Ethan Penner 3.0
In the mid-1990s, there may have been no more powerful player in the worlds of either commercial real estate or finance than Ethan Penner. The "father of the CMBS market" was riding high at Nomura. Many expected him to continue that run. Instead, after a bitter breakup there, he took seven years out to balance his life, including building a close-knit family and living in Hawaii. Now a gentler version of Ethan is back in action, gearing up for Act Three. That's why we're excited he'll be a speaker at our annual national multifamily conference in LA on July 28. (Registration info.)
Ethan says he's always been questioning and introspective; he tells us it comes from a working class upbringing in Yonkers, where his divorced parents struggled financially but were rich intellectually. His father, a rabbi (the youngest in the history of the American Jewish conservative movement), gave a weekly sermon on life to his congregation; and his mother had walls of books that imparted to Ethan a lifelong love of reading (see his suggestions below for your summer rejuvenation). Ethan cites these influences in explaining a path few who knew him in the '90s would have expected.
Now 54, Ethan spent seven years in the mid- and late 2000s remaking his life. After Nomura and a divorce, he moved to San Diego to be near his two kids, and while there found a new wife, then moved to Santa Monica and the Big Island with her as he attended to personal health and relationships he had previously sacrificed while consumed in business. He beams that he's now totally in love with his wife (a triathlete from Venezuela), five kids (ages 6 to 26), and West Coast lifestyle in the suburb of Calabasas, what he calls the "Greenwich, CT, of LA").
Last year, Ethan began a regular teaching gig at the USC Marshall School of Business, where in addition to talking about capital markets, he's known for sharing his life philosophy and teaching two exercises: First, creating a horizontal timeline of what you’ve done and what you’ve tried but couldn’t accomplish in your career—the pattern of which, he believes, lays out a story over decades of what a person is all about. In his case, as he sees it, it's the story of an entrepreneur on a mission to determine what needs are not being met, and trying to fill them because be believes that's where value is added and you can be well compensated. The second thing he recommends: listing your failures and what lessons you feel you learned—so you can apply them as you keep living your life.
His bio could hardly be more impressive. His first jobs after NYU were working at two small S&Ls 1983 to '85, initially as a loan officer trainee in the single family lending business. There he got profound insight, he says, into how financial institutions deal with regulation and evaluate loans—a more valuable experience in certain ways, he thinks, than friends had at business school. In 1986 he joined Drexel Burnham in NYC, becoming a mortgage backed securities trader, who at age 24 controlled a billion dollar balance sheet. Late in '87 he was recruited to Morgan Stanley to build from scratch a non-agency mortgage business, which became one of the firm's biggest contributors of fixed income revenue for decades. At the end of '91, in the midst of the S&L crisis, perceiving huge opportunities in the commercial real estate arena, he and a partner started their own company with Cargill financial backing. In the process, he created the foundation for CMBS. Nomura realized how big it could be and coaxed him away. He started there in February '93 and within a year, from a standing start, had created net income for the firm of $110M.
For four years, he ruled that roost, credited with creating an industry. Then he feels he took a misstep due to hubris. He excelled in entrepreneurial energy, doing deals, identifying unmet needs, and being an inspiring leader. But he says he failed at two things that today he would do differently. He had no interest in the administrative side of the business, and looking back feels he should have found a strong operations chief from the likes of GE Capital or JP Morgan. And then when he says a colleague betrayed him and tried to force him out, he chose to walk away without a fight, figuring he could easily re-create his success elsewhere. Only in retrospect did he realize that achievement takes more than the talent of one individual—it requires a team and a unique moment and set of circumstances, and he lost that chance. On reflection, he feels he was on the verge of creating another Blackstone, and might still be there today growing it.
Recently he launched a new business with veteran real estate investor Vicky Schiff, who he'd known casually in the '90s and was reintroduced to by a friend last fall. As they lunched at an Italian joint in Brentwood, he said he felt instinctively they were destined to be business partners. They want to build their business slowly and carefully, so you'll have to wait a bit to find out more. Stay tuned.
One of Ethan's hobbies, he says, is daydreaming—a bit like meditation, he says. Ever since November 2013, he's channeled it to a weekly blog, typically 500 words he knocks out in 15 minutes and sends to his two oldest sons to tweak. (A 26-year-old who spent five years in commercial real estate, and now has founded the Fitwall fitness centers in LA; and a 23-year-old getting a master's in data science at Stanford, who's also a gifted musician and fluent in Japanese.)
Ethan remains an inveterate reader. He especially recommends classics: Ayn Rand's books, so mammoth he suspects not enough folks have actually read them cover to cover. And Hermann Hesse's Narcissus and Goldmund—an amazing tome, he summarizes, about the journey of life.
And here's the best book he says he ever read. It's by Ray Bradbury, which Ethan says he likes largely for the message—the dangers of an illiterate society—but also because he respects brevity. In light of that, who are we to say more?