Yeah, that sounds great. It sounds really helpful when you're first starting out.
MALLORY: Well, I hope that it's helping them. It seems like that's what a lot of the recruiters are really looking for. They want them to be as prepared as possible and if they don't have to pay to get them trained and they can start on day one, it's saving them money. So we want to have our students be the best students that they possibly can be differentiating themselves and be able to get their careers jump started and that's what we're really looking to do.
JON: So you work in corporate and commercial real estate. How would you say that differs from residential?
MALLORY: Two completely different worlds. So when we're thinking about residential, we're thinking about homes, you know, people are coming and staying there. Probably not that much in leasing. Right? So it's basically a sale. It's a one off, one more. Thinking about commercial. We have a lot of different components with that. Are we selling? Are we leasing? Are we managing all of these different things where we're going to have tenants, we're going to have a different types of tenants. Maybe we have residential tenants, maybe we have commercial tenants, but all of those fall under the commercial route. If you are making money off of that product constantly, it's classified as a commercial entity. So when we're thinking about that, it really is about who are we serving and with residential real estate agents, you know, you're serving a client, you either are representing them on the buy side or the sales side.
JON: Once that transaction is over, typically you're not going to hear from them for quite some time, right?
MALLORY: They're probably not purchasing multiple homes, uh, frequently. On the flip side, when we're dealing with commercial, we might be dealing with a business who wants to grow, they want to add more places, they want to, you know, expand. Maybe it's too small and they want to grow. So you're dealing with these people on a more regular basis, which is why relationships are very, very important specifically with commercial real estate because you're going to continue growing your business and when word gets out that you're not doing a good job. It's definitely going to hurt you when it gets out. You're doing a great job. Your business is going to grow.
JON: Yeah. Nice. Real estate has a reputation for being kind of tech phobic. What kind of technology would you say is changing the way things are done in the corporate world?
MALLORY: Oh, I mean, tech is just kind of changing everything. I mean, everybody looks at Zillow before they think they're going to look at a house and I think that's a huge disruptor specifically for agents because people might not have representation and they just get on Zillow rather than calling up their local real estate company. Now they're, you know, the people who are listed on the Zillow page that they're probably contacting first. So I mean, and with commercial you have Airbnb, you have, you know, all these other types of entities that are really changing and disrupting how people are doing business. Bitcoin might even be a form of currency when it comes to the transaction. So I think technology is really adjusting the way that real estate has to be handled, but it's all about adaptation. And how can you embrace the change and make it work in your favor?
JON: Yeah. I've read several news articles recently of agents becoming terrified of giant corporations coming and taking away their jobs. Amazon's been apparently messing around with having some kind of automated service that works instead of a realtor or Zillow, where you can buy directly through their website. So I think there's a lot of fear about technology and not many agents learn how to use it very well.
MALLORY: Well, and I think, you know, not that fear isn't, it is realistic that technology is going to change what you do, but what you realize is that you have to incentivize people to really see property because property is one of those entities wanted to huge investment, a huge purchase. So not like buying where that might be something you can do online or feel comfortable doing online. If I'm buying a property, I am going to see it and I want somebody to tell me, you know, these are some problems or here are some things that you're going to need to do. I want an advocate, you know, I want somebody on my side who's going to help me with that process. And that's where agents come into play, you know, they really have to be advocates for their clients and they really have to kind of show their importance outside of the tech piece. They still are important. They're not obsolete, but they really have to remind the client of that.
JON: Yeah, absolutely. So you mentioned you have a law background and you teach courses on risk management. What are some basics that you recommend for agents to do in terms of managing that risk?
MALLORY: So liability is one of the scariest words I think in the dictionary. If I think about it, definitely. Especially in terms of real estate. So you never want to put yourself in a position that you become liable. And what I mean by that is if you do not disclose something that you fully know to be true or you say that it is not true, when you know it is, you put liability on yourself. So what I always tell people is that, in doubt, always say I will look into that. Don't necessarily give them an answer, but show that you're going to be proactive about it. If you don't know the answer, you know? Tell them. Just be honest, I don't know. I will look into that if you think you know, but if you're not 100 percent certain, don't say anything. Or even if it's something that might kill the deal, rather than kill the deal, then you'll be losing your license, getting fired or worse, getting put in jail for fraud. So all of those things put together. It's really about, I think of it as how would I want to be treated in that situation? So if it were me on the other side, what would I want somebody to tell me and really put yourself in the shoes of the other party so that now, okay, the roof is 20 years old. Do I want to tell them that it leaks in the past or do I want to just let that go? It had been told to me specifically, there have been leaks. I am telling my client, you know this roof is 20 years old. There have been leaks. Make sure it's upfront. Make sure that you are not the person who did not disclose something.
JON: It's always hard figuring out where to draw the line, right?
MALLORY: Every property is going to be different, right, and you always want to make it in the best light possible, but not at the expense that you are being dishonest, right? Honesty is where you're going to get into trouble and always try to reduce liability. Liability, liability, liability. Always want to make sure you're doing that, and especially with the new requirements of going through all of this additional paperwork, you know at closing, make sure that everybody knows what is happening. They understand what their obligations are. They understand that these are time requirements. This is what you know. It may only be 30 days to get an inspection. Make sure that's noted. You know, all of these little details because for some of these people it's going to be the first time they've ever done anything like this. It's going to be scary. It's the biggest purchase they're ever going to be making, make sure that you are holding their hand and walking them through these things because the worst thing you could do is have, you know, a month, two months, a year later they come back and sue. So always be upfront, always be as transparent as you possibly can to reduce any sort of liability that you might have. Like I said, liability is a very scary word.
JON: Yes it is.
MALLORY: Reduce it as much as you possibly can.
JON: So going back to commercial real estate and changing new technologies. Driverless cars. Is this something that comes up a lot in commercial real estate?
MALLORY: It hasn't really come up in terms of commercial real estate specifically. I think that it may, you know, I think that the markets might overlap between, you know, people not needing to own cars. Maybe they're going to downsize, maybe they're living lifestyle is going to be different. I think that's going to take a couple years to actually come to fruition. So, I think that time will tell as far as government regulation, for these things to pass, it's going to take some time.
JON: Yeah, definitely. It's just, it's kind of exciting to imagine. I mean parking lots are such a giant waste of space. Imagine if we just didn't need them in downtowns anymore.
MALLORY: Also a great money generator. Well, so I mean you got to see it on both sides, you know, that sometimes is how maybe cities make a lot of their money from parking meters and whatnot and other entities that have parking where they pay. And I mean, maybe somebody can spend more money because now you don't have to drive to work. They don't have to park their car in, you know, that sort of thing. So I think it's going to have implications on both sides, but again, time will tell us what happens there.
JON: So in the residential side of real estate, it's a rapidly aging industry. I think the average real estate agent is 56 years old. Well, first of all, is that a problem with the commercial side?
MALLORY: I think that commercial real estate people are starting - I think the thing that really hurt real estate was the market crash in 2007 and 2008 and it terrified people that I don't want to lose my job. I don't want to be out of a job, you know, people are buying houses. They're not opening up new businesses. That sort of thing. Now that our economy has recovered, I see more people now entering back into that scope. Now as far as residential is concerned, I think that the difficulty with that is that one, a lot of it is strictly commission based, you know, so you have to be comfortable with, you know, it's feast or famine, right. You need all the houses or you don't get paid. So in today's society where we're seeing people leaving with a lot of student loan debt, you know, getting married later in life because they have either credit card debt or other things. It's really pushing people back and having a commercial or a commission only job is only worsening that situation. So I think that's why older people are more successful right now because they've been in the business, they have a book of business and that's another thing, you know, when you're just starting out, you don't know, you don't know where to go. You don't know how to get started. And so you're kind of figuring it out. I'm really joining a good team, you know, finding a company that's really going to help train you and really show you, show you the biz, you know, for instance is really going to set you apart and help you grow that. And I think that's where younger people need to go. They need to see that there are companies out there that will help train you properly, meet the right people, and then you're going to be basically making your own schedule, which is very incentivizing for young people. You know, not everybody wants to work 60 or 70 hours at a desk. So the fact that you can kind of create your own schedule, meet people, talk to new people, I think that's where young people have to get excited about this industry.
JON: Yeah, absolutely agree. My last question, which is one I ask of all of our guests, is if you could go back to the beginning of your career, what is one thing you would have done differently?
MALLORY: I probably would have majored in real estate, so I probably would have gotten into real estate a lot sooner and I would have probably liked to work in a larger firm in a larger city for a little while to see what that was like. But, you know, law school taught me a lot and it gave me a backbone and it gave me a differentiator. So I kind of, I liked the fact that I did get that education along with my MBA. So I mean I kinda, I go back and forth because I love what I'm doing now and I don't think any other path would have brought me here without me getting a phd in real estate. So honestly, if I could go back and do anything differently, I wouldn't because I am where I am because of the path that I took and I love what I'm doing.
JON: Yeah. It's always a hard question to answer because you know, if things had changed who knows where you would end up now.
MALLORY: I'm a firm believer of everything happens for a reason and you know, you get to where you are through your own hard work and hopefully the network that you create, and it pays off in the end. And I can't tell you. I love my job. I love the students I work with. I love the staff that I work with. Everybody's fantastic. We're really trying to do great things and grow our program. So yeah, I wouldn't change anything.
JON: If somebody wants to learn more about the program at Penn State, where can they go?
MALLORY: They can feel free to email me directly. My email is m, m, m, or for six PSU Dot Edu. Or they can go to our website and just search for risk management smeal, which is our business college name. And they can get directed to an information pack via the Internet.
JON: Well, that's a great place to end. Okay. Thank you for joining me, Mallory.
JON: That's it for this episode of Shop Talk. Thanks for listening. You can subscribe to us on iTunes or wherever you get your podcasts and while you're there, consider leaving us a review. Join us next time for a deep dive into career growth, how you accelerate it, and why you should never stop learning. Shop talk is a production of The CE Shop.