40 Years of Real Estate, Relationships, & Investing with Mitch Pleis | Durable Value Ep. 99
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Ryan Swehla: So it's great to have you here, Mitch. Uh, we have as our guest today Mitch Pleis, who is the retired co-head of real estate, director of real estate for CalSTRS. And just as a side note, uh, Mitch, y- you've, you've been a wonderful mentor and advisor for us, uh, o- over the years, um, just truly in that mentoring capacity, and, uh, w- we genuinely appreciate the, the guidance that you've given us.
And so we thought it'd be a great opportunity for our audience to hear a little bit about you, uh, your background, and, and gain some lessons along the way. So thank you for being here.
Mitch Pleis: You're welcome. It's been an honor to be part of your organization.
Ryan Swehla: Thank you.
Mitch Pleis: Yeah.
Ryan Swehla: Uh, one of my favorite, um, history points about you is, uh, your football history.
'Cause I grew up, uh, in the, uh, '80s and '90s when the 49ers were just an absolute powerhouse of a football team, and you have a little bit of connection to that. So I'd, I'd love to hear if you, if you could gi- give a little bit of, uh- Yeah ... connection to the 49er organization.
Mitch Pleis: Yeah. Well, I was recruited by Bill Walsh when he first went to Stanford-
Ryan Swehla: Wow
Mitch Pleis: in 1977, and he was building out the West Coast offense. And, uh, I was a tight end, so in the West Coast offense, it was a lot of fun to be a tight end.
Ryan Swehla: Yeah. Oh, yeah.
Mitch Pleis: Catch passes, and, uh, he was a great coach. He, uh... Junior year, I think we ended up 15th in the nation. Led the nation, I think, in passing.
Ryan Swehla: Wow.
Mitch Pleis: And, uh, we beat LSU in a bowl game.
Uh, my senior year was similar. I think we were 14th or 15th at the end of the season nationally, and we beat Georgia in the Blue Bonnet Bowl. So we beat two SEC teams, led the nation in passing I think both years, and, uh, the West Coast offense was really born at Stanford- Wow ... which was a lot of fun. And then he went to the 49ers, and he took kind of a handful of us that knew the offense.
I was a tight end, and I was signed a free agent contract and went into camp and got a chance to catch passes from, uh, rookie Joe Montana.
Ryan Swehla: Never heard of him.
Mitch Pleis: Yeah. And OJ Simpson was his last year. Wow. So I was in the huddle with the two of them. And then, uh, in the beginning of that practice, I ended up tearing the cartilage in my knee- Oh
and got put on injured reserve. And so my playing days ended there.
Ryan Swehla: Yeah.
Mitch Pleis: But it was still a great experience, and- Wow ... Bill went on to just have a fantastic... He was a great coach.
Ryan Swehla: Yeah.
Mitch Pleis: Really good coach.
Ryan Swehla: That's amazing. And, and, um, you know, y- you've had a, a long trajectory from football at Stanford to d- uh, director of real estate at CalSTRS.
How did you... W- what was the first transition into real estate or into investment management out of, uh, you know, football?
Mitch Pleis: Well, what's interesting, I, um, was a human biology major with a, um, a minor area of concentration in urban development. So I always enjoyed, uh, real estate, real estate development, putting pieces together.
Mm-hmm. And I went to work after the 49ers for a industrial developer, Cadillac Fairview.
Ryan Swehla: Okay.
Mitch Pleis: Canadian company that built distribution buildings, um, this one on the West Coast, but they built them all over.
Ryan Swehla: Yeah.
Mitch Pleis: And it was my first foray into commercial real estate. But after two or three years, I realized I, I need to learn how to finance these projects.
Yeah. Because you can't... Unless you understand how to finance a project, as you know- Yeah ... you can't build it or buy it.
Ryan Swehla: Yeah.
Mitch Pleis: It's gotta make sense. So I took a job with Wells Fargo, and I stayed in the mortgage banking and finance space- For six years learning how to finance projects.
Ryan Swehla: W- and what, what time period would that have been?
Mitch Pleis: That would've been during kind of the go-go years in Silicon Valley. Oh, interesting. So it would've been kind of '80-
Ryan Swehla: Yeah ... '
Mitch Pleis: 82 through '89.
Ryan Swehla: So, uh, I mean, how did that overlay with the, um, savings and loan and the ultimate- They
Mitch Pleis: were just- ...
Ryan Swehla: RT- RTC days.
Mitch Pleis: Yeah. They were just burning away, and I fortunately was working with life companies- Mm-hmm
and representing the Cignas and the TIAA-CREFs and the- Okay.
Ryan Swehla: Yeah ... large
Mitch Pleis: life companies doing creative joint ventures. Mm-hmm. We'd do a Cigna, or in those days, participating loans with TIAA-CREF. Yeah. So kind of structured finance-
Ryan Swehla: Yeah ...
Mitch Pleis: which was really fun, and working with some great developers down in the Silicon Valley as all the new building, you know, was going on down there.
Ryan Swehla: Yes.
Mitch Pleis: So it was a, it was a fun time.
Ryan Swehla: What led your path to CalSTRS?
Mitch Pleis: I was doing investment brokerage, so that's a national kind of a transition from mortgage banking to- Yeah ... investment brokerage in the early '90s-
Ryan Swehla: Mm-hmm ...
Mitch Pleis: when everything fell apart-
Ryan Swehla: Yeah ...
Mitch Pleis: in that time. In fact, Sam Zell had that saying, "If you could just stay alive to '95."
That was his famous saying. Yeah. What-- I answered an ad at that time because I had a bunch of listings, but I couldn't sell anything- Yeah ... in the marketplace. Yep. I answered an ad for the California teachers. They were looking for a new investment officer. Because of my development and finance background-
Ryan Swehla: Yeah.
Mitch Pleis: Yeah ... it was a good fit for that job.
Ryan Swehla: Yeah.
Mitch Pleis: And so they hired me first initially as a contractor because CalSTRS at the time had contractors, and while I was there, they later converted all of us that were contractors to civil servants.
Ryan Swehla: Got it.
Mitch Pleis: And so I was there for the first go-around at CalSTRS for eight, eight and a half years.
Ryan Swehla: And you had that private sector experience coming into CalSTRS. W- what would you say are some of the, the key expertise or, or experiences that you had that you think helped with-- And you did mention your first stint at CalSTRS. Yeah. We, we'll, we'll get to that. Yeah. But what, what are, what would you say are some of those key, uh, elements that helped?
Mitch Pleis: I think one of my first projects was I got a-- We had some office buildings in West Los Angeles.
Ryan Swehla: Mm-hmm.
Mitch Pleis: But we had all different leasing brokers- on all five office buildings that were all in the same market. And so that was just a, a, a function of how the group was set up. Yeah. And I came in and I said, "Wow, the market would just hire somebody specific for all those buildings, have them working 100% of the time."
And so through one of our advisors, we hired a full-time, 100% marketing person on our payroll- Yeah ... and saved money-
Ryan Swehla: Yeah, yeah ...
Mitch Pleis: but got better execution.
Ryan Swehla: Yeah, 'cause you came from the brokerage background and understood how motivations work- Yes, exactly ... and, and how you, you created that alignment.
Mitch Pleis: Yeah, so that was one of my first kind of value adds.
And just being in the private sector for that length of time in development-
Ryan Swehla: Yeah ...
Mitch Pleis: even though at the time we weren't taking that kind of risk, that actually helped me shape some of the changes I made when I was the director. Eventually became director of real estate during that first tenure. Some of the stuff I had in the marketplace helped me-
Ryan Swehla: Yeah
Mitch Pleis: make changes there. We did, we did more, uh, joint ventures.
Ryan Swehla: Yeah.
Mitch Pleis: We took on more leverage because that was something that pension funds didn't do. We just expanded the property types that we were investing in.
Ryan Swehla: So at that time, what did the CalSTRS real estate, uh, uh, portfolio look like and compared to today- Yes.
Oh, my gosh ... just to provide some reference point.
Mitch Pleis: Yeah. So- '
Ryan Swehla: Cause that would also be at a time, I would guess, when pensions in general were continuing to grow into their allocation that they have today. Correct,
Mitch Pleis: yes. I can still remember when we hit 100 billion. And we had a big party. Yeah. We, we got key chains that said 100 billion, which I still have.
And, um, we were at 3% of the total portfolio, so $3 billion in real estate.
Ryan Swehla: Wow.
Mitch Pleis: So think about how small of an allocation that was.
Ryan Swehla: Wow.
Mitch Pleis: And the private assets were just beginning to launch. So private equity was in that same percentage.
Ryan Swehla: Wow.
Mitch Pleis: And so just comparing then to now, think about that difference.
Yeah. You know, going from really 3% to 15%- Yeah ... where many pen- large pension funds own today.
Ryan Swehla: Yeah, yeah.
Mitch Pleis: And then you add on private equity, maybe 40% of the portfolio today.
Ryan Swehla: Yeah.
Mitch Pleis: 30 to 40 might be private assets, where, um, back then it was maybe 10 in private assets, both private equity- Yeah ... and real estate- Yeah
at the time.
Ryan Swehla: Yeah.
Mitch Pleis: And we owned 100%, wholly owned-
Ryan Swehla: Mm-hmm ...
Mitch Pleis: probably 90% of the portfolio. And we were just beginning to dabble in opportunistic funds that had just come. Yep. We invested in Colony- Yep ... Morgan Stanley- Yep ... and Lazard Frere.
Ryan Swehla: Yeah. Yeah.
Mitch Pleis: And it was just a foot in the door. But that's where the industry began to change, but it was all direct ownership-
Ryan Swehla: Mm-hmm
Mitch Pleis: managed through the traditional advisor.
Ryan Swehla: And with that direct ownership, y- would you say that it was more kind of the core aspects of real estate?
Mitch Pleis: It was all about- Yeah ... safety.
Ryan Swehla: Yep.
Mitch Pleis: Cashflow and safety.
Ryan Swehla: Yep. Yeah.
Mitch Pleis: We really were about, uh, the safest investments- Mm-hmm ... that maximized cashflow. We made- Yeah
you know, like anybody, to get that allocation, everybody invested in office. Most pension funds are big- Yeah ... office investors.
Ryan Swehla: Yep.
Mitch Pleis: I think we were very successful. We had a big portfolio in Los Angeles, West LA- Mm ... that stayed leased-
Ryan Swehla: Yeah ...
Mitch Pleis: through most cycles. Yeah. And that was unusual.
Ryan Swehla: So, uh, y- you're one of the...
Y- well, you're the only person that has been the director of real estate, uh, twice- Yes ... at CalSTRS.
Mitch Pleis: Yes.
Ryan Swehla: Could you describe a little bit of the, the time in between and then, uh, you know, what eventually brought you back to, uh, CalSTRS?
Mitch Pleis: It's i- interesting because coming, uh, le- when I left CalSTRS the first time, uh, it's a challenge to be in the institutional market in smaller markets like Sacramento.
There are plenty of jobs in Los Angeles- Yep ... in New York. And I really didn't want to move my family. That was important, and so I kind of pieced together in between times jobs that had me traveling more. Um, I had a seven-year stint with Principal in, uh, Global Investors- Yep ... where I did some marketing and some portfolio management, and ended up getting CalSTRS as a client.
Ryan Swehla: Mm-hmm.
Mitch Pleis: Which was fun to be on the other side-
Ryan Swehla: Yeah ...
Mitch Pleis: as an advisor, uh, for the pension fund that I worked for.
Ryan Swehla: Yeah.
Mitch Pleis: Which was another kind of, I think- Yeah ... unusual-
Ryan Swehla: Yeah ...
Mitch Pleis: to be able to do that- Yeah ... was relationally really- Yeah ... fun for me. But staying in Sacramento had me do a little bit of my own thing- Yep
by raising capital. Yep. Helping real estate operators raise capital, working for Principal. I had a very short stint as an athletic director, as you know.
Ryan Swehla: Uh-huh.
Mitch Pleis: Worked at a faith-based college- Yep ... in Rocklin.
Ryan Swehla: Yep.
Mitch Pleis: And-
Ryan Swehla: That was your sabbatical ...
Mitch Pleis: was my sabbatical. But I'll tell you, I learned a tremendous from that.
Yeah. Uh, n- not so much the pieces in real estate, but working with people because-
Ryan Swehla: Mm-hmm, mm-hmm ...
Mitch Pleis: getting things done in a small, any kind of small organization like that required me to learn a lot- Yeah ... and work with people. And I... The real estate business is really, as you know, about working with people.
Ryan Swehla: Yep.
Mitch Pleis: All kinds of people.
Ryan Swehla: Yeah.
Mitch Pleis: But that was, uh, my last job, and then I was rehired by Mike DiRe back in 2018 as a portfolio manager in charge of the real estate operating companies, their credit progr- credit, credit lending program, all the debt investments they made, and then just special projects.
Ryan Swehla: And, and how, uh, take those two s- Yeah
stints at CalSTRS and, and the composition of the portfolio- Oh, my gosh ... and how real estate was viewed as a whole. Like, and I think this is a, a great conversation because I think today there is that broader question of what is real estate's role in a portfolio, and, uh, how, how did you see that evolve between those two, and where do you see that evolving-
Mitch Pleis: Wow
Ryan Swehla: moving forward?
Mitch Pleis: Yeah. So back in the '90s when I was there, I wrote a paper on the role of real estate and presented it to the board, and it was very much cash flow and diversification, very low risk. Today, a- a- as you've seen, real estate's role has changed to much more of, of a return enhancer with some risk and, and s- you know, lower standard deviation applied to it.
Ryan Swehla: Yep.
Mitch Pleis: But the portfolio I came back to at CalSTRS Basically, we could do anything. We had the tools to invest in operating companies.
Ryan Swehla: Mm-hmm.
Mitch Pleis: We could do debt. We could do public. We have a little public portfolio. Mm-hmm. We could take companies public to private, private to public. We could do all out- property types.
Mm-hmm. There wasn't any property type we couldn't do.
Ryan Swehla: Mm-hmm.
Mitch Pleis: Uh, we had the most diverse, uh, background and partners. We could manage our leverage appropriately. I don't think there is a tool that we didn't have-
Ryan Swehla: Wow ...
Mitch Pleis: when it comes to just all real estate. Yeah, yeah. We were one... We, we develop properties, and we leverage that.
And we, as you know, we've actually had our own construction lending program that lent to- Yeah ... our own partners.
Ryan Swehla: Yeah. Yeah.
Mitch Pleis: E- even though we were 99% of the equity- Yeah ... it was like lending to ourself, but it really- Yeah ... cut the cost dramatically-
Ryan Swehla: Yeah ... of our cost 'Cause you could use CalSTRS balance sheet.
Mitch Pleis: Yes.
Ryan Swehla: And y- you mentioned real estate operating company investing. Today, I would say that that's kind of the, one of the key topics of, uh, you know, how do we do more of that? How do we get the GP economics? How do we partner with GPs where we have long-term alignment? There's a lot of really good discussion around that, but we're in 2026.
Right. And you mentioned in... This was 2018-
Mitch Pleis: Right ...
Ryan Swehla: uh, or earlier. Well, CalSTRS must have been one of the early investors in real estate operating company, companies.
Mitch Pleis: I think I, I'd say we were one of the early investors. I would agree with that. And I... We looked at these as strategic investments that we were going to grow, either at the time CalSTRS early on took an interest in PCCP and Fairfield And both of those were strategic investments for us, meaning we were gonna put LP capital out- Mm-hmm
through those vehicles and still get a GP interest alongside of those. But in many ways, those GP interests were not as important as getting out the strategic LP capital. Only till recently did we realize the value of those investments that- Interesting ... that a- as we built those companies out as part of our investing thesis, those companies, along with growing their brand, took on value.
Took on
Ryan Swehla: value, yeah.
Mitch Pleis: And those investments and those companies really were beneficial. And I think CalSTRS has developed, and many other investors now today, in trying to access GP interests in different vehicles. As you know, that-
Ryan Swehla: Mm-hmm ...
Mitch Pleis: article came out in PREA that talked about that. I thought that was a really well-written article on how different ways are to get access to GP interest.
Ryan Swehla: Yeah.
Mitch Pleis: And use your power as an LP to do that.
Ryan Swehla: You, uh, mentioned real estate as a relationship business, and I've heard you use the word partnerships a lot. Um, y- how, how does that tie into... Because obviously, when you're investing in real estate or you're investing in a closed-end fund or an open-end fund, you have more of a transactional relationship.
When you're investing in the operating company, it's much more that word partnership. Um, you know, how, how do you see that dynamics change and, you know, what are the benefits and the drawbacks of that?
Mitch Pleis: Yeah, I, I think one of the drawbacks we experienced when we were major owners of companies was the time involvement, 'cause you're approving lots of operational issues.
And there was an inordinate amount of time, um, that we spent on things we shouldn't have been spending our time on. That's not the role of an investor like CalSTRS.
Ryan Swehla: Yeah.
Mitch Pleis: Uh, so we've made some changes. We, we hired, at the time, someone to help us with that-
Ryan Swehla: Yeah ...
Mitch Pleis: kind of in an advisory role for us, um, to help us with some of those-
Ryan Swehla: Mm-hmm
Mitch Pleis: longer term things. But being in a minority position does not require that additional time, and I think there was a, a leaning for investors like us to be in more of in a min- minority position. The, the benefits that we saw, it is a long-term relationship. It really is. And the benefits is that you get to see inside the operation of good GPs, see how they run their business.
And if, I think one of the things that Mike DiRe started and was applied was, how can I help GPs?
Ryan Swehla: Mm-hmm.
Mitch Pleis: GP has a choice to bring a transaction-
Ryan Swehla: Yep ...
Mitch Pleis: to a partner.
Ryan Swehla: Yep.
Mitch Pleis: Just like you do. You, you could- Yeah ... bring it to a partner. We wanted to be the first choice with all of our partners. And to do that means we had to listen to them, build a re- relationship with them, and really give them the best tools they could have.
Yeah. From tax-friendly structures, to construction lending like we did- Yeah ... to capital they could count on, to quick decisions. Yeah. All of those were part of us capturing really good partners.
Ryan Swehla: Mm-hmm.
Mitch Pleis: And really competing against our fellow LPs.
Ryan Swehla: Yeah. Yeah.
Mitch Pleis: As, as col- collegial as this industry is- Yeah ... as you know-
Ryan Swehla: Yeah
Mitch Pleis: we're still competing-
Ryan Swehla: Yeah ...
Mitch Pleis: with other LPs for good deals with partners.
Ryan Swehla: So you, you've had a 40-year tenure, uh, in the real estate, in the institutional real estate space. And what do you think has changed for the better over that period of time, and what do you think has maybe been lost along the way in that period?
Mitch Pleis: Yeah, back in the '90s when everybody was so under-allocated to real estate, it was, it felt like the Wild West sometimes.
Ryan Swehla: Yeah.
Mitch Pleis: I mean, it, uh, you, because you were buying just to get to your allocation.
Ryan Swehla: Yeah.
Mitch Pleis: And-
Ryan Swehla: And everybody knew that there was money flowing into the space.
Mitch Pleis: Yeah, and everybody had high targets, and they wanted to invest, and so big numbers.
Big companies got launched during that long wave of trying to get to our allocation. I think one of the things that's changed is everybody, it's matured. Most real estate LP investors have hit their allocation- Yeah ... or close.
Ryan Swehla: Yeah.
Mitch Pleis: And so they, they have developed much better strategies of beating their benchmark.
They have longer partnership relationships, which is better, 'cause you are gonna go through up and down times.
Ryan Swehla: Yeah.
Mitch Pleis: And so working with good partners that you trust and you have long relationships with is, makes the job a lot easier and, and is more fun. But, you know, I think one of the, the changes in the industry is just the continually changing of the role of real estate, like we talked about- Yes
earlier.
Ryan Swehla: Yeah.
Mitch Pleis: You know, because is the role about, uh, cash flow and diversif- diversification, low volatility, or is it really private equity like, and you're taking risk, and you're competing with private equity? And I've seen back and forth in my tenure several times that shift.
Ryan Swehla: Mm-hmm.
Mitch Pleis: And as soon as we take more risk and we get burned, then we retreat back-
Ryan Swehla: Yeah
Mitch Pleis: to a safer investment, and I think that, that's hard-
Ryan Swehla: Yeah ...
Mitch Pleis: because you have different partners, different players, different strategies that you're implementing. Based on those. Based on those. Yeah. The changing role of real estate.
Ryan Swehla: How do you see real estate's role playing out going forward now that we are at kind of this- status quo in terms of hitting targets and being kind of d- developed out, how do you see the role of real estate in the, in the defined benefits, you know, portfolio?
Mitch Pleis: I mean, I, I think the near term you'll see more alternative asset classes being funded. You, you see that in the public markets, and I think you'll see more of that with public pension funds. I think that the return parameters are going to be higher going forward for most pension funds and LPs, partly because of the underfunded, partly because of the competition.
There's more capital going to some of your larger allocators, like we talked about, TPG, KKR, Ares, that are- Yeah ... they just have a lot of money to put out, and they want higher returns with that role that that real estate plays in those portfolios. So maybe you'll see more development.
Ryan Swehla: Yeah.
Mitch Pleis: Maybe you'll see more distressed debt.
Yeah. But you're, you're going to see a leaning into of more higher return investments, which creates more risk-
Ryan Swehla: Yeah ...
Mitch Pleis: because- Yeah ... how can you have that big of, that much capital-
Ryan Swehla: Mm-hmm ...
Mitch Pleis: flowing into good high returning deals- Yeah ... that are in partial distress?
Ryan Swehla: Yeah.
Mitch Pleis: So really, I think the challenge is going to be underwriting- Yeah
coming back to basic- Yeah ... real estate. Yeah. Underwriting your partner, underwriting the strategy, and the real estate itself if you're a hands-on investor.
Ryan Swehla: How do you see for a GP like us that is, uh, you know, on the smaller end of the spectrum, how do you see... Y- y- it feels like there's a bifurcation in the market to a degree.
The, the TPGs and the Ares on the one end, but how do you see, how do you see the role of the, you know, niche real estate manager, uh, playing in the, in the future portfolio?
Mitch Pleis: Well, most managers all started small.
Ryan Swehla: Mm-hmm.
Mitch Pleis: Like, not that you're small.
Ryan Swehla: Yeah, yeah. But- A billion in AUM is n- is not
Mitch Pleis: large It's
Ryan Swehla: not, but- It's not large.
Mitch Pleis: No, but it's- ... it's a good, it's a good start. Yeah. And every manager learns along the way-
Ryan Swehla: Mm-hmm ...
Mitch Pleis: on the, as they build out their company. And I, I think that if you have, if you're transparent and open- Mm-hmm ... and you have a strategy that's working now- Mm-hmm ... um, and you're going to be just as attractive, uh, to, uh, any investor If you maintain kind of the discipline that you've already been obtaining-
Ryan Swehla: Yeah
Mitch Pleis: and your performance already.
Ryan Swehla: Yeah, yeah.
Mitch Pleis: So I, I don't, I- CalSTRS when I was a principal, we underwrote mostly emerging managers that were on the small side that had a proven track record- Mm ... and a region. Now they all didn't pan out, but they- Yeah ... some of them are still with CalSTRS today. It's been, that's been 18 years, almost 20 years, and, and have provided good returns and grown- Yeah
and provided a place in the portfolio of CalSTRS. Yeah. Whether it's been retail or college student housing we did a partnership, or multifamily.
Ryan Swehla: What would you say is one of the hallmarks of those relationships that have lasted 18, 20 years with CalSTRS?
Mitch Pleis: Well, it, you know, that's a, it is a long time. But I, I just look back on those relationships.
They, they were really committed to making the relationship work. Mm-hmm. What I mean by that is if there was a glitch or a mistake, they fessed up to it. They made it right. If, i- even if it was an economic mistake that they felt their, it was their fault. They were patient when CalSTRS at times ran out of money.
Ryan Swehla: Yep.
Mitch Pleis: You know, that's one of the big things where- Yeah ... pensions fund lose good GPs, is they just- Yep ... for whatever reason, start lose that, those- Yeah ... dollars for that strategy.
Ryan Swehla: Yeah.
Mitch Pleis: But those strategies come back. Retail's a great example during COVID. Yep. You know, where many retail developers didn't get any money.
But the ones that hung in there, s- maintained relationship, managed the assets, they got money maybe five or six years later. So patience was important-
Ryan Swehla: Mm-hmm ...
Mitch Pleis: for keeping those relationships, and just regular communication. Just- Yeah ... not too much. Yeah. But enough to know what's going on.
Ryan Swehla: And, and transparency.
Mitch Pleis: Yeah. Yeah. Transparency. And part of this is just- They were just good people, and w- you had a sense. I mean, I do think there's a little- Yeah ... bit of, it isn't all just checking boxes to make sure partners check performance. There, there's- Yeah ... still a trust and relational factor-
Ryan Swehla: Yeah ...
Mitch Pleis: that, uh, I just have to admit is part of the equation.
Ryan Swehla: Yeah.
Mitch Pleis: You, s- you're still gonna do all the-
Ryan Swehla: Yeah ...
Mitch Pleis: reference checking, box checking- Yeah ... metrics that you do. That's a standard. Yeah. But there still is a relational dynamics, and I think continuity in investor and pension fund- Mm-hmm ... is one reason that those relationships can also stay together. If you have pension funds that turn over all the time-
Ryan Swehla: Yeah
Mitch Pleis: that, that- The
Ryan Swehla: staffing?
Mitch Pleis: The staffing.
Ryan Swehla: Yeah.
Mitch Pleis: Because that- Yeah ... staff has different relationships.
Ryan Swehla: Yeah.
Mitch Pleis: Or they don't care about the relationship.
Ryan Swehla: So you, you mentioned that qua- kind of qualitative aspect of understanding who a manager is. How do you go about assessing that? Or what are some tips or, uh, tools that, that you used or have used over the years to really, uh, understand that?
That's
Mitch Pleis: a good, it's a good question. Uh, dinners- Yeah ... have been great, actually. Yeah. Dinners have been really good- Yeah ... evaluators. I could tell you- Yeah ... stories where, um, after a glass of wine-
Ryan Swehla: Yeah ...
Mitch Pleis: and a partner relaxes, how much information you might get, good or bad.
Ryan Swehla: Yeah, yeah.
Mitch Pleis: Both. Yeah. Um-
Ryan Swehla: Yeah.
Mitch Pleis: We always try to get, see if we could have dinner with the wives, 'cause you probably learn more- Yeah
about that, if you can.
Ryan Swehla: Yeah.
Mitch Pleis: These are the qualitative- Yeah ... things, right?
Ryan Swehla: Yeah.
Mitch Pleis: Um, baseball games-
Ryan Swehla: Yeah ...
Mitch Pleis: are- Yeah ... great because you, in between innings, you-
Ryan Swehla: Long periods
Mitch Pleis: of time ... long periods of time, and you're around a sporting event. I- that was something I would use every once in a while, was-
Ryan Swehla: Mm-hmm
Mitch Pleis: baseball games.
Ryan Swehla: Mm-hmm.
Mitch Pleis: So-
Ryan Swehla: That's fascinating ...
Mitch Pleis: just spend time- Yeah ... because you're making... You're gonna have a consultant or somebody do all the metrics that you need to check the boxes with But you still need to spend time with somebody outside of that-
Ryan Swehla: Yep ...
Mitch Pleis: a- and not just have them come to your office with their best foot forward.
Ryan Swehla: Yeah.
Mitch Pleis: Especially if you're gonna have a long relationship and give them-
Ryan Swehla: Yeah ...
Mitch Pleis: 300 million or more in dollars. Yeah. You need to spend time with them. And I think good investors do that. I do think they spend time with every partner- Mm-hmm ... that they have a direct relationship with.
Ryan Swehla: Yeah.
Mitch Pleis: So they get to know them.
That's great. Yeah.
Ryan Swehla: Turning that a, a little bit, um, if someone is new in the business, someone starting out and, and thinking about either getting into institutional real estate as a professional or, um, or they're early in their career, uh, so what, what's some advice that you would have to those individuals to help foster the kind of deep relationships that you're talking about?
Mitch Pleis: I think getting good real estate experience because with that knowledge, you will move up in, if you go to work in an institutional setting- Mm ... a good foundation of the numbers and valuations, how you value a product. Yeah. Y- you can go anywhere. You c- i- if y- you could work in a CalSTRS shop, and y- you would bring a lot to the table.
Even if it was just you went, you were working for a mortgage banker, you went through appraisal school, and you had some basic understanding.
Ryan Swehla: Yeah.
Mitch Pleis: That would be very valuable-
Ryan Swehla: Mm ...
Mitch Pleis: in the shop. You'll learn relationally 'cause you'll have people in your office talking to you every day. Yeah. You know, you're all...
Any m- anybody with money is being pitched all the time.
Ryan Swehla: Yeah, yeah.
Mitch Pleis: Every day somebody's pitching you-
Ryan Swehla: Yeah ...
Mitch Pleis: about- Their latest strategy. And you'll learn. Yeah. I mean, you will learn good and bad.
Ryan Swehla: Yeah.
Mitch Pleis: What you like, what you don't like. We used to spoof people sometimes that came in and just because we would have fun.
Uh-huh. That would j- you know, if you make a presentation and all you do is c- you know, won't go from the printed PowerPoint presentation- Uh-huh. ... and you have to go through it, you know, we'd throw stuff at them. I mean, we'd... I mean-
Ryan Swehla: Yeah, yeah ...
Mitch Pleis: you know, just to, just to help them.
Ryan Swehla: Yeah, yeah, yeah,
Mitch Pleis: exactly. But we'd have fun- Yeah
with it too.
Ryan Swehla: Yeah. Yeah, exactly.
Mitch Pleis: Don't go through the PowerPoint presentation.
Ryan Swehla: Yeah. That's, that's your advice. That's
Mitch Pleis: my advice. That's advice. Don't just go- Yeah ... through PowerPoint.
Ryan Swehla: Yeah. Yeah, exactly. And, um, y- you know, you're, you are in, uh, y- just kind of rounding out a little bit, you're in retirement phase now.
Uh, I happen to know that, uh, some of that has to do with some wonderful family dynamics- Yeah ... that you have right now. Uh, could, you, you know, maybe tell us a little bit about your, uh, your next chapter and- Yeah ... and, uh, and what's going on?
Mitch Pleis: Well, when, I think when I retired, we a- we had maybe six grandkids, but now we have 12.
It's been- Wow ... just over two years. Right at- Wow ... actually, right at two years I've been retired. So we had a bunch of births. Wow. So we have 12 grandkids, 10 boys. Uh, and we have, of those 12, eight are local.
Ryan Swehla: Wow.
Mitch Pleis: So they're over all the time. I still like the business, and so- Yeah ... I still wanna stay connected, and so I sit on a couple of boards of- Yeah
operating companies, real estate operating companies, and I'm doing some consulting. Yep. Um, because I just enjoy the people in the business really. I, and I enjoy the business itself. So that's been fun. Um, and just, um, hanging out with my grandkids and my wife. So it's been, it's been great.
Ryan Swehla: And, uh, of, of the 12- Yeah
uh, do you see any real estate, uh, shining stars
Mitch Pleis: coming through? Oh my gosh. My oldest grandson is already... He's, he's either gonna be a lawyer or a real estate owner. One of... He's gonna be one or the other.
Ryan Swehla: Well, we'll hope for real estate.
Mitch Pleis: Yes. Yeah, yeah. Exactly.
Ryan Swehla: Well, Mitch, thanks for taking the time today. Uh, this has been very insightful, and, uh, you know, look forward to further conversations.
Mitch Pleis: Yep. That's great. Thank you.
Before he spent four decades in institutional real estate, Mitch Pleis was a tight end catching passes from a rookie Joe Montana. In this episode of Durable Value, Ryan sits down with Mitch Pleis, the retired co-head of real estate at CalSTRS and the only person to hold the director of real estate seat there twice. Mitch traces the full arc: recruited by Bill Walsh to Stanford, a brief run with the 49ers, then industrial development, mortgage banking through the savings and loan years, and finally a seat inside one of the largest pension funds in the country.
He walks through what the CalSTRS real estate portfolio looked like when the fund first crossed $100 billion with only 3% allocated to real estate, how that role has swung between safe cash flow and return enhancer across three decades, and why he thinks underwriting is about to matter more than it has in years.
Much of the conversation lands on relationships. Mitch explains what keeps a partnership alive for 20 years, why owning a mistake counts for more than never making one, and how he actually took the measure of a manager, dinners and baseball games included.
Timestamps:
0:00 - Introduction: Mitch Pleis and 40 years in institutional real estate
1:07 - Bill Walsh, the West Coast offense, and camp with a rookie Joe Montana
3:00 - From development to finance: the path into commercial real estate
8:02 - CalSTRS then and now: $100 billion in the fund, 3% in real estate
12:54 - How real estate's role in a pension portfolio kept shifting
19:07 - Forty years on: what got better and what go