Peter Linneman is the most famous academic in an industry where street smarts and grit can trump education and financial minutia.
He is the founding chairman of the powerhouse real estate department at the Wharton School at the University of Pennsylvania and author of the real estate textbook “Real Estate Finance and Investments,” assigned to students at 125 colleges and universities and even used by firms to train newcomers on the job.
Linneman, unlike some professors, built his career at the university and in the field at the same time.
In the mid-1980s, he was teaching economics and consulting for Fortune 500 consumer companies when the field of real estate started to professionalize. Ivy League students wanted in, and Linneman figured out how to splice together his hands-on experience with the principles of buying, selling, building and financing buildings. When he couldn’t find a book to assign, he wrote it.
For the following three decades, Linneman mentored and educated the industry’s Who’s Who: Jeff Blau of Related, the late Keith Barket of Angelo Gordon and Ivanka Trump.
At the same time, he ran a consulting firm and served on the boards of nearly two dozen public companies, including Sam Zell’s Equity Office Properties, Paramount Group and Rockefeller Center Properties. While at Rockefeller, Linneman helped lead the famed Rockefeller Center in Manhattan through a messy bankruptcy process.
He no longer teaches, finding the gap between his generation and incoming students almost too large to bridge. (“I didn’t want to spend my whole life working ever harder to be less connected,” he said.) He remains a reliable voice for news outlets about major economic events and real estate trends, sending out a widely read quarterly newsletter and running his advisory and consulting firm Linneman Associates. He spends a lot of time on his educational charity for orphans and children in rural Kenya and co-authored a book on longevity.
The Real Deal caught up with Linneman in his Philadelphia office to discuss his life as an educator, a serial board member and what’s next.
The interview has been condensed and edited for clarity.
Born: March 24, 1951
Hometown: Covington, Kentucky; Raised in Lima, Ohio
Lives: Philadelphia
Family: Married, No Children
How did you realize real estate academia was what you wanted to do?
I was a PhD in economics. My focus was labor markets, industrial organization, regulation and urban economics, but not real estate … more housing, and why people live in [what] neighborhood and those kinds of questions. I taught at University of Chicago after graduation for two years, and then Wharton hired me. I taught microeconomics and macroeconomics and applied statistics.
So you went straight to the ivory tower?
Just as I was getting ready to come to Wharton, I got a call from Scott Paper … [to] hire me as a consultant. And then two days later, Michelin Tire called — same conversation. I did that [as a consultant] and that began Linneman Associates. So I’m tenured: I’m teaching, and I’m also working for water heater companies and copper tube companies, advising them on deals and strategy, and I’m very happy.
Where did the real estate angle come from?
There was a dean, and he came to me and said, “I know you do a fair amount of consulting work, and you’re already on my payroll. Why don’t you look at what we do in real estate?”
[Real estate education] was very under-professionalized. And what is Wharton in the business of? Professionalization.
It was 1985, and it was all about tax deals and getting 120 percent [loan to value] loans. It was all about, how could I get these huge loans and get money out before I did anything? I looked at it and said, you know, this isn’t going to last.
[Real estate education] was very under-professionalized. And what is Wharton in the business of? Professionalization.
And then you built the program.
I got Al Taubman and Miles Tannenbaum and Mel Simon, a bunch of people who, 40 years ago, were the Who’s Who [of real estate], and worked with them to build the program. That’s how I started learning real estate, and that’s how I started moving my teaching to real estate and Linneman Associates moved from old-economy companies to real estate.
What happened next?
Then you had the crash of 1990 and suddenly you couldn’t get loans, much less 110 percent loans. And I suddenly had an advantage. I had done paper companies and water heater companies, and I knew how normal companies financed, how they operated and so forth. It wasn’t just flying around, getting tax credits.
How did you pair the academic world with the practical real estate world?
I probably glommed on to the people who were interested in their industry being professionalized, the Al Taubmans and such. [Taubman, onetime chairman of Sotheby’s, founded mall owner The Taubman Company.] They were characters, but they were very smart characters — they weren’t just hucksters.
You’ve been on about 20 advisory and corporate boards. How’d that happen?
I got asked to be on my first corporate board for healthcare in 1987 [when] I was in my 30s. And then I got asked to be on a couple other boards as these companies were going public in the early ’90s. Why did they ask me? You’d have to ask them, but my gut is they had worked with me.
And then I became chairman of Rockefeller Center REIT, in like ’94 or something like that. I’m not a Rockefeller but a working-class kid from a working class neighborhood, a working-class town.
What was that like?
Well, that thrusts me into what turns out to be the largest deal up to that point in history, in real estate in the United States.
And you learned really fast. I was around really smart people like Pete Peterson, one of the co-founders of Blackstone, and the head of Goldman Sachs’ real estate efforts.
We were in a room a little bigger than this, and there was a really hard set of problems we were working on, and these legends were sitting there going, “Oh, here’s what I think,” and “Here’s what I think.” And then I remember Pete Peterson saying, “What do you think, Mr. Chairman?” and your first instinct is, “Why are you asking me?” And then you realize, this is it. It’s just a whole bunch of people trying to do the best they can with the resources they have, how to gather knowledge and judgment and bounce it off people. And I got it.
You oversaw the sale of Rockefeller Center in the mid-1990s to Mitsubishi Estate. Was that the craziest deal you’ve ever been a part of?
Yes, probably. Because the geography, involving Japan, was a big part. You had the normal craziness, plus language craziness, plus big cultural difference, plus you had a big time difference.
One footnote: $2 billion total was the universe of real estate private equity — total. Not in one fund, basically in five funds. And of course, they all had restrictions on how much they could put in any single deal. Try to do a deal for $1.3 billion. How do you get there? No one has money. You didn’t have sovereign [wealth funds] operating like they do today. You didn’t have REITs operating. How do you put all that together? But it worked.
Did you have imposter syndrome?
You must have those moments too — you’re an accomplished guy. You go from what 98 percent of your life, you don’t even think about it. And then there’s 1 percent of your life, you go, this is insane. And how did this happen? You think back to when you were playing Little League or something, right? And you go, how?
How did you meet Sam Zell?
On the conference circuit. We knew one another pretty well, and if I was in town, I’d have him out for class. But we became really close around Rockefeller. He was a really treasured friend for about 33 years, and we did business together right to the very end, and we did social together to the very end.
Who was your most famous student?
In general fame, Ivanka Trump. She was a great student. She’s a wonderful person. I haven’t seen her for several years. I was sort of her mentor, advisor, whatever you want to call it, three classes, and she was an excellent student. She’s done okay. Not because of anything she learned from me.
I would say in the business, people like Jeff Blau at Related. Keith Barket, who passed away some years ago. He was running Angelo Gordon’s real estate at the time.
What lessons did you want to leave your students with?
The last lecture in every one of my classes was: Be honorable. Be successful. But don’t confuse money and success. The one thing I did for a lot of students was [show] there are many answers. There’s a tendency in real estate finance to think there is an answer, like a math problem. But it’s not a math problem.
Did you grade on a curve?
I was known as a pretty tough grader. You either know the shit or you don’t.
Did you have a favorite student?
Sure, and I mean, how do you avoid it?
What’s your preferred form of exercise?
Until 50, it was basketball. [I was] in leagues with people of all ages. I didn’t like to play just with old guys, and I played with some very good players, a couple guys who had played in the pros. I wasn’t that level, but I was good enough to be on a team with them as sort of the fifth guy.
[Now,] I do my stretching, and I do about 80 minutes on a stationary bike, and I do an hour of weights, and I do about 15 minutes of balance exercises. I try to structure my day to walk 9 or 10 miles while doing calls.
There’s a perception of board members being chummy with the CEOs, sitting in on a few meetings and collecting checks. What do you actually do?
When I first served on the board in 1987, I think it kind of was what you were saying. The CEO really ran everything. You had some smart members on there to basically make sure you’re not doing something completely stupid. Today, these are real boards with real people … who have other things to do. They don’t need this as a source of income. They don’t need to placate the chairman.
You were on the board of Paramount Group, which was under scrutiny for its corporate governance. What’s it like to be on the board of a company where governance is questioned?
My good fortune is I rolled off that board before all that happened, at least as far as I understand.
You recently co-authored a book about longevity. How long do you want to live?
As long as I can — I hope well into 100. I had my greatest mentor, [who] just died at 103, and she was really good. She got slower, but she was really good until 97 or so, good until 100, adequate till 101 and a half. And then she had the last year and a half, not so good. We haven’t done a lot to make the last year and a half much different. I know my year and a half is coming. I don’t want that year and a half to come for a long, long time, as long as I can be productive and have joy.
What do you think of famous biohackers such as David Sinclair or Bryan Johnson?
I suspect these kinds of longevity extremists are buying minutes and hours and God bless. I don’t think they’re buying multiples of a year. Last night, I had some pecan pie with whipped cream. You know, I made the decision, I’ll take the 32 seconds shaved off my life.
What time do you wake up in the morning?
I get up around 4 a.m. But I go to bed around 8, 8:30 p.m. I’m going to a concert tonight so I’m not going to bed at 8.
What concert?
CeCe Winans, a gospel singer. And then Saturday night I’m going with my brother to the Sixers.
What is your biggest vice?
One is sugar. One is an undue level of arrogance, and the other is just being incurably cute.
What’s the last book you’ve read?
It was by Jonathan Haidt, about how the phones and such are ruining kids. Jonathan’s a smart guy, and whether he’s right or not, we’ll find out. The best popular book that I can recall reading was “The Rational Optimist” by Matt Ridley.
You’ve been married about 50 years.
52. 53 in July.
I just got married. What advice do you have for a happy and healthy relationship?
Marry an angel. Learn to laugh, because the alternative is scream, right? And there’ll be no shortage of times when you’ll go, “What the hell?” If you can laugh, it makes it a lot easier.
Third is, never say, “You’re just like your mother.” Unless her mother is drop-dead gorgeous, and I don’t even know how you work that in.
And the last thing: write down on one piece of paper the 10 things that are the most wonderful about that person. And then on another piece of paper write down the things that really bother you. Come back on your fifth anniversary, your 10th anniversary, your 50th. The good list gets shorter and shorter. You better be able to make a list of 10 things you don’t like and figure out how to live with them, because they’re not going to change. You have to change, to manage your life around them.