| Harold Brown
Title: Chairman, The Hamilton Co.
Age: 89
Experience: 60 years
Over the course of his life, Harold Brown has seen a lot. He has seen his share of failure – he was part of the largest bankruptcy in state history in the early ’90s – but he reemerged as one of the most successful real estate titans in New England. During the recession, Brown, a Brookline resident who turns 90 next year, snatched up about a half a billion dollars worth of real estate.
While everyone else was standing on the sidelines, Brown and Hamilton President Carl Valeri bought Brookline’s Dexter Park luxury apartment building for $129.5 million, one of the largest transactions in the U.S. at the time. Now, Brown says, the building is worth about $200 million. But in addition to his business dealings, Brown is also giving away a lot of money. In 2011, he started The Hamilton Co. Foundation, which gives out up to $1 million each year to various community groups. His son, Jameson, is the foundation chairman. As a testament to his commitment to the foundation, all of the net proceeds of a Hamilton apartment building now under construction at 1085 Boylston St. in Boston will go to the charity.
Brown talked recently about the state of the real estate market in Greater Boston, The Hamilton Co.’s 60th anniversary next year and why he’ll never invest in the Seaport District.
Q: What’s the state of the real estate market?
A: In the last 150 years, there’s been about 15 up-and-down cycles. We’ve been through about five of them. We were in a down cycle in 2007, that was the last low point. In fact, we took advantage of that. Properties were at a bargain rate.
That was the bottom of it. Where the top of this one is, I don’t know. But it’s got to be within the next three, four, five years. I think we’re somewhere 40, 50 percent on the up cycle. There are thousands of units being built next year, like 8,000. That’s a lot of apartments. Will there be enough demand to fill it? I don’t know. If there is, fine. If there isn’t, the market’s going to tank.
Already you’re starting to see cracks. In the Seaport, they’re starting to give a month, two months’ rent. It’s getting a little frothy.
Q: You were born in Allston. How has the neighborhood changed?
A: It’s changed dramatically. When we first started, I would say elderly was probably 50 or 60 percent of the tenants. There weren’t that many students, maybe 5 or 10 percent. Over the years, you’ve got a lot of younger people. Students are probably 25 or 30 percent or more now.
Q: Affordable housing is always an issue in Boston. What solutions are there for Boston?
A: I’m not sure you need a solution. They always talk about affordable housing, affordable housing. But, in fact, any new construction has to have a component of affordable housing. If we put up a new apartment building, 10 or 15 percent is affordable housing. If the community really truly was concerned about affordable housing, all they would have to do is reduce the taxes and the rents would come down, but they don’t do that. They want the landlords to subsidize the tenants, which ain’t gonna happen, because if that happens, you won’t build any new apartments. New York did that once. They had a 10-year plan and if you built affordable housing, they had a 10-year tax bill. No taxes the first year and every year it went up and the 10th year was the full tax bill. And it worked. I’m surprised they haven’t done it again, but then they had rent control.
Q: What advice do you have for the Walsh Administration about housing in the city?
A: Continue the path they’ve been on. They all talk about doing away with the Boston Redevelopment Authority, which is ridiculous because the BRA’s responsible for all this development. The BRA … it’s extra work, but it’s worthwhile.
Q: What is 2014 like for you? And what about the next 60 years?
A: We’re going to operate the way we are now. We’re hoarding cash now waiting for the next buying opportunity. When we buy, it’s going to be something conservative. We hope to continue to operate the same way we are.
Q: What is the impact of foreign investment in the Greater Boston area?
A: Our own experience is that over the years … first it was the Arabs. Remember the old Hotel Touraine? It was an old hotel in Downtown Boston, right on the fringe of the Combat Zone. The Arabs bought it. Charlestown Savings gave the mortgage and they ran it in to the ground. And Charlestown Savings took it over and called me: “Harold! Will you help?” Long story short, we bought it for $1 million, paid $250,000 cash. It was all hookers and it was 30 percent vacant. The taxes were more than the rental income. We just rejuvenated the building. We probably spent $10 million on it. It’s worth $80 million or $90 million today. Prime, prime location. Then the Chinese came in, then the Japanese come in, then Koreans come in. Once a month, they want to buy one, but they lose their investment a few years later.
Top Five Most Important Real Estate Business Lessons:
- Don’t commingle funds: “Don’t use funds from one building for another building; have each building stand on its own.”
- Have a low loan-to-value-ratio: “We’re at least 50, which is very low.”
- Know your capital sources.
- Cash is king: “Emphasize cash flow, because with cash flow you can’t go wrong. We take the long view.”
- Live long enough and you’ll be successful.
