Blake
Eagle is Founder of the National Council of Real Estate Investment Fiduciaries
(NCREIF). NCREIF is a Chicago based non-profit commercial real estate industry
association focused solely on the collection, processing, validation and
publication of investment performance return information on commercial real
estate assets owned in the private market by pension funds, endowment funds and
other categories of institutional investors. NCREIF membership is comprised of
real estate investment managers, pension funds, endowments, consultants,
certified public accountants, appraisers, and academics.
From
1994 through 2000, Mr. Eagle was the Thomas G. Eastman Chairman, Center for
Real Estate, Massachusetts Institute of Technology. The Center offers a Master
of Science in Real Estate and engages in a wide variety of research and
educational programs.
From
1971 through 1993, Mr. Eagle headed up the real estate consulting group of
Frank Russell Company, a global pension fund asset strategy consultant and
investment advisor headquartered in Tacoma, Washington. Mr. Eagle had senior
management responsibilities for domestic and international real estate
consulting for Russell's pension consulting clients. During his 23-year career
at Russell, pension fund consulting clients invested more than $18.0 billion in
real estate. Mr. Eagle also played the leadership role in the establishment of
NCREIF.
In
1992, he was honored with Lifetime Achievement Awards from the NCREIF, The Wharton Real Estate Center,
University of Pennsylvania, and the Homer Hoyt Advanced Studies Institute for
his contributions to the field of real estate research. Mr. Eagle received the
1993 Dr. James Graaskamp Award from the Pension Real Estate Association (PREA) for his
contributions to the body of knowledge about institutional investment in real
estate.
Mr.
Eagle has served as a member of the American Society of Real Estate Counselors,
the Pension Real Estate Association, National Real Estate Roundtable and
National Association of Real Estate Investment Trusts (NAREIT). He has served on the
Boards of Directors of three publicly listed real estate investment trusts, two
privately owned real estate operating companies and one real estate securities
mutual fund.
He is a member of the Real Estate Advisory Committee of the New
York State Teacher's Retirement Fund and has served as a real estate oversight
consultant to the New York State Nurse's Pension Fund and 1199 Health Care
Workers Pension Fund. He formerly served as a Director of the Institute for
Real Estate Research; Member, Board of Advisors, Fannie Mae; Faculty Member,
Mortgage Bankers School, Northwestern University. He has provided testimony to
the President's Commission on Housing, Department of Labor and the U.S. Senate
Banking Committee on U. S. pension fund real estate investment practices.
He
earned his undergraduate degree in business at the University of Washington. He
pursued postgraduate studies in real estate at the University of California,
Berkeley. Prior to joining Russell, Mr. Eagle was a real estate developer.
Blake and I met at NCREIF
events. As the founder of NCREIF, Blake
opened most of the conferences with a few words – although Blake isn’t
generally a man of just a few words! His
passion for the contribution NCREIF has made to the institutional real estate
industry was evident and still is. Few people have had the impact that Blake
has had on this industry. Blake is the real deal. He has a great sense of humor and is one of
the most humble people I’ve ever met. One last thing: Blake Eagle is truly a legend!
Q. How
did you get your start in commercial real estate?
A. I graduated from the University of Washington
in 1956 with a degree in Business Administration. I was a depression era baby. From the get-go
our parents drove into those of my generation the need to earn a college degree.
It wasn’t particularly important as to the field in which you earned your
degree, as long as you had one. Once you
completed your education, it was expected you would go to work for corporate
America, work your tail off and stay there for your entire professional career.
Then, when you reached 65, you would have earned a pension, which along with
your social security, would allow you to live comfortably for the rest of your
life.
My
college curriculum included general courses in economics, accounting, business
law, business management and business administration. No courses in real
estate. Never thought of real estate as a professional field, nor do I recall
any fellow students who did. To most of us, “real estate” was the residential
housing business.
Upon
graduation from college, my “first job” was as a Second Lieutenant in the U.S.
Army. Able bodied young men of my generation were required, under the Uniform
Military Act of that era, to serve in the military. One entered the military as
an officer through ROTC (Reserve Officers’ Training Corps). Upon discharge from
the military, I then did what I was supposed to do: pursued a job in corporate
America.
I went
to work for The Ford Motor Company, in their district sales office in Seattle,
which served the dealerships in the Pacific Northwest states of Washington,
Oregon and Idaho. I enjoyed the work, saw plenty of opportunity for
advancement, and the prospects of long term job security looked promising - just
what the parents of depression babies wanted for their offsprings.
After
having worked for Ford for about a year and a half, I was contacted by a shirt-tailed relative of
mine, a cousin in-law by marriage, who was starting a real estate business and
wanted me to join his firm. He had been a successful home builder, but saw an
opportunity to leverage his knowledge and experience into a more profitable
real estate business—land and community development.
His
business model was based on the economic facts of life in the home
building
business in those days, i.e. the great majority of home builders were “ Mom and
Pop” operations with little resources, limited credit and therefore unable to
inventory enough land at any point in time to sustain their businesses through all
the ups and downs of residential housing cycles.
The
new business model called for raising capital from investors, buying land in
the “path of progress”, preparing the land for home development through the
land planning and entitlement processes, arranging land development financing, managing
the development process, then offering finished developed lots to home builders.
One might say I entered the real estate business at the ground level.
I
spent ten years working for the community development company; 7 of those years
as part of a project management team overseeing the development of a 2500 acre
Planned Unit Development in the North San Francisco Bay Area community of
Benicia, California. The development plan called for mixed-uses of
single family housing; some multi-family residential; neighborhood retail; some
commercial to accommodate suburban office and industrial warehousing; plus,
land set asides for schools, churches, parks and other community needs.
At
one time or another, I was involved in just about every phase of the project
development plan—from working with local authorities in land use and zoning
approvals, to procuring land development financing from third-party financial
intermediaries, to finding prospective buyers for finished product. I also attended
school at night taking real estate courses at the University of California at
Berkeley. Courses included Real Estate Fundamentals; Real Estate Financing;
Real Estate Law; Real Estate Investment. Some taught by faculty; some taught be
practitioners. All good courses; all contributed to furthering my knowledge and
helping to fill in some of the blanks.
Returning
to Seattle in 1969, I joined up with a couple of UW classmates, with the intent
of starting our own commercial property investment development business.
No sooner had we lined up capital sources for our first project, when Seattle’s
largest employer, The Boeing Company, announced huge layoffs – more than 40,000
employees. Overnight Seattle went from a boom to bust economy.
Unemployment
quickly reached levels in excess of 25%. A real estate broker, rented
a major highway billboard with a sign that said “Will The Last Person Leaving
Seattle Turn Out The Lights”.
A
photograph of that billboard made the cover of Time Magazine.
Among
the many businesses to fall by the wayside were start-up real estate
development companies. Just like that, I was unemployed.
It
took a few months, but I was most fortunate to land a job with Tacoma,
Washington - based, pension fund consultant, Frank Russell Company. They were
looking for someone with a real estate investment background that could work
with their pension fund clients in adding real estate to their mixed-asset
portfolios.
As
a pension fund asset strategy consultant, we built a case for Why Real Estate? as a portfolio
investment. Then, when given the go-ahead, hired their real estate investment
managers. We did not underwrite the real estate investments; we underwrote the
underwriters.
It
wasn’t long before our clients raised the following question, “Now that we are
invested in real estate to what do we compare our investment performance?” “How
will we know how our real estate is performing compared to stocks and bonds. How
will we know how our real estate managers are performing compared to their
peers? In other words, “Where is the real estate equivalent of the S&P 500?”
This
was the beginning of what we know today as the NCREIF Property Index (NPI). We
at Russell led the effort. The institutional investor wanted a standard measure
of private market real estate investment performance and it was within
Russell’s purview to make that happen.
Q.
What advice would you give someone early in his or her commercial real
estate career or a student looking to get his or her start?
A. I thought about that question for a long time.
When
asked, I would advise my MIT students, all things being equal, to start out in
a role in property management - managing a large apartment complex. I told them
they will learn the operating side of real estate from A to Z.
Big
apartment complexes are particularly management intensive. First, you manage
the operations—collect the rents each month; chase down the delinquencies; pay
the operating expenses; pay the debt service if there is a mortgage; budget for
capital improvements; and deal with the various outside service providers;
janitorial, elevator maintenance, insurance agents, etc.
The
property manager also “represents” the asset in the local community in
which it is situated. You have to constantly deal with managing move-ins and
move-outs; as well as respond to tenant requests, complaints. Further, you must
recognize that the owner of the property, ‘your boss’, is looking to optimize
his investment return, so you are functioning as an investment manager as well
as a property manager.
That’s
the advice I would give today, along with getting an education in real estate
from any one of the top-flight universities that offers a degree program in
real estate. There were no such programs around when I was in college. Real
estate was not “a field of study”.
Q. As
you look back on your career, is there anything you wished you had done
differently and if so, what?
A. Nothing that I can think of. Prior to joining
Russell, I had my fair share of ups and downs. Once settled in at Russell, all
went pretty much according to plan. Bumps along the way, but nothing that could
not be managed.
Working
with those in corporate America who were responsible for their respective
company’s pension fund, was for me, pure joy. And real estate as an asset
class, performed pretty much as expected over a market cycle. In looking back
over my 23 years at Russell, I cannot think of anything I would have done much
differently.
The
biggest challenge I faced, interestingly enough, was internally—trying to sell
the Russell Quantitative Research Group - which included three PhD’s in Finance
- that Russell take on the responsibility of developing a standard measure of
real estate investment performance - which eventually would become the NPI.
All
the ‘academics’ at Russell were students of Modern Portfolio Theory (MPT),
which meant all recognized mean variance analysis as the standard measure of investment
risk. They could not buy into a private market performance index that would
report investment results on a quarterly basis and which would report market
values based on third party appraisals. According to MPT, risk would be significantly
understated and therefore returns overstated. Further, in their view, the
return data could not be used in asset allocation modeling.
I
had to convince the “quants” that we working with the best data we could
extract from the private real estate market and that we were converting that
data into the best performance measure we could construct-MPT notwithstanding.
The biggest battle I had in getting the NPI off the ground was with my own
organization. But that was fair-challenging data is among the many things
consultants are supposed to do.
Q. Who
have been the major influences on your career? Why?
A. By far, the most influential person in my
career, the gentleman for whom I worked for 23 years, George Russell, Jr.
George
founded the pension consulting business in the mid 1960’s, way ahead of the rest
of the pack. Under his leadership, Frank Russell Company became the world’s
leading pension investment and advisory consultant. Among the many Russell
Company contributions to the global investment community: a pioneer in asset
class diversification beyond just stocks and bonds; a leader in both
quantitative and qualitative investment research; developer of the Russell 1000
and 2000 stock indexes to better track comparative investment performance;
fully committed to providing the necessary resources to develop the first ever
private market real estate index
A
truly great leader and investment visionary. In 1993 Pension and Investments
named George Russell and Warren Buffet among the four most influential people
in the world of institutional investment.
Other
folks that influenced my career? Meyer Melnikoff, Chief Actuary at Prudential Insurance
and the architect of PRISA, was a very early supporter of the real estate index
project and took an active role in making it happen. Another, Russell’s Peter
Dietz, PhD. and head of Russell’s quantitative research helped your friendly
non-quant to better understand what MPT was all about. Not an easy task, to say
the least. Professors Jeff Fisher and Mike Miles have also been great
influences in my career. Both Mike and Jeff are real
estate scholars and were great
contributors in bringing the NPI to realization. We
needed scholarly input and both brought that perspective
to the effort.
Russell
colleagues Madelyn Smith, head of equity research and Gene Hoffman head of
fixed income research were Russell professionals I could go to whenever I needed
professional guidance outside my realm. I had great support and mentoring from
some of the very best in the business. For which I am eternally grateful.
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