Howdy from Dallas, Texas, home of some of the great names in private real estate, such as Crow Holdings and Hillwood Investment Properties.
My name is Jim Hime. I’m the Chief Financial Officer of Accordant Investments, which is a registered investment adviser that advises private real estate-focused funds, and I’d like to take this opportunity to tell you a little about my background.
At the risk of coming across as a bit cryptic, I’ll start with the fact that my wife often says to me, “You’re the Yoda.” I think she is only half-kidding when she does this.
Why this imminently practical and level-headed woman, whom I married over fifty-one years ago, would liken me to an imaginary green creature, smallish in stature, with the pointiest of pointy ears, may or may not become clearer once you’ve read what I’ve written below, in what is my first post on this blog that I’ve named, in partial homage to Hemingway, “The Old Man and the PRE*” *Private Real Estate, A CFO’s Journal.
This Journal will be about private, institutional-quality real estate (or “PRE” for short), which has only recently become available as an investable asset class for people from ordinary walks of life. For many long years before that, stretching way back into the past, it built a well-deserved reputation as something of a members-only club, reserved exclusively for the very largest investors, like state and corporate pension funds and sovereign wealth funds and really rich people, as well as being something of a risky, scary, murky, even occasionally dodgy affair.
I have been around PRE since, as the old saying goes, Hector was a pup – almost as long as I’ve been married, in fact. I have seen it evolve from the early days when it was often financed mostly by groups of old men gathered at the nineteenth hole of their local country club, on down through the years of institutionalization and globalization during which it developed as an asset class, to the data driven, technologically enabled business that it is today.
In these posts, I intend to share some of what I’ve learned, and how my decades of experience shaped my current views on PRE (including those stories, like the distress that in recent times has afflicted pockets of the office sector, that occasionally make it into the headlines) in hopes of shining a light on what for years has been a rather dark corner of the investment world – because, like Norma Desmond from “Sunset Boulevard,” PRE is ready for its close-up as an asset class, not just for the aristocracy of the investment world, but for thee and me.
Now you may be thinking hang on a minute. What’s up with this adjective “private?” Is there anything more public than a shopping mall, or for that matter an office building or an apartment complex?
Fair point. But when we at Accordant Investments use the phrase “private real estate,” we’re talking not so much about how it’s used, but rather about how it’s financed, that is to say, with private capital in contradistinction to the publicly listed real estate investment trust sector which has historically been the individual investor’s principal way of accessing high quality, institutional assets. As I will come onto in later posts, we draw this distinction because of the meaningful difference in investment performance between private real estate, in the sense in which we use the term, and public REITs.
Now, back to yours truly and how I got here.
Back before my career even started – when I was a kid, growing up mostly in small towns in the South – there was barely such a thing as PRE.
Indeed, my first real introduction to PRE, or at least to the kind of asset in which PRE would come to manifest itself over time, was courtesy of the girl I was dating in 1973 who now joins me in chasing grandkids around on our somewhat creaky knees.
In the summer of ‘73, I was attending classes at the University of Texas during the day and making ends meet by working night shifts for minimum wage, stocking groceries at an east Austin H-E-B. I truly lived each day in eager anticipation of the arrival of the weekend, when I could drive the three hours to Houston to see my gal. Once I actually got to her place, though, since I didn’t have two nickels to rub together, we mostly entertained ourselves by sitting on the couch in her living room enduring the beady-eyed stares of her parents.
One Saturday evening, after suffering through about five minutes of that scrutiny, she turned to me and whispered, “Let’s go to the Galleria.”
“I don’t know what that is,” I whispered back.
“Get your car keys.”
Fifteen minutes later, she was leading her wide-eyed countrified boyfriend by the hand through a three-story enclosed shopping mall that was topped by a glass roof and that had an ice-skating rink (an ice-skating rink in steamy Houston, Texas!) on the bottom floor. The department store anchors included Lord & Taylor, Saks Fifth Avenue, and Neiman Marcus. In-line retailers were the likes of Brooks Brothers and Tiffany’s, along with sundry antique stores, card shops and restaurants. It was all shiny brass railings and sparkling clean glass.
Galleria, Dallas Texas, 1980s
I was agog. I had no idea that such a thing existed or, for that matter, that it could be brought into being by the wit of man.
And pretty quickly I knew that I wanted very much to have something to do with PRE (though I had no notion of the term at the time) during the course of my career, once I had achieved my then dream of graduating from law school.
Graduate I did, in 1976, and joined the Houston-based law firm of Baker & Botts, among whose clients were Gerald D. Hines, developer of the said Galleria and, indeed, of One Shell Plaza, the downtown office building in which Baker & Botts had its blonde-wood paneled offices.
Starting that very year, and continuing to this day, I have had nearly half a century of experience in PRE – first as a tax and deal lawyer, and after twenty years of that, as a senior finance guy for, successively, Hines, a small private equity real estate shop, an enormous Middle Eastern sovereign wealth fund, the real estate subsidiary of a well-known US insurance company, and now Accordant Investments, which I’ll talk at length about in later posts.
I’ve been through at least four booms in PRE, followed by the inevitable four busts, because PRE is nothing if not a cyclical business.
I’m going to say that again:
Private real estate is (ahem, clears throat in order to raise voice) NOTHING IF NOT A CYCLICAL BUSINESS.
Let that be the note on which I close on for now.
In the meantime, just know that good old Yoda here has a lot of wisdom and war stories to share with you, on a monthly-or-so basis, so if you’re of a mind to do so, he’d love for you to come along for the ride.
We’ll have ourselves some fun and you might even find some of it sort of interesting, if you or your clients are wondering about whether to add PRE to a portfolio and, if so, how.
As the genuine article himself would say:
Do. Or do not. There is no try.
Accordant Investments LLC (“Accordant”) is an SEC registered investment adviser. For more information about our services and disclosures, please visit our website at www.accordantinvestments.com.
This article reflects the personal views and experiences of the author and is provided for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any product or service offered by Accordant Investments or its affiliates. Any such offer or solicitation will be made only through formal offering documents, which describe the terms, risks, and fees associated with an investment. The information contained herein should not be construed as investment advice or a recommendation to buy or sell any security. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
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