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Getting into Real Estate:

“I was the worst student in my real estate class,” recounted Bill Walton (MBA ’79) at a talk on campus last week. He certainly knows real estate now. Walton has had the type of wildly successful career that most only dream of. Fresh out of HBS, Walton joined Morgan Stanley Realty and rose through the ranks to become a Managing Director. By 1994, he saw an opportunity he just couldn’t refuse.

Real estate was just beginning to rebound from the woes of the early 1990s. Walton recognized the opportunity to enter the industry at a low cost and to exploit its inefficiencies. He began with single-family lot developments, and continued moving into sectors that were largely void of capital. Westbrook Partners, the opportunity fund he co-funded in April 1994, has equity capital of $4 billion and has consistently earned 20% returns. Westbrook’s fundamentals are basic: buy low, sell high. But Bill Walton, a deal maverick, does it like none other. He likes to keep the deal flow heavy and his eyes open.

Walton gave a detailed look into real estate private equity. He spoke of passion for real estate and shot off the fund’s latest figures. He sang the praises of flexibility of product type and geographic dispersion. He urged us to take “deals with hair on them” and espoused an “everybody wins” attitude. There were also war stories, like the deal on oceanfront property on the Big Island of Hawaii that soured. And, of course, he alluded to compensation that makes your eyes roll to the back of your head.

Sounds nice, right? Everyone wanted to know: how can I get into this? Most, however, were disappointed with his response. Walton tempered the crowd’s optimism. Cautioning that the current climate is bad for private equity, he nonetheless encouraged us to look for inefficiencies in the real estate market, and most of all, to be resourceful. There are always opportunities; we just have to find them. Walton did however offer this advice: “A life, a career, is a long time. Be patient. No one ingredient ensures success.”

January 28, 2002
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