Dottie Herman, CEO, Douglas Elliman
You don’t become the richest self-made woman in American real estate by playing it safe. Dottie Herman has proved time and time again that bold moves pay off.
In the 1980s, in a maneuver that solidified her path to the top in real estate, Herman flew to California and convinced Merrill Lynch to hire her to help the company expand into the real estate market.
In 1990, when Prudential decided to sell its regional holdings, Herman then persuaded the company to lend her $9 million to purchase its own Long Island real estate offices.
And in 2003, Herman expanded her empire into New York City with the nearly $72 million purchase of the most prominent Manhattan real estate company, Douglas Elliman (again convincing Prudential to finance the deal).
“If you don’t ask, you don’t know,” Herman says. “And the worst that can ever happen is someone says no.”
- How Dottie Herman got into real estate
- Her bold move that convinced Prudential to lend her money to purchase one of its own companies
- How she weathered a recession while running her business
- The story behind acquiring Douglas Elliman, a prestigious real estate company in Manhattan
- Why she wanted to expand her real estate empire into New York City
- Her thoughts on branding
- How she maintains a good working relationship with her employees
- What she hopes to do next
Full Transcript of Podcast with Dottie Herman
Nathan: So the first question I ask everyone that comes on is how did you get your job?
Dottie: Interesting. I was in school going to get a certification in financial planning and my series seven license. And in the interim … I started to do real estate just because I could do flexible hours and still go to school. And while I was going to school doing wills, and I told my boss, as soon as I’m done, I get my series seven and I’d get my certification of financial planning, I’m out of here. And when that all happened, I said to him, “Well, I’m out of here.” And he said, “No, don’t leave because I’m selling my company to Merrill Lynch and Merrill Lynch is now answering the real estate market. And you would be great with your background because you have a real estate backward and a financial planning background. It would be perfect.”
And I read in a book, because in those years, it’s the late eighties, there was no internet. It’s sad. If you want to get ahead in life, you are better off working with a cop people work or seeing them then to be around people who really don’t have authority. So I looked up where the people that ran the Merrill Lynch realty wire, I took a plane and flew to California and I basically broke into their office. And I just basically said, “Look, I don’t have an appointment with you, but I’m really great and I heard you are coming into the real estate business and I would be a great asset.” And the CEO, I think it was George Rathmann, said to me … He looked at me like, how did you get an appointment with me? And then he just started to smile. And then that I started working for Merill Lynch building their brand in real estate because they were basically known for their socks.
And they had decided to do an array of financial services. Mortgage, real estate, so that they would get multiple margins and multiple profits from their customers. And so Merrill Lynch was not known in the real estate business and I basically started from them. I was an employee of theirs and we built that brand in real estate.
Nathan: Interesting. And what happened next? When did you go off and …
Dottie: Yeah it’s interesting. And I always say a lot of … There’s opportunities in life. People just sometimes don’t recognise them. I worked for Merrill, I loved working for them. I ended up seeing real estate in a global way because I flew all over and saw it in a global way back in the late eighties. It was very small, it was local businesses and I saw it very differently and they put a lot of money in their place.
The ones that they think are good, they really spend a lot of their resources on them. So they believed in me and I owe a lot to them. And then one day it came over the wires that they were selling the real estate and that they decided after like five or six, maybe six years, that they wanted to put their money more into global markets and that real estate was not going to fit in. And so now, my job was to stay with Merrill and keep. I was in the northeast region, and keep the company together, because of course, once that announcement is made, all the competitors trying to steal the agents that work for you. So, I found a way around and got everyone to stay and I probably was one of the youngest people in the company at that time.
And I stood in front of everyone and I said, “Stick together, stick with me because we’re going to get through this together, and together we’ll be and strong.” And we had about maybe 70 offices and we were in a way of family and people didn’t ask them too many questions. They just stuck with me. And it took about a … Maybe six or eight months and they finally sold it to Prudential. And I will never forget that day because now I walk in from the Merrill Lynch thighs and there was a lot of men then and they were all dressed to the nines and did everything for you. And they said, “Now meet your new boss, Prudential.” And it was very different. They dress differently. They just worked a whole different type of company. And after they made some announcements, they said to us, all the people that were running the company in the United States, because Merril was a national company, “They said we do not believe in national real estate companies. We think that business is very local and that it’s not good to have a national company. We bought it for the relocation services. And so therefore we’re going to franchise this … I think there are about 460 offices throughout the United States and we’re going to franchise regions like the northeast and north western region, northern California, southern.”
And there I am now working. I was very sad. I hated working to go into Prudential from Merrill. And furthermore, now my job was to keep everyone together until they found the buyer for the northeast region, which I was part of the advancement. So I’m eventually going to be out of a job basically. And in that time, I think I was about 28 or 29, or something of that nature. And I was, “Oh gosh, like I can’t believe this is happening.” And someone said to me, well, “Dottie, why don’t you buy it? Buy a region?”
I said, “Well, I don’t have any money.” They said, “So what? Just write to prudential that you do and that you have money and you have venture capital money and that you have investors and that you’d like to be considered to buy part of the region.” And that’s what I did to actually … They had … It took them a year, at least a year to sell off everything. And so they were unable to sell the north east as a region. They sold Connecticut, they sold Boston, New Jersey I think they busted up, and I was on Long Island and there were 37 offices. And I said, I wrote them a letter with a little help from some of the agents husbands who helped me with business plans and stuff. And I called up the banks and the banks refused me. They laughed in my face. I called up people who I thought had money. I said, “You could have an opportunity to buy this company.”
And eventually people bid on it. But I really wasn’t showing … Eventually I ended up having a meeting with them and I had to tell them the truth and say, “I really don’t have the money but you should sell it to me.” And now that’s kind of crazy. But the truth is they did. They said, “We can’t do that. We can’t do that.” But they eventually did. And I bought 36 offices on Long Ssland, no money down, no personal guarantees because I had nothing to guarantee them. I worked for them as an employee for a while, and then I bought 36 offices or Long Island.
Nathan: Yeah wow. How do the economics work? Because you didn’t have the money, they still sold it to you. How did all that sort of things work? Because that’s quite an audacious move.
Dottie: Well, here’s how it worked. And I know this is almost hard to believe. So when I’m speaking about entrepreneurism, I tell him, I ended up buying no money down. They sold me the company, and I think it was about nine million dollars. I believe that I did … I think it was about 1.8 million in working capital and they had done the evaluations on a Wharton study that they use the last five years of the real estate market’s numbers to the determine a value and they happen to be very good real estate market. It was a very good real estate market for the past five years and they sold it to me no money down and no personal guarantees. They lent me the money, Prudential.
Nathan: Oh so they lent you the money.
Dottie: Yes, they love to be 100% of the money. And we then, about a year and a half later, went into … I’m sure it was the 90s. Some session and obviously I was having a tough time paying them and they were sending me, you didn’t send the franchise fees, you didn’t pay this. And I looked up where their corporate office was and it was in Newark, New Jersey, which I had never been to nor do I think that I really want to go there. I’ve got a car and I had a driver drive me there. I met with them and I wasn’t being a phoney . I was really being real. I said, “You cannot take my company for me. I will do this. Just give me some time. We’re in a bad recession.” And I was a little hysterical. I don’t think they knew what to do. “Calm down, calm down, calm down,” and they ended up forgiving a lot of my loan. And then they forgave I would say over 50 or 60% of my loan, and they said, “Now go to the bank and refinance that.” And I did. And that’s how I started.
Nathan: Yeah wow, that’s crazy.
Dottie: Well, I learned a big lesson from that. And I tell people this all the time. I was young and I wasn’t afraid of failing because … And I really didn’t even think about it because I didn’t have anything really to lose. And it was a crazy thing to even think of. And if you’re, even now, I probably wouldn’t think to even think of doing it, but I didn’t really think about it. I just did it. And they ended up saying yes. So if you don’t ask, you don’t know. And the worst that can ever happen is someone says no. And I learned that. I’ve gotten a lot of no’s, but I keep on persisting and I think that’s really important to know.
So I then refinanced the loan, I stayed with them. I still with them actually until thought it was over. But in the interim, was sending them and they were buying a lot of companies and they offered me a lot of money for my company on Long Island. I took in a money partner and I then went back to Prudential and this was right after 9/11.
So if you go back to 9/11, New York City was expecting a second terrorist attack. Real estate was totally dead. And I pull with my partner, a gentleman named Andrew Farkas, who at the time ran the biggest real estate company in Manhattan, which was Douglas Element. And we said, “Would you ever sell the company?” Because it wasn’t for sale. And he said, “For 75 million I will.” No contract. He said, “There’s people bidding for it. If you come up with the money, if you’re the first one then you’ll get it.” And truthfully, I had a very good relationship with Prudential and if I were to leave Prudential, they would move all their franchisees cause I had now become a franchise at Prudential, I wasn’t an employee anymore.
And Prudential financed the sale of Douglas Allman, which was $75 million approximately a year after 9/11. And I’ll never forget, I was on a plane and we had to close the sale on a Friday, but it was a public company, so we were announcing it on Monday. And the president came on, said we had just gone to war. And so it was the year after 9/11, we were at war. It was not a good real estate time, but so be it. That’s what happens. Finance that money. And again, of course my company was collateral, but again, I didn’t sign personally cause I certainly didn’t have $75 million. And then I borrowed from my partner, a second 10 or 11 million dollars extra that I needed and I had tonnes of debt, but I moved forward. And I’m proud to say that we paid off all of our debt in the last recession.
Nathan: Yeah wow. What I’m trying to work out Dottie is why did you want to buy Douglas Allman if it was … It was a really, really hard time in the industry.
Dottie: Because I loved building a company, I loved running the company and I just wasn’t worried about it. I felt that I could do it and I was … We were on Long Island and there was no real estate company that went from New York city right as to Montauk, which is the east end. There was big real estate companies in New York City. There are big ones on Long Island, but there was no one that connected the city to all the suburbs around it. And I thought, “Well, if I can connect this company will be the first company that is not just in the city that connects to the suburbs outside the city. And then I can sell those customers anywhere from Montauk to Manhattan or Manhattan to Montauk.” And out in the Hamptons, out there, it’s a second market for New York City anyways. So, I really just felt I could do it.
Nathan: You thought it was a good idea though? Or just thought it was the next level or-
Dottie: Well I was the first company that ever was not just in the city, that went from the city right out to Long Island, to the Hamptons, and Queens and connected all those dots. And I felt customers, once they know your brand, if they dealt with you one place and they’re happy with you, then they are going to use you in another place. So, the Hamptons is a very big second market for Manhattan and I was in the Hamptons as part of my company, was in the Hamptons. I was in the suburbs of Long Island, I was in Queens, which is next. It’s part of, it’s not Manhattan, but it’s next to New York City. And I thought no one ever connected the dots and that’s what … I was the first person to do that. Since then other people followed doing that. But I thought it was a good idea and I think people … And even now, if you looked at my business plan you would see that I am in … I think we have something like … I’ll have to give you an exact number. It’s 60 something offices, 60 something.
But I’m in all the markets that my customers are in. So we’re in New York City, we’re in southern Florida since a lot of people in the northeast when it’s cold buy a second home or a rental in a warmer climate. We’re in LA and southern California because the coasts work together. And I’m in Connecticut and all the little suburbs around the state, right around New York City. And I think we built a great brand and I actually kind of copied the business plan that I learned that Merrill, except they just didn’t save it long enough.
Nathan: Why didn’t you eventually rename Douglass Allman to your name? How come you kept the brand name?
Dottie: Well, the brand name was … It was a white glove company in New York City. It was probably about 95 years old. Actually Douglas Allman started the residential real estate business 100 years ago. There was really no residential real estate business in the United States. People just would go to the buildings and ask the supers, “Do you have apartments?” So it was a great name. I was watching public companies come in to the business and it’s about branding. So my name was known on Long Island in some of the places that I worked at, but I wanted to take a brand name and make it bigger. And I also had a state Prudential because that was part of where they lent me money that I had to stay part of Prudential also.
Nathan: Interesting. Because a lot of entrepreneurs would want to rename it.
Dottie: I don’t have … Look, I think I have an ego, but that was a much bigger name, Douglas Elliman, in New York City, than Dottie Herman. And I also was competing now with new national companies, which will let Caldwell banker and companies like that that had a national name and I didn’t … And prior to that there were little brokers that had a name in wherever they lived, and that’s where the real estate extended. Just where people knew them. So, I was very personalised, was a company, but I felt that it was a better move to keep that name.
Nathan: Yeah, no, I find that quite interesting because now you’re taking your real estate company to be the fourth largest real estate company in the United States. And Forbes quoted you as the most successful self made female real estate woman in America. So I’m curious, going on from taking on Douglas Allman what has been key for you to continue to grow the brand and build from scratch?
Dottie: That’s really what I love doing. I love growing companies. And I happened to be in the real estate business, but I love business and growing. And I set a mortgage company up and we have a large rental company and when I bought Douglas Allman, I didn’t know that they had a property management company, which they’ve managed a lot of buildings in New York City and they wanted to sell it to me. And I said, “Listen, I don’t know anything about property management so I don’t want it.” And they said, “Well, guess what? It’s our gift.” So we have a property management company that manages buildings and I would say that we built a brand that was originally strong in Manhattan and not where I was in long island, but through marketing. And I’m a big believer in marketing and branding because I think besides for having good people and putting a lot of resources in that, I think you could be great. If no one knows who you are and you haven’t done the right branding, then you might be a great company, but no one will know who you are.
So we did spend a lot of money on branding it. And then in New York City I was nice to the press and I think Barbara Corcoran had just sold her company. And so they … In real estate in New York City, real estate is like hot on the press. So everyone we wrote about it, and I was pretty press friendly and I was me. I didn’t try to be somebody else. I didn’t lose one person. We didn’t lose one person in the move. And when we did our projections for Prudential that lent us the money, they said, “Dottie, you’re going to have breakage. There’s no way you’re going to take a company over and people don’t leave.” And I said, “No, I don’t think that’ll happen.” And I didn’t. No one left, and everyone asked me, “What are your credentials?” And I said, “I have risked everything I have in life to do this. And I wake up every moment the way you do. And I don’t want you to respect me because of the title. Just give me an opportunity to earn your respect.” And that’s what I did.
Nathan: When you talked about you spent a lot of money on marketing, what kind of split was that? Were you sacrificing profit for growth for a long time? Because I think that’s a difficult one to understand for a lot of entrepreneurs. We love growth, but sometimes it can cause us a lot more stress, pain, headaches than it needs to because we’re all told that you want to take the market, you need to take your market. You need to dominate, you need to be the biggest. So sometimes that idea of being the biggest, the best you can … Yeah, growth is an all consuming thing. So I’m curious around … You said you invested heavily in marketing. What does that look like? Can you be a bit more specific there?
Dottie: Let’s put it this way. I believe in branding, and I didn’t sacrifice …I obviously would have made a better bottom line, but when I bought Douglas Allman, they were making, I think about eight million dollars, bottom line. And I sacrificed making more money myself to grow the brand. At the same token, I wasn’t crazy … I wasn’t trying to be the biggest, I was trying to be the best, and have a name that people knew so that when we were in different locations, they would recognise that brand, believe in that brand. And since I believe just like with a doctor, if you lose somebody and you were happy with them, you’re going to use them, and continue. And so that’s what I did.
Did I take a huge salary? No. And don’t forget, I was also a franchise at prudential, so they spent a lot of time when my partner was good in finances and so they would have never let me go crazy. So I was always in check, but I really … I should put it, I always believe in the value of marketing and branding. And I feel that today also.
Now, when we went through the recession in 07 or yeah, I think it was 07, I cut back on marketing, but I still did marketing. When we did 9/11, I wasn’t even in the city then, but I remember a week after 9/11 I did open houses knowing no one was going to buy anything but just being around, being part of the community and being part of … And I think that’s really important. Being part of the communities you work with. So I branded, and I was out there, I went to everything you could think of. I got some I was from the island. So I didn’t know the players around the city all that well.
I made sure to go to everything and I think I was liked. And when I think your liked, people want to succeed. And I did buy a good company. And then I had to then take that brand, Douglas Allman, which was not known out in the Long Island end or the east end, and I had to rebrand that also. And that’s what I did. We went to …
I had gone to … Because I was Merrill Lynch, when Merril sold, we had to then change the names to be Prudential, and then when I bought it I changed it to Prudential Long Island realty. And then when I did the city I changed it to Douglas Allman. So I’m used to changing names and branding. This one is forever though. This one not going anywhere. This is the one that I keep. And we’ve been Douglas Allman for 17 years I think. And the brand itself was 100 and … Probably 107 years old.
Nathan: So talk to me around I guess some strategic moves or things that you’ve done really, really well. You mentioned marketing, you mentioned branding, you mentioned being friendly with the press, having good people. But what are some unique things, I’m curious, that you think that that has been critical to your success of building Douglas Allman and I guess building your company.
Dottie: I think … and again, I don’t know if you … I’ve read a lot of stuff on entrepreneurs, and not sure if I agree with all of it, but I think part of my success was number one, I made sure to know everyone. And if you, or somebody who just put listings into our computers, or if you were somebody who was answering phones at the time, or you are a top producer, I made everybody important. And I created a team because I … And I believe this. No one’s great alone and we can’t grow the company without good people around you and when people feel needed, and I was not ashamed to say when I came into the city … Because people came up and said, “I could leave,” and I said, “You can’t. I need you.” And I remember the CEO that ran said that was stupid set that you risked everything and you need them.
And I did. And I told them that, and I have to tell you … Because there were people in Douglas Allman that were there for 25 years already. And they did help me and they helped me build the company. And I was just at something two days ago for the company. And I said, “I need to thank everyone here because there’s no way this company would have been built.” And Howard Law was my partner, so I said this with him, but I said, “We wouldn’t have built it without the people because our business is all about people.”
Nathan: I have a few friends that have real estate agent agencies and that is something that is difficult is maintaining good agents. Because a lot of the agents have relationships with the clients, not so much yourself. So I’m curious, what do you look for in great people? What have you found that has worked for you? What are some key things?
Dottie: Well, I think I learned this from Mel, I think or at least … I was young. And I was part of this big company that I felt part of a whole team of people, and I knew people and going back, business real estate then was very local. But I think people in LA, I knew people and I would meet with them. I knew people all over the country. And that is very hard to leave because I had made, first of all relationships, with so many people across the country that all shared the name because Merill was a one company. It wasn’t a franchise. So I built friendships. And that’s really hard ti leave. I had personal relationships with so many people and if you look at my company now, if you were to make phone calls, I do very many social things that are some social and some educational.
I do conferences, I do retreats, I do a lot of round tables. We meet, we do trips, and people get to know each other outside of work and build relationships. And that’s really so important. And in my business, if you have a customer in New York and then going to move to Florida or maybe LA or something, the west coast, you know agents in the west coast. You’re not just giving somebody a list of names and saying, “These people want to move. You know the agents, you know the personality. And if you talk to our company, you’ll feel like you’re at a wedding.” Everyone kind of knows each other. And it’s that. But we do things all over and people enjoy being with each other. And I think that’s really special.
Today I just came back from a veterans club and every year at around the holiday time they took veterans who have been in the business and had been with them for over 20 years to the Rainbow Room, 21 club for a holiday luncheon. And I think I have a company about 16, 17 years now and I still do it. And I just came back from it. And some of the ladies are still working, some of them are 90 years old and they’re not working, but they all come back to this and see each other. And that doesn’t look like revenue. But those are just a little special things that you do for people that make them want to stay with you.
You can’t force people to say with you. But I think the people want to belong to something that they feel part of. And I’ve always felt that way and that way myself. And so I think that I followed that route. That doesn’t mean that nobody will ever leave or that some people … Companies pay a lot of money to get some people and that doesn’t mean that doesn’t happen. But for the most part, I think we built a very good team. And you can talk to anyone in my company. People in Florida know the people in … And we do the horse shows. In the Hamptons, we do the horse shows and people flying in get to know each other. It’s a big family.
Nathan: Yeah amazing. So have to work towards wrapping up, Dottie. So I guess what’s next for you? What are your ambitions?
Dottie: You know, look, I built the biggest roles. I built a great company and I love doing it. I had a lot of great mentors also. I hope, and I’ve tried to do it all along, but I hope to be able to mentor more people, and I love helping people grow their careers. I think I’m a pretty good visionary, so I kind of like do that. I would not say that I’m part of the meet movement, but I speak a lot and I found … I’m not sure the exact number, but I think it was close to like 91% of venture capital money was going to men. So I would take the woman over a man if they were better, but I really try to help also women on helping them get money, and I enjoy that. I enjoy growing people. And I want you able to do that, because I feel very fortunate and I was asked many times, “Gee, what did you go through?” I have a lot of great mentors and some are not so great, but I plan to continue doing that kind of work and making a difference. I think that really is important to me.
Nathan: Yeah. No, I think it’s important to go full circle, right?
Nathan: Amazing. Well look, we can work towards wrapping up, but where’s the best place people can find out more about yourself and your work?
Dottie: They can go to www.Dottie D-O-T-T-I-E, Herman H-E-R-M-A-N.com. And they can Twitter me. I’m Dottie Herman. They can Facebook me, Instagram me. Or they can go, if they have an iPhone, and get my radio show, there’s an APP called Ion real estate. That’s my radio show that I have to do for 10 years or some more. So those are how they can reach me, or they can just email me. I still like those people.
Nathan: Awesome. Well look, thank you so much for your time, Dottie. It was a pleasure speaking with you.
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Key Resources From Our Interview With Dottie Herman
- Learn more about her at DottieHerman.com
- Follow her on Twitter
- Listen to the Eye On Real Estate podcast