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The Next Tycoon
The scion of a family that
helped build Boston sold his father's firm and
started again from scratch.
Now, just six years
later, he's back on top.
By Greg
O'Brien
Page 2 of 3 --
Alan Leventhal, who is 51, doesn't even remotely
look the part of real estate "tycoon" or
"gorilla," as the Boston Herald and Boston
Globe, respectively, have called him. He looks
more like a Little League dad in a suit. But
he's back in the Boston big leagues, already
poised to have as significant an influence on
commercial real estate investment and
development as his father did before him.
Bullish on the city, he sees a bright future for
Beacon Capital and for Boston, as much a part of
the Leventhal legacy as the family tree. Just
look out the window of a corner office on the
26th floor of One Federal Street, headquarters
of his Beacon Capital Partners -- only five
years old and already one of the nation's
leading real estate investment companies. Rising
from the streets like soldiers on review is a
platoon of buildings developed under the long
and prosperous watch of Norman Leventhal: the Meridien hotel, 75 State Street, nearby Center
Plaza, Rowes Wharf, and One Post Office Square
on the lip of tranquil Norman B. Leventhal Park,
to name a few.
The Leventhals are to development
and real estate investment in Boston what the
Kennedys are to Massachusetts politics. And they
date back just as far.
"When you talk
about what Beacon Capital has accomplished over
a short period of time, you have to go back to
1946," Leventhal says in a rare boast during an
equally rare interview. Fifty-seven years ago,
Leventhal's father and his uncle Robert started
the Beacon Construction Company, which later
expanded into the Beacon Companies. "My father
and my uncle taught me that if you do the right
thing for your investors -- even though in the
short term you have some doubts -- in the long
term you will do well," Leventhal says. And in
spite of Beacon Capital's tower-like rise in
five years -- $2 billion in acquisitions
nationwide in the last 18 months, half of it in
Boston, including the Hancock deal and the $123
million purchase of 501 Boylston from MetLife --
Leventhal says his company's investment strategy
was firmly in place five decades ago. "It is a
belief that cities like Boston that have a very
high concentration of knowledge content --
colleges and universities, teaching hospitals
and urban, core residential units, a place where
people want to eat, live, congregate, and work,"
he says, "that's where you want to invest."
Freshly minted MBA in hand, Alan Leventhal
walked out of Dartmouth's Tuck School in 1976
and into the family business, helping the Beacon
Companies build its aggressive office portfolio.
It was the same year the Hancock Tower welcomed
its first tenants. Eighteen years later,
Leventhal formed a separate, independent
company, Beacon Properties Corporation, and took
it public.
Over the next three and a half years,
the company grew tenfold in value from $400
million to $4 billion with an astounding annual
compounded return of 42 percent and a total
return of 245 percent. "We did it in six major
markets with a very focused strategy in Boston,
Washington, Atlanta, Chicago, San Francisco, and
Los Angeles," Leventhal says now. "Our
knowledge-based strategy was built on successes
in Boston, buying mostly unique, urban assets --
not commodities. When we went public, there
weren't many believers. There was an attitude at
the time that cities like Boston and San
Francisco were dead."
The funeral became a bar
mitzvah, and Leventhal quickly grew in stature
as a brilliant analyst with a cool knack for
bucking conventional wisdom and for knowing when
to buy and when to sell. He confounded observers
in 1997 when he sold Beacon Properties -- his
legacy at midlife -- to Zell. "It was the right
thing for the shareholders," says Leventhal,
reciting the family mantra. The Monday after the
sale was announced, most of the 1,000 employees
at Beacon Properties were stunned. Leventhal
called a meeting to tell his employees they no
longer had jobs. "Do whatever you have to do,"
one told him, "but it's just a wonderful
company." Leventhal choked up. "I was about to
break down," he recalls. "I declared, 'Okay, the
meeting is over.'" Leventhal was out of a job,
too. "I was walking around asking myself: What
am I going to do? For the first time in my life,
I had no direction." The drift didn't last long.
The deal with
Zell closed in December; by the first week in
January Leventhal was back in business with a
new company, Beacon Capital Partners. Buoyed by
Leventhal's performance, his stockholder
allegiance, and a timing Ted Williams would have
envied, investors queued up. "He could have
packed it all in and gone to the beach," says
John Fowler, executive managing director of
Holliday Fenoglio Fowler, who has done business
with Leventhal for 25 years. "He has incredible
team loyalty and has created a lot of wealth for
many." Thomas J. Hynes Jr., president of
Meredith & Grew, says Leventhal's strength is
that "he thinks strategically where others think
tactically. And that attracts a lot of
investors." Leventhal has never appeared
ego-driven, something else that has built
investor confidence over the years, says Robert
Lieber, managing director of Lehman Brothers'
Global Real Estate Group, which provided
financing for the Hancock sale with Morgan
Stanley. "He doesn't fall in love with himself,"
says Lieber, "or his acquisitions."
Leventhal never missed a beat. Begun with 32
employees -- including many former senior
managers from Beacon Properties -- the newly
formed Beacon Capital Partners raised $470
million in initial capital in 1998 and invested
$321 million of it in four Kendall Square
properties, including Tech Square and One
Kendall Square. Leventhal sold the buildings two
years later for $610 million. In 2000, Leventhal
created Beacon Capital Strategic Partners and
raised $287.5 million for its first fund. In a
blink, he used that fund to buy a prime office
building at 415 Fremont Street in San Francisco,
which he sold almost immediately to Charles
Schwab, giving investors a 217 percent profit
before any capital was even called. The fund
didn't make its first foray into Boston proper
until 2000, when it invested $40 million in
Channel Center, a planned mixed-use development
in the Fort Point Channel district.
Last year
Beacon Capital created the largest
office-focused fund in the country, Beacon
Capital Strategic Partners II, with $740 million
in capital. Since this fund became active, its
more than $1 billion investment in Boston has
turned the most heads -- first 501 Boylston,
longtime headquarters of New England Financial,
and then the stunner, in March, against all
odds: John Hancock's rhomboid-shaped glass
tower, plus its buildings at 197 Clarendon
Street and 200 Berkeley Street. Word on the
street, and for a time in the media, was that Leventhal's bid couldn't possibly succeed.
Yet
in an irony sweeter than Queen Anne corn, he
bested both Zell and Tishman Speyer, the
deep-pocketed company that owns Rockefeller
Center. "We knew at the end of the day, John
Hancock was concerned about price, certainty,
and who would be their landlord," says Leventhal.
"All we could do was worry about communicating
that, and not about what anyone else was
saying." It was no surprise to Leventhal,
he says, when Beacon Capital prevailed. "The Hancock is an
irreplaceable asset in the heart of the Back Bay, which has only
improved over time to become a diversified office location," he
says.
Leventhal, as he likes to say, is "bullish" on
Boston and expects to continue investing here.
"We have an incredible city," he says. "We're
concerned about the short term. I don't see any
meaningful recovery for 12 to 24 months. But in
long-term fundamentals, we think Boston is a
fabulous market." Will short-term angst slow his
pace? "The best answer to that question," he
says, "is the Hancock complex and 501 Boylston."
There are other signs -- besides the
brick-and-mortar kind -- of Leventhal's
deepening involvement with the city. A major
political fundraiser who has helped stockpile
cash for Senator John Kerry's presidential bid,
he was named by Mayor Tom Menino to cochair the
host committee for next year's Democratic
National Convention here. "He's focused, has
strength and character, and believes the best
years in Boston are yet to come," Menino says.
Leventhal's biggest cheerleader is his father.
The two talk daily. "I'm very proud of him,"
says Norman Leventhal, who at 86 remains as much
engaged in Boston civic affairs and professional
issues as many people half his age. "Maybe Alan
is like his mother. I don't know," the
MIT-trained patriarch muses. "He's a bit
different from me. I think like an engineer; he
thinks like a businessman. His approach is
different than mine, but in the end our values
are the same." "He has a quiet tenacity," says
Beacon Capital president
Fred Seigel. "There's a
continuity in Alan, but he's flexible. People
here know what he stands for."
In an
uncharacteristic moment of self-reflection,
Leventhal himself, who acquired a 36-story
office tower at 10 Universal City Plaza in Los
Angeles for $190 million from Vivendi Universal
of France before the ink had even dried on his
Hancock purchase, admits to having "intensity."
He says his father is "the most calm,
even-tempered, mild-mannered" person he's ever
known. "You ask him how he is and he has one
word for you: "Perfect!' And he says it in such
a nice way; there's a serenity to it." By
contrast, Alan Leventhal says, "If I'm unhappy
about something, I'll state it. I'll be very
direct about it. I'm not a screamer, but I'm
clear."
Leventhal
confided to a friend recently that he was
puzzled about how his father managed to remain
so much more serene than he is. "I don't
understand it. When bad things happen, I get
upset," Leventhal told his pal. "I express
myself. Things bother me."
The friend,
who worked closely with Norman Leventhal in the
early years, when the stress of doing business
in Boston was as intense as the pressure built
up in the boilers that heated Leventhal's
buildings, told him bluntly: "Don't think for a
second that you're not like your father!"
It was a
compliment of Hancock Tower proportions.
Related:
Alan
Leventhal Blog |
Beacon Capital Partners
Related:
Fred Seigel Beacon Capital
Partners
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