Leadership Lessons: David Neithercut
AGE: 54
FIRST PROFESSIONAL JOB: Loan officer at Continental Illinois National Bank
BEST BUSINESS DECISION: Accepting a job offer from Sam Zell
FAVORITE QUOTE: “Luck is what happens when preparation meets opportunity.”
GREATEST CHALLENGE: Navigating the Great Recession
BEST ADVICE RECEIVED: Trust in yourself.
LAST BOOK READ: The Big Short: Inside the Doomsday Machine by Michael Lewis (W.W. Norton, 2010)
WHAT’S PLAYING ON YOUR iPOD: Grace Potter and the Nocturnals
As competition grew for stabilized assets, Equity switched gears in April. It bought an empty, 559-unit condo complex in Washington, D.C., out of bankruptcy for $166.9 million (and later changed the name from The Dumont to 425 Mass). In two days, the management team had set up signs and furniture and began leasing. “At the time, we commented that we thought the Macklowe assets were fairly priced,” McCulloch says. “It turned out to be a great deal. We were a little more skeptical for 425 Mass, and that deal has been a home run, too.”
But analysts aren’t universal in their praise of every Equity deal. In September, Equity secured Vantage Pointe in San Diego, an empty,
679-unit former condo building, for $200 million; as well as Renaissance Villas, a 34-unit, 50-year-old property in the Bay Area for $7 million. “Vantage Pointe may be a bit of a stretch because San Diego seems to have stalled,” says Mike Salinsky, vice president of RBC Capital Markets, the Toronto-based corporate and investment banking arm of the Royal Bank of Canada. “They may be more challenged, but I don’t think they underwrote the top rents in the market to [make the deal].”
Even deals that don’t look great from the beginning ultimately have potential, says Richard C. Anderson, a senior research analyst on New York-based financial services provider BMO Capital Markets’ REIT research team. “While the initial acquisitions are not going to be anything to write home about in terms of cap rates, they very likely present a growth angle for the company to supplement the growth that it already has in large portfolio,” Anderson says.
Interestingly, while Equity did capitalize on some pain in the market, their 2010 buys weren’t the result of any distress bloodbath. “I’m supposed to be the grave dancer. I’m supposed to be the maven in economic distress,” Zell says. “But from the beginning of this thing, I told everybody, ‘Not this time.’”
Flexibility in the Future
Ask Neithercut what he wants to buy in 2011, and you won’t get a lot of specifics. As of press time, Equity hadn’t issued its guidance for 2011 to the public markets. And, of course, he doesn’t want to completely show his hand. “I’m not sure how we play it in 2011, honestly,” he says. “I think it will be lumpy again. My guess is we’ll bump along and, all of a sudden, something will present itself that might be a little unusual. Hopefully, we’ll be able to jump in.”
