Financial Industry Expert, Author Advises Younger Professionals on “Making It”
The first in his family to attend college, author and REIT (real estate investment trust) expert Ken Campbell utilized meticulous personal preparation and a relentless pursuit of precisely targeted career openings in order to achieve his career goals.
Rising from a gritty Pennsylvania steel town, Campbell worked his way up the ladder to arrive at the position he now holds as one of the country’s foremost experts on REITS.
“Watch That Rat Hole” details Campbell’s rise to expertise in the industry and exposes the in’s and out’s of the industry and its volatile twists and turns into the modern-day equity REIT industry that investors now know.
“I began writing the book as a way to explain to my now adult children why I spent so much time away from them during their childhood,” Campbell said. “However, as I began to write, the simple story grew into a full-fledged account of what I deem the REIT Revolution of the 1970s and 80s.”
Campbell spent over 20 years publishing a bi-monthly advisory newsletter covering the niche topic of REITs, advised investors based on market growth and decline, published the first hardcover book on REITs and ultimately became a leading voice among REIT investors.
“Being incredible specialized, as I was and am with REITS, is not always the smartest move,” Campbell said. “But if you find something you’re good at, know a lot about and have people who are willing to listen to you, it’s worth the risk.”
Several million Millennials today are seeking fame and fortune in real estate, business, finance, technology, you-name-it, by leveraging their brains and breaks into advancement either within their organizations or by striking out on their own as entrepreneurs. Although they can’t follow Campbell’s precise personal footsteps, they can emulate his brassy traits – intensive preparation, self-taught learning coupled with concentrated pursuit of available opportunities. Campbell shares with Home Business Magazine readers in-depth insight on the REIT industry and how motivated entrepreneurs can dive into a successful career in finance.
HBM: You were first in your family to attend college. Please share your success story and how you came to make it to the top of the REIT industry.
Campbell: “It’s a long story consuming nearly two decades, which I tell in lavish detail in Watch That Rat Hole. I enjoyed writing in college, was named editor of my college “literary” journal, graduated with a major in English lit and took a summer temp job as a newspaper reporter out of college in Columbus, Ohio in the early 1950s. The newspaper taught me how to gather facts quickly from interviews and releases, organize the whole into a story people would want to read, and write that story quickly under deadline pressure. Columbus was exploding with suburban growth and the Federal government began major urban redevelopment and expressway programs, so along the way I became the paper’s “go to” writer for city growth stories. I got all the boring stories crime-action reporters wanted to sidestep: new housing developments, traffic and expressways, water and sewers, slum clearance, etc. I began answering queries from two Time, Inc. magazines on these topics and eventually landed as an associate editor of a Time housing magazine in 1961. Congress had created real estate investment trusts, or REITs, just months before and on my first day in the office my new boss told me to “Watch that rat hole,” meaning I must flag him with any news items on my “beat,” the REITs. I have essentially followed that assignment for fifty-five years, hence the title for my memoir.”
HBM: What lead to you publishing the bi-monthly advisory newsletter REIT? What are some of the milestones and achievements it has had?
Campbell: “Eight years after arriving in Manhattan I gained enough confidence in my ability to advise investors in the stock market, thanks to two events. First, I nearly tripled a small severance pay when my first magazine was sold. I include details down to the dollar in Watch that Rat Hole. Second, I also obtained my MBA degree by studying nights at New York University, keeping me from enjoying much of my children’s growing-up years. Combining academic with practical experience gave me confidence to start, in March 1969, an investment advisory newsletter on housing stocks, then coming public in swarms. But REIT stock offerings quickly stole the limelight from housing stocks, literally overrunning that initial service. A year later I started Realty Trust Review (RTR), the first printed advisory service covering the real estate investment trust (REIT) universe. RTR was an instant success and became my vantage point for the REITs for the next two decades. RTR reported on the growth of those early REITs, most committed to lending construction and development (C&D) money to homebuilders and developers. When the OPEC oil embargo and price increase of October 1973 sent the U.S. economy into a tailspin, we issued a “sell” signal to investors, discomfiting many subscribers. The C&D REITs fell 90% in price and all disappeared, bought in the 1970s and 1980s by over 150 activist “vulture” investors seeking to capture their massive tax-loss carry-forwards. I tell the stories of Sam Zell, Carl Icahn, Michael Milken, George Mann, Anthony Gumbiner, Leland Speed and Gene E. Phillips any many other notable investors of those days in Watch that Rat Hole. Their efforts effectively paved the way for the rise of the equity, or property owning, REITs of today – a process I call the REIT Revolution in my book. In the late 1970s and 1980s I fought hard through RTR to bring transparency to the pricing of REIT properties at current market value under generally accepted accounting rules (GAAP). Many REIT shares sold at small fractions of their true real estate values because of this discrepancy, and again this stance angered some subscribers. Accounting rules never have changed but today nearly three dozen Wall Street analysts provide investors with internal estimates of REIT valuations. In one sense I lost this battle but the war was won.”
HBM: Tell us about your new book “Watch That Rat Hole” and your writing process.
Campbell: “My answers to the previous two questions cover most important aspects of my memoir. Watch that Rat Hole began as a letter to my three children, now all grown with children of their own, explaining why I had been away from them during their teens. That letter provoked so many memories that I convinced myself that a full-blown memoir, packing in all the stories I had been telling my family for years, would be a worthwhile read for a wider audience. Writing the book took seven years because I faced two challenges:
A. Documenting times and events. One’s mind tends to romanticize and/or gloss over details of far-removed events. Luckily I discovered my pack-rat tendencies had over-ridden good sense and I was able to resurrect many key documents from the past – more than half of my weekly calendars from 1969 onward, my letters seeking a magazine writer’s job, and my stock trading records between 1964 to 1969 when I learned the fundamentals of investing. I thought my trading records had perished but found them in a yellowed envelope. They let me document how I nearly tripled my magazine severance to give me the funds to begin my own business. I included details to the dollar in Appendix II because I hate investment books that tell tall tales of stock market gains without providing specifics. Finally I relied upon nearly every issue of my main investment advisory service, Realty Trust/Stock Review from March 1970 to June 1990, and they helped nail down countless facts. The University of Pennsylvania Libraries is digitizing their nearly 4,000 pages for use by scholars beginning in late 2017.
B. Selection of stories to tell. Early on I decided to tell all the notable stories I had been telling family and friends over the years, but that canon was so broad I had to focus on only the best. My first outline had something like 46 chapters, which I ultimately winnowed over several revisions to the 26 chapters forming the book. Along the way I had been given a slim 20-page booklet titled “Securities Admitted to Trading New York Real Estate Securities Exchange Inc.” dated July 12, 1930, and I spent considerable time tracing the history of that ill-fated entity, largely through the digital files of The New York Times, to tell the story of this most significant precursor to equity REITs. The NYRESE story appears as Appendix I.”
HBM: What do you consider your greatest business achievement in your career?
Campbell: “I started out hoping to bring a journalist’s honesty, transparency and professionalism to two businesses – housing and real estate – certainly not known for those qualities, in 1969 and still today. “Builders go broke,” one Wall Streeter told me very early on, hoping to dampen my enthusiasm and entrepreneurship. But today publicly traded housing companies and REITs represent about 15% of their industries, and the required filing of public documents detailing the intricacies of real estate deals, along with their costs and expected returns, has added immensely to the public’s understanding of these arcane businesses, each with their own separate argot for insiders. And this added disclosure reduces risk for both investors and the economy, a double bonus.
I also believe that I brought a new level of honesty to businesses known for their puffery, especially when discussing sensitive or unpleasant events such as property problems, activist investors, and true returns to shareholder. When I started RTR, nearly all mortgage REITs were externally managed for fees that often siphoned income away from shareholders and created conflicts of interest. For many years we published very detailed analyses of fee arrangements for externally-managed REITs and that disclosure helped, I believe, ultimately shift REITs from external to internal management, the industry norm today. My 1976 testimony to a Senate committee also forwarded this cause.
After selling my investment services in 1990, I searched for a way to use my knowledge in managing investments in the REIT area and in late 1992 joined with two strong partners, Ritson Ferguson and Jarrett Kling, to form the predecessor to CBRE Clarion Securities, a global firm now managing approx. $20 billion in REIT and real estate securities. Our 100 skilled employees in five offices around the globe constitute my proud business family.
My wife and I try to share our blessings with those less fortunate and are donating royalties from Watch that Rat Hole to the BCS-YES Angel Scholarship Fund to help at-risk youth in the Philadelphia area.
HBM: What are key skills and traits successful financiers have?
“Financing real estate requires the ability to project accurately the likely course of interest rates and rents several years into the future. Projecting those two variables for five, seven and ten years into the future forms the basis for every pro forma income and cash flow statement presented to a lender for both construction and permanent financing. Yes, real estate developers possess enormous creativity and optimism in building an attractive environment to attract tenants, but without sound financial planning, those skills are worthless. Nearly all successful real estate executive teams – the CEO (chief executive) working with the CFO (chief financial officer) – I have known possess incredibly detailed knowledge of past financial history, gleaned from past deals, that lets them project into the future. Many have seen deals or financing go awry because of events they never expected. After many years of good deals and bad, they instinctively can spot fish-hooks in any proposition before them, and can project within manageable ranges what interest rates and rents are likely to be several years into the future. Most executives I have met can recall to the second decimal point the interest rates and expected returns from deals of yesteryear. All this requires hands-on serious experience, gleaned over years, which means that I rarely have met a successful CEO or CEO under the age of 40. People and presentation skills are important but can be bought; Great CEO and CFO teams are forged in the crucible of experience.”
HBM: How has the REIT industry changed over the years, and what can it offer young financiers today?
“Early equity REITs of the 1970s were relatively small and dealt with smaller urban and suburban properties. In the early 1990s a REIT was considered large if over $100 million in equity market capitalization and the first $1 billion REIT didn’t arrive until 1991. Such equity REITs were almost entirely internally managed and could be true one man shows. Their small staffs rarely numbered over a dozen. Today the average equity REIT is 50 or more times larger with average $6.3 billion equity market capitalization and staffs that can number into the thousands, depending upon property type. Young financiers willing to work hard and learn can rise through executive ranks where earnings potential is virtually unlimited. The dream of creating enormous wealth remains alive and well in real estate and REITs.”
HBM: What is the best way for entrepreneurs to get a head-start in the REIT industry and what are the best areas to tap into?
“I began by reading books by entrepreneurs in real estate and the stock market, many listed in Watch that Rat Hole. For many years I caught a suburban 6:20 a.m. bus to arrive two hours later at my Manhattan office, leaving at 5:30 p.m. to arrive home at 7:30 p.m. My studies at NYU added three hours to those days. I often say that success comes dressed in overalls or a cap-and-gown and carrying a book-bag. Sounds tough but true. College education is a big hurdle for young people now and I pumped gas in a service station up to 47-hours a week to earn tuition money. Many young people want an easy and instant path to success. The world doesn’t operate that way and young entrepreneurs will take great career risks to achieve their goals. I tell how I risked being fired to win advancement, and the nitty-gritty of learning stock market trading to get my initial stake to start a business. Nothing comes easy to entrepreneurs, but good training and good experience can shorten the odds on success. Watch that Rat Hole offers clues to what is needed.
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