With a Monster Project like Hudson Yards, Related Tapped Jennifer Tuhy to Manage the Books
Terence Cullen Nov. 11, 2015, 9:45 a.m.
It’s a daunting task to dole out the red and the black ink of any project—from a single building to an entire portfolio.
The Related Companies’ Hudson Yards—essentially a city unto itself, but on a platform—gets trickier with the various investors and partners in the project, which will lead to roughly 17 million square feet of commercial, residential and retail space.
In March, the company tapped Jennifer Tuhy (who has been with Related since 2001) to serve as chief financial officer for Related Hudson Yards (the division of Related that operates the day-to-day activities of the project)—the first CFO solely dedicated to the project. Prior to the creation of the position, several different executives were juggling various different roles on the accounting end.
Ms. Tuhy, 40, a native of northern Virginia, said the trick has been to keep the bookkeeping innovative through a mix of different types of talent and technology.
While she’s worked on both specific projects and corporate accounting for Related, Ms. Tuhy is now assigned to one of the costliest projects in U.S. history at an estimated $20 billion. When she sat down with Commercial Observer last week, Ms. Tuhy said the number of invoices for steel is so voluminous that it was a relief the company is going paperless.
And because there are so many investors in the project, her team is also tasked with preparing financial reports for international investors, on top of the monthly, quarterly and annual statements it provides to partners in the project.
Commercial Observer: Can you briefly explain your main role and responsibilities for Hudson Yards?
Ms. Tuhy: As CFO, I’m overseeing finance and accounting for the [phases]. That’s everything from job costs accounting and construction accounting up to financial reporting and audited financial statements to our lenders and partners.
It’s such a big project. Can you characterize what goes into that?
It’s hard to describe it. It’s over 80 legal entities. Sixteen buildings. And within those buildings you have potentially multiple equity partners for tracking and reporting to. Until you dig into all of that, it’s really hard to fully grasp the breadth of it all.
How big is your accounting team?
Right now we are a team of 36, including myself, to handle all of that. Over time, I imagine that we’ll grow. It all depends on how quickly we decide to go onto the next [phase]. Ideally, you want to build efficiencies into your processes, and that’s really what we’re striving for now and using technology so that we don’t have to add necessarily the extra person, but obviously with some of that growth we will need to do that.
Are you just focusing on whatever’s under construction right now or is it everything at once?
Well, it’s different phases that happen. My team is also budgeting, so financial planning and analysis. I have a separate group [within the team] that handles that. That’s cash analysis across the whole project over the life of it. So predevelopment, as well as going into operations or whatever happens.
When we met with [Related Chief Executive Officer] Jeff Blau in April, he said this was pretty much the largest development ever done, with steel coming in from all over the world. How would you characterize the $20 billion construction cost?
Large. Very large. We spend a lot of time managing that. Much more so with something like steel, where we need to make sure that it’s fabricated and brought here on time.
I spend a lot of time making sure we’re managing those costs appropriately with the construction team. And building out processes and procedures that we follow to ensure that we’re paying our vendors on time and helping the construction teams deliver, in that respect.
Have you had to employ new systems to manage the cost of this?
Absolutely. We rolled out a new construction management system called e-Builder. There are a lot of advancements in technology everywhere, all the time. My staff is “What about this?” and “What about this?” A lot of ideas are always coming to me.
Where is the money coming from?
An interesting part of this project is that we can’t only go to one source because it’s so big. We are going out to different sources than where we’ve had to go before. It’s literally all over the world. Finding innovative ways to raise money.
What’s the game plan when the market eventually does slow down?
Right now, we’re in the mode in which we will be building the buildings, and we are going forward. I’m not sure that would necessarily change as far as finishing the eastern rail yards. Nothing will really slow us down for the eastern rail yards at this point.
I’m not sure how that will impact the western rail yards [the yet-to-be designed residential component of Hudson Yards]. I think we’ll start planning [the western rail yards] in 2016 into 2017.
How time consuming is it for your team to prepare all of those financial statements for all those different phases?
We have an actual reporting and financial team that is responsible for the final output of all of the audited financial statements. They’re working with the development and construction team. It is a big job. We do monthly for some such as Time Warner [which is moving to 30 Hudson Yards]. We also then have your normal quarterly reports and then obviously annual for multiple entities. We’ve had the request to do IFRS.
‘When we’re in 100 percent construction, this [14-foot] table will be filled with books of requisitions, which are essentionally your invoices every month. It’s going to be huge.’
International Financial Reporting Standards. So not just GAAP, which is the U.S. generally accepted accounting principals. That’s what we then have to manage and figure out. We have to be able to help and make the deals happen. Some of that is agreeing and then figuring out how do we do that and making sure we can deliver for the business.
How do you do that?
We don’t have to do it yet. It’s been a request. It’s a matter of working with your auditors.
Is there anything different in that process you’ve come across so far?
Nothing major. There quite possibly could be.
How far off is that and how soon do you have to start planning to assemble an IFRS?
Potentially, we’ll have to do it next year.
Can you run us through what goes into GAAP?
It’s the rules behind the financial statements and how you present the information. There’s a different international standard that potentially has different rules for how things need to be displayed in a financial statement. It’s knowing what those differences are, reconciling them and then having them signed off on. You have third-party auditors come in and do an audit. They would do an audit of the GAAP, which is what we do formally.
Could you describe what goes into an audit for something this big?
It’s not necessarily the size of the project. Really what you’re talking about then is volume. You’re putting together work papers, and you have your accounting firm come in and they do testing to make sure the way you’re presenting it makes sense. If there are issues with how you’re recognizing revenue or how you’re classifying a lease, you go back and forth, and agree upon this is the way to do it for GAAP.
The accounting department has to understand all the agreements behind all of the projects in order to put together a sound financial statement. It’s not just the debits and credits and job costs to put the steel in, it’s also “O.K., what are the agreements behind how I present this in a financial statement that then goes out to lenders and partners?”
Is the volume you mentioned because you have all these different tenants?
No. It’s more of the steel, and the work behind that. It’s the number of invoices we’re paying to build the project.
What does that stack of invoices look like?
It would be pretty large. That’s why we’re going paperless.
Could you put a number on how many invoices there would be if you didn’t go paperless?
We’re going to be closing on hopefully three construction loans within the next 60 to 30 days. When we’re in 100-percent construction, this [14-foot] table will be filled with books of requisitions, which are essentially your invoices every month. It’s going to be huge.
How far along are you in that planning?
Hopefully, I’m far along, because it’s starting. We’re always looking for better ways to improve our processes.
Also finding great people. That’s been really tough. The accounting market is amazing out there right now for people looking. Hudson Yards is a pretty easy sell; I’m not going to lie. It’s a great project to work on. People are really excited generally—coming in and seeing it—who are interested in real estate and development. It’s still tough to find great people.
How did you get into real estate accounting?
I kind of fell into it, actually. I was at Price Waterhouse Cooper doing audits in their entertainment/publishing group. It was actually a lot of fun. I was looking to go to a private company. I knew someone at Tishman Speyer. He introduced me to people. I interviewed there. They had me working on 101 West End Avenue, which was a residential project. I loved it, absolutely loved it. From Tishman, I came to Related.
What made you jump to Related?
The project had finished at Tishman Speyer. I was able to get into the operations side, as well, which was great experience-wise. But I was looking to really do development and there was an open position here. I interviewed and really liked whom I met and the people that were here.
What’s your favorite part of the real estate business?
I love learning about the construction and development. I love the meetings with the senior construction guys and hearing about all the goings-on with the unions and learning about steel. That to me, it’s just neat to see it. The tangible piece to it is what I really enjoy.