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On the 20th of April, 2017, we had the honor of hosting Ms. Susan Dollinger, Managing Director at Citibank, over a skype conversation for the Distinguished Speaker Series. Ms. Dollinger has stretched the boundaries to define success for women. Working for a large multinational corporation around the globe has made her an authority in the real estate industry globally. Right before the skype session, I had an opportunity to have tête-à-tête with her and receive insights into her career at Citibank.
Ms. Dollinger is currently working in Mexico City handling a broad range of industries from real estate to the energy sector; a multi-billion portfolio. As a portfolio manager while individual deals are scrutinized carefully another important consideration is spreading the investment risk — how much in total should one do in any industry and within the industry how much diversification should the portfolio have. With individual deals, importance is placed on deal size, debt service coverage, loan to value, etc. and in large deals sell down to other financial institutions.
Previously she was the Regional Risk Manager for Citibank’s mega billion Asia Pacific and Japan Real Estate responsible for approving debt and equity investments which included handling new business initiations and the liquidation of a problem portfolio which included loans, bonds, equity, and ownership of hard assets. In initiating new business, she needed to make judgements on how comfortable the bank was with the structure being proposed, the size of the exposure and the ability to underwrite and sell down exposure. She shared her experience of working on several multibillion dollar deals where the bank selected a financial institution to partner with and approved large positions with confidence that they could be syndicated to other investors. As in any complex large transaction key is partnership with the investment bank and promoting a market acceptable structure with appropriate covenants and limitations.
Ms. Dollinger also shared her one year experience on CCAR, the Federal Reserve (¨FED¨) annual stress test to assess the implications of hypothetical stress scenarios assessing the Firms capacity to withstand the stress. She said the project was difficult as it was as it is always based upon tough assumptions provided by the FED and requires various teams to create models to test and configure the outcome on the Firm. The CCAR test is annual and required on all US Financial institutions and is comprehensive testing everything from consumer loans to large institutional exposures. The purpose of the stress test was to check:
- How the bank would be affected given the set of draconian assumptions?
- Did the institution have the capacity to absorb the stress?
- Were the operations of the bank sensitive to various stress scenarios
- Are the people managing the bank – good, prudent?
I asked Ms. Dollinger what it was like to work in different geographies, specially the experience of doing business / real estate around the globe. She mentioned that the processes, analysis is not very different. You need to know the market and the people doing business there. The key differences between the regions arise on the matters of reliability and enforceability. Mumbai or London is the same, as far as cash flow analysis is concerned. The important consideration is being able to understand sustainability, and trying to figure out where the market is headed — again an analysis that is required in all markets. However, another consideration is, if something goes wrong, what can I do? Is the legal system robust? What are the other lenders willing to do? In the culture you are operating in is there a proclivity not to take any action — to pretend and extend.
Ms. Dollinger said in doing a deal the most important component for succeeding at making good investments is ‘trust’, trust specifically in the people who are bringing you deals. One should be thorough and thoughtful, walk the market and get a feel for the underlying real estate. One needs to meet the clients to figure out how they think / their business strategy. She gave us an example of a deal in China, where the senior management were keen to invest in a residential developer. Ms. Dollinger and a very senior senior in the Firm went to meet the clients. The client had a great office but he did not know the project. He stalled the construction and he wasn’t protecting the building. Would you invest with him even if the project seemed good?
Ms. Dollinger also talked about her presence on the Board of Directors on multiple investments in the UK, France, Germany, India and China. For an office property investment in UK, Citibank owned 20% of the asset. There was a common consensus amongst the other investors, that the office property should be converted into service office space. Ms. Dollinger was aware because of her many years in the industry that the service offices performed well in a tight market but not otherwise. She refused to approve this usage (not permitted in the Partnership Agreement) and recommended that Citibank, sell its stake rather than stay in a Partnership where we were not in sync with all the other Partners. Luckily it was a good call as in a cyclical downturn as predicted the service sector took its hit.
As we progressed with the conversation, Ms. Dollinger also offered precious advice to the Baker Program students about to enter into the industry. She mentioned that meeting people from the industry is critical to success. One should try to meet young people to understand what they do and how to bridge the gap. That is very valuable. She explained further, “When I entered the real estate industry, I would call recent graduates of my business school to seek advice, asking questions. People welcomed teaching. It is a way to get up the curve up quickly. Networking with people is key to that”.
Ms. Dollinger also shared her leadership experience with the Financial Women’s Association (¨FWA¨) where she became its President, a 1,000 member organization with a 30 person board. The importance to her, as in networking recent graduates, was contributing to the organization but also benefiting from the experience. In the case of the FWA it was polishing her public speaking skills and learning to run a large team.