How Glenn Rufrano Became CRE’s Turnaround Specialist

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When Glenn Rufrano assumed the CEO post at American Realty Capital Properties on April Fools’ Day in 2015, the net lease REIT had barely begun digging its way out of an accounting scandal.

The scandal triggered the departures in late 2014 of co-founder and Chairman Nick Schorsch; CEO David Kay; Lisa Beeson, president and chief operating officer; and Lisa McAlister, chief accounting officer. It also marked the beginning of the downfall of Schorsch’s REIT empire, of which American Realty Capital Properties was just one piece. In addition, the corporate catastrophe led to an 18-month prison sentence in 2017 for the REIT’s chief financial officer, Brian Block, who was convicted of securities fraud tied to accounting irregularities that had surfaced in October 2014.

As of April 2019, VEREIT, the REIT that arose from the ashes of American Realty Capital Properties, had reached shareholder settlements totaling $245.4 million related to the accounting scandal. However, VEREIT hasn’t put the American Realty Capital Properties era completely behind it. A federal trial is set to start Jan. 21, 2020 in a class-action case brought by American Realty Capital Properties shareholders—notably financial services giant TIAA—who opted out of the settlements. “Litigation remains our last major legacy issue,” Rufrano wrote in VEREIT’s 2018 annual report.

In wading into the American Realty Capital Properties chaos, Rufrano was certainly no fool. The beleaguered REIT recruited the commercial real estate veteran to, once again, work his magic as a corporate Mr. Fix-It. He’d previously been tapped to mop up messes at shopping center operator Centro Properties Group, retail REIT New Plan Excel Realty Trust and commercial real estate services company Cushman & Wakefield. At American Realty Capital Properties, Rufrano was being called upon to duplicate his previous successes, like putting Cushman & Wakefield on the path toward a sizeable global expansion when he was global CEO.

In laying out his plan for what now is VEREIT, Rufrano promoted a company-wide mindset that valued “discipline, transparency and consistency.” Those traits had been sorely lacking at the REIT. To be sure, many distressed companies have leaned on turnaround wizards like Rufrano. But friends and colleagues say his talents and experience uniquely lent themselves to engineering VEREIT’s desperately needed overhaul.

“He’s a guy you call on when you really want to get the job done,” says longtime friend and colleague Ben Gifford, chief investment officer of Americas real estate at JPMorgan Asset Management. “He’s certainly got the playbook.”

Orchestrating a comeback

As the second act of the net lease REIT proceeds, Rufrano and his team at VEREIT have followed a playbook designed to orchestrate a comeback.

Shortly after Rufrano’s arrival, the REIT switched accounting firms and brought aboard two new executives to complement the existing team. Rufrano recruited Mike Bartolotta, who’d been his CFO at Cushman & Wakefield, to fill the same position at VEREIT. He also tapped Lauren Goldberg, formerly the top lawyer at Revlon Inc., as the REIT’s new chief counsel.

VEREIT subsequently slashed debt (down to $6 billion as of March 31 from $10.5 billion in 2015), shed billions of dollars in assets (focusing on the disposition of office, restaurant and non-core properties), secured investment-grade ratings, sold investment management arm Cole Capital, moved its stock from NASDAQ to the New York Stock Exchange and changed its name. The Phoenix-based REIT, which rebranded as VEREIT following the American Realty Capital Properties bedlam, has wrapped up more than $11 billion in capital transactions since 2015 that have been aimed at reshaping the company. In May, for instance, VEREIT formed a $407 million investment partnership with Korea Investment & Securities Co. Ltd.

Longtime friend and colleague Thomas Flexner, global head of real estate at Citigroup, says Rufrano has navigated the REIT’s course correction by deftly dealing with numerous stakeholders, myriad capital structures and “significant reputational headwinds.” Over the years, Flexner has witnessed Rufrano’s work up-close on an array of projects, including Citigroup investment banking deals for New Plan Excel, Centro and VEREIT.

Those who know Rufrano cite a number of pillars that support his professional and personal ethos, such as humility, calmness, pragmatism and benevolence. Additionally, they say, he shines as a logical thinker, data aficionado, straightforward negotiator and smart leader. “He’s the complete package,” Flexner says.

Righting the Centro ship

In no situation has Rufrano delivered that “complete package” more than when he led Centro. According to those close to him, the Centro situation exemplifies his approach to turnarounds. The story starts with Rufrano’s seven-year tenure as CEO of New Plan Excel.

When he arrived at New Plan Excel in 2000, the REIT’s stock was trading at around $11 a share. Right on the cusp of the financial crisis, Centro bought New Plan Excel in 2007 for $33.15 a share (a total of $6.2 billion)—a roughly 200 percent jump from where the stock price had been in 2000. At New Plan Excel, Rufrano executed a retooled business plan that steered the company in the right direction following a troubled merger and departures of several executives.

After the acquisition of New Plan Excel, Rufrano agreed to stay with Centro for one year to organize the company’s U.S. operations. Through the New Plan Excel deal and other purchases, Australia-based Centro had catapulted to No. 5 among the largest owners and managers of real estate in the U.S., according to NREI research.

The arrival in the 2007 of the financial crisis and subsequent onset of the Great Recession scrambled those plans. In December 2007, Centro’s stock tanked when a slew of creditors—banks and institutional investors—swiftly confronted a grave combination of mounting loan defaults and falling real estate values. Centro was caught off-guard by the evaporation of its funding pool. At that time, Centro’s debt had swelled to about $5 billion, Rufrano recalls. The debt load eventually peaked at around $8 billion, which was owed to 23 lenders around the world.

Centro stood on the brink of financial collapse. Lenders were poised to force the company into bankruptcy. As Centro faced this stark reality, its CEO and CFO were fired, and the board was revamped. The company reached out to Rufrano about relocating to Melbourne, Australia, to take the reins. He and his wife, Mary, wound up living in Melbourne for two and a half years.

Banking on the lenders

Central to Rufrano’s Centro mission was keeping the company’s lenders at bay. Of great concern was that Centro would lose its grip on 100 million sq. ft. of retail space in the U.S. and 22 million sq. ft. in Australia. Rufrano had to convince the lenders that it was in their best interest to let Centro keep managing the portfolio.

“I must have told those lenders 20, 30, 40, 50, 100 times in the most boring way possible: We are the best managers of your properties, and we will work this out to maximize your benefit if you leave us in,” Rufrano recalls.

Rufrano’s line of reasoning resonated with the lenders, enabling Centro to embark on a three-year rescue plan. In the end, the lenders recouped their money at par plus accrued interest, he says, and all of Centro’s employees kept their jobs. Of course, those same lenders and many others were grappling during that time with whether to take back properties from a number of debt-saddled owners like Centro or to risk letting those owners remain as operators.

A workplace test

Aside from proving to lenders that Centro was the best and only choice to manage the retail assets, Rufrano had to stop employees from jumping ship. Rufrano and his team accomplished that by constantly reminding them of their value to the organization. For his part, Rufrano had to maintain positivity in the workplace.

At one point, Rufrano’s rapport with the Centro workforce was tested. In the open floor plan of Centro’s 50,000-sq.-ft. headquarters in Melbourne—formerly occupied by an anchor tenant at one of its shopping centers—no one had an office, not even Rufrano. One day, Rufrano was chatting on the phone with someone; he displayed a contorted, unhappy face. The company’s HR director soon stopped by Rufrano’s desk. Based on their reaction to Rufrano’s phone call, some employees were fretting that Centro was teetering toward Australia’s version of bankruptcy, the HR director told him.

Rufrano assured the HR director that bankruptcy wasn’t impending. But he realized he needed to do more to instill confidence in his colleagues, so he convened a town hall meeting where he spelled out Centro’s financial status. He also decided to set up private offices for himself and nine other executives so they could converse without employees overhearing delicate discussions. Rufrano needed his own office, he acknowledges, because he’s “too transparent.”

Logical and boring?

Friends and colleagues would argue that Rufrano’s transparency serves his employers well. He has coupled that transparency and other attributes with clearly articulated strategies at VEREIT; Centro, which he left in 2010; New Plan Excel; Cushman & Wakefield, which he led from 2010 to 2013; and O’Connor Capital Partners, where he was chairman and CEO after having co-founded the real estate investment firm’s predecessor.

When he’s been tasked with executing a turnaround, Rufrano says he’s had to “compartmentalize” 10 problems, more or less, at the same time.

“Whether people like it or not, I’m too logical at times and I’m boring at times because I do the same thing over and over, but being logical, boring and [sticking] to the plan is a way of convincing both the market and the internal folks that you can turn yourself around,” Rufrano says. “You just cannot be haphazard in a turnaround situation, because the basis of a turnaround situation is someone else has been haphazard before you and you can’t replicate [that].”

While Gifford, the JPMorgan executive, concedes that Rufrano is “very professorial,” Flexner, the Citigroup executive, dismisses the notion that Rufrano is “boring.”

“I think he’s a very interesting guy because of what he’s done and what he’s accomplished,” Flexner says. “But … he’s not this outsized ego, he’s not arrogant, he’s not seeking to impress people with how smart or wealthy he is.”

Learning and listening

Longtime friend and colleague Debra Cafaro, chairwoman and CEO of seniors housing REIT Ventas, attributes Rufrano’s core qualities to their shared upbringing in working-class Italian households. (Rufrano is a former member of Ventas’ board.) Brooklyn-born Rufrano, now 69 years old, is one of two sons of Onofrio, a sheet metal worker, and Grace, a seamstress.

“Glenn lives by the principles that his parents taught him—that is to be honest and treat everyone with respect and do your best. It’s very simple, but those are the principles that he lives by, and they’ve made him really successful,” Cafaro says.

Some of that success lies in the fact that Rufrano is willing to listen to the “smart people” around him, whether a company is in turnaround mode or not. He acknowledges that this listening style has prompted him to reverse “wrong” positions on issues.

One such reversal came when Centro was negotiating its debt stabilization plan with lenders. Rufrano says he was “adamantly opposed” to the banks’ request for substantial equity. But after listening to a number of “informed parties,” Centro worked out an equity deal with the banks, he says, “and the company survived and ultimately prospered.”

“He doesn’t think he’s the smartest guy in the room; he doesn’t presume that to be the case,” Flexner says. “He’s not arrogant. He’s not narcissistic. And that gives him the ability to actually listen carefully to what other people are saying. That’s as key in the world of geopolitical diplomacy as it is in the world of deal-making. If you can listen to what other people are saying, then it really helps you in devising solutions. He’s got that ability.”

Setting an example

Flexner cites another trait that underpins Rufrano’s success: “He’s the kind of person who has always taken less than his fair share of the credit and more than this fair share of the blame, which makes him a leader.”

Bartolotta, VEREIT’s executive vice president and CFO, says Rufrano is the embodiment of leading by example. When they worked together at Cushman & Wakefield, Bartolotta says, Rufrano underwent mandatory cyber-risk training before anyone else did to demonstrate the importance of completing the training—and completing it by the deadline. Rufrano also strictly complied with the company’s frugality-minded travel rules, flying in coach and staying at less-than-luxury hotels just like everyone else had to, Bartolotta notes.

Rufrano “always sticks to what he says he’s going to do,” says Bonni Rosen, senior vice president of investor relations at VEREIT.

A changing career course

Commercial real estate wasn’t an industry that appeared on Rufrano’s radar as a student at Rutgers University in New Brunswick, N.J. He entered the industry upon graduation with a bachelor’s degree in business administration for one simple reason: He was struggling to find a job during the 1970s recession.

Rufrano finally came across a newspaper ad for a job at New York real estate appraisal firm Joseph Blake & Associates. The firm hired him, even though he was clueless about what a real estate appraiser did. Less than two years later, the firm asked him to help launch an office in Miami. While in South Florida, he earned a master’s degree in real estate from Florida International University. By then happily immersed in the commercial real estate business, Rufrano exited a sagging Joseph Blake & Associates and headed back to New York to join JPMorgan Chase.

He would later go on to New York investment manager Landauer Associates, where he helped carry out the sale of the iconic Pan Am, Daily News and General Motors buildings. Flexner worked with Rufrano on the GM deal. He says Rufrano exhibited competence and imagination as the two of them hammered out tax considerations, investment return requirements and other details of the GM transaction.

“I was a punk analyst on those deals,” Rufrano says of the three building sales, “and did all the computer work and projections, and really got a good education through that.”

In 1983, the late Jerry O’Connor, a New York real estate developer and investor, invited Rufrano—they’d become acquainted through the GM deal—to join him in launching The O’Connor Group, which specialized in retail properties. Rufrano departed O’Connor in 2000, when New Plan Excel offered him the opportunity to be a first-time CEO and undertake his first turnaround.

“Go ahead and do it,” O’Connor advised Rufrano. “If you don’t like it, come back.”

Rufrano did come back, but not until 2013, after The O’Connor Group had morphed into O’Connor Capital Partners. Today, of course, he’s in the midst of his fourth turnaround. In 2018, Rufrano renewed his VEREIT contract for three years (through 2021).

“I think it’s a good business if you can go into a company that has some relatively good qualities, but is in disarray,” Rufrano says. “A company in disarray with some relatively good qualities gives someone the ability to work with and manage through some of the difficult parts and change the company, as long as you have a clear strategy and, just as important, a very clear and organized execution plan.”

What’s next?

As for Rufrano’s career plan beyond VEREIT, Gifford says his friend could easily remain in an industry that continues to deliver both professional satisfaction and personal wealth for Rufrano. Rufrano, who lives on Long Island, could also retire and carve out more time for hobbies such as scuba diving and fishing, and more time with his wife of 46 years, Mary, along with their two children and four grandchildren.

But Rufrano has made it quite clear that he’s not inclined to end his more than 45-year career in commercial real estate anytime soon. At a recent VEREIT conference, Rufrano declared: “I will work until I die; the only question is if I die here [at VEREIT].”

It’s easy for Rufrano’s friends and colleagues to envision another Mr. Fix-It scenario if he ends up not closing out his career at VEREIT. Flexner, for one, puts a great deal of faith in Rufrano’s talent and character.

“I will say as sincerely as I can that there’s nobody I trust more in the industry. Period,” Flexner says. “There are other people I trust a great deal, but there’s nobody I trust more.”

“Glenn was and has been and is,” Flexner adds, “one of the fundamental architects—intentional or not—of helping us develop the industry into what it is today … . Glenn is one of the pivotal architects just by virtue of how he has done business over the years and how he has participated in a number of large industry groups. He helped legitimize the business.”

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