Oliver T. Carr, III- Establishing His Own Legacy (#10)

"Persevere through the tough times"

Bio

Oliver T. Carr, III ("Ollie") serves as Carr Properties’ Chief Executive Officer and is a member of the Board of Directors.  Oliver also serves as Chairman of the Executive Board of the MIT Center for Real Estate and on the Executive Committee of the Federal City Council. Prior to founding Carr Properties, Oliver served as Chairman and CEO of Columbia Equity Trust (NYSE:COE), where he and his team successfully took the company public in 2005. During his career, Oliver has completed over $4.0 billion of property acquisitions, mergers, joint ventures, and financings. Oliver received his Bachelor of Arts in Urban Studies, with a concentration in Economics from Trinity College and his Master of Science in Real Estate Development from the Massachusetts Institute of Technology.

Carr Properties is a privately held real estate investment trust that owns, manages, acquires, and develops high-quality properties in Washington, D.C. and Boston, Massachusetts. The company currently owns a portfolio of fourteen commercial office properties totaling approximately 3.8 million square feet and maintains a pipeline of five development projects that will add a further 2.4 million square feet to our portfolio of properties. They are continuing to expand through strategic investments in the Washington, D.C. and Boston, Massachusetts areas.

Show Notes

Ollie Carr and I have known each other since 1999 when I helped him finance his first suburban office building acquisition. We went on to finance over $300MM of debt and equity transactions together until 2004 right before he rolled up his company into a public REIT called Columbia Equity Trust.

The youngest son of Oliver T. Carr, Jr., perhaps the most prolific office building developer in the 1970s and 1980s in Washington, DC, he had real estate in his DNA with his namesake to boot, but as you will hear, he initially wanted to go a different path and became a banker prior to the 1990-91 financial crisis. Resetting his sights at that point as banking became difficult, he applied to graduate school and decided that MIT's Real Estate Program was the best opportunity. That led him to start his own company, Carr Capital in 1994, first into CMBS lending until the late 90's financial crisis that crashed the CMBS market, then into acquisitions with the help of two of his MIT classmates and seed capital from friend and family. Subsequently, he took his company public and then private again with many iterations. Now he leads a company that has and is developing among the largest mixed use projects in the region. Below are key parts of our conversation:

Current Role

• Passion toward new business and setting strategy and trends as CEO and thought leader (3:30)

Family & Educational Background

• 4th Generation and youngest of six children (5:30)
• Grew up in Potomac, MD in house his Dad built (5:55)
• Oliver T. Carr, Jr. was a single family homebuilder
• Enjoyed large family- Age gap- 6 yrs. to his next older sibling, Tom Carr. (6:25)
• Moved to DC in HS and went to Landon (6:40)
• Trinity College (6:50)
• Alliances when very young with siblings (7:18)
• Learned considerably with his Dad (Oliver T. Carr, Jr.) (7:39)Army during WW2
• Amazing self starter as an entrepreneur
• Always Optimistic
• Either follow in footsteps or go a different direction (8:55)
• Interested in corporate finance at Trinity College (9:10)Joined American Security Bank after Trinity (9:20)
• Corporate lending, not real estate
• Banking issues in 1990 caused him to change his thinking (10:20)
• Applied to MBA programs- Applied to 1 yr. Masters at MIT and was accepted (10:39)Decided to attend and shifted his focus to CRE (11:09)
• Coterminous with the roll up of the Oliver T. Carr Co. to CarrAmerica (11:22)
• Intrigued by REIT phenomena- equity source for scant capital at the time (12:05)
• Wrote thesis about REIT industry (12:45)
• Decision not to join CarrAmerica was because family was already in it and he wanted a new path (14:20)

Career Trajectory

• Took job with BankOne on workouts in the early 1990s- difficult and great learning experience primarily about dealing with people and solution oriented. (14:52)
• Learned how to treat people with respect (15:30)
• Take chances when young- classmates and he decided to join and address the CMBS market- Ollie, Clint Fisch, Jim Smalanskas formed Carr Capital in 1994 (16:33)
• Underwriter for CMBS loans- early relationship with Smith Barney and Diawa Securities (18:24)
• National footprint headquartered in Boston (18:50)
• Later in 1990s changes in CMBS industry affected Carr Capital such that he took no income during challenging times (19:40)
• Two years where he had no paycheck (20:10)
• Equity from Dad- $250,000 and never borrowed any more company equity and returned it 50 times over (20:40)
• Difficult to become an entrepreneur- has a supportive wife, Bonnie, who was on board through all his challenges (22:30)
• Stepped back to look at Principal side of business in 1998- Commuted from Boston to DC (23:53)
• Acquired first property in 1999- opportunistic suburban office (24:30)
• Holualoa relationship backed Carr Capital with initial transactions- MIT classmates (25:00)
• OTC, Jr. and Jim Clark who provided equity (25:45)
• Scrappy, entrepreneurial- closing 5 transactions at once (analogy of landing planes simultaneously) (26:22)
• Closing multiple transactions simultaneously was too difficult to create scale (26:33)
• Evaluated a fund and a private REIT along with the public REIT strategy they proceeded to execute in 2005- 14 people with 3rd party leasing and management (28:24)
• Trammell Crow were the supporters upon the rollup in leasing and management  (29:54)
• John Schissel joined in 2004 as CFO (30:50)
• Successful IPO to Columbia Equity Trust- enjoyed road show yet knew that small companies struggle (32:00)
• Matured to love building a company over transactions- likes the discipline of a public company and part of the capital market system (32:50)
• Privatization theme came to Columbia, such that JP Morgan (JPM) came to create the "revised" O.T. Carr Company and called it Carr Properties (34:14)
• Became vertically integrated private company with in house management and leasing in Spring 2007 and saved valuation being public during financial crisis in 2008. (34:50)

Company Strategy & Personal Philosophy

• Low leverage became a good long term strategy- to run a long term business to sub 50%, if possible (37:00)
• Taught the most in the hard times…workout time offered the best lessons (39:00)
• JPM cooperated well during difficult times of 2008-9
• "Look people in the eye and say you'll do the right thing"
• Ethical approach from both parents- Do the right thing (40:30)
• "Always think like an owner" (40:50)
• Fund at JPM was open ended, yet Carr was growing too quickly and they brought in a new partner, Alony Hetz, to JV with JPM and Carr to allow for growth…2013 (41:30)
• Private REIT sale of shares to Alony Hetz based on valuations (43:00)
• JPM and Alony Hetz the two major shareholders and voting board members (44:00)
• Carr Properties has $3.5B assets and $2B in equity (45:30)
• Most of capital has gone into development (46:25)
  • Midtown Center- FNMA HQ
  • Wilson/Elm- Bethesda
  • One Congress- Boston, MA in partnership with NREA and HYM
• Line of Credit or Sale of shares to existing partners who provide equity (48:30)
• Wave Office- flexible office investment offering- licensing to user- variable flow space (49:30)
• Users are either growing or shrinking and Wave Office accommodates this "flowing" space (51:00)
• No preference between acquisitions and development with a bias toward "new space" in development (53:50)
• Evolved thinking to intensely focused on the "best possible" customer service- "The Carr Experience" with a custom app (55:00)
• Rolling out "customer focus" business one building at a time (57:14)
• Agnostic about buying or building.  Make sure we can accommodate amenities for customer experience in what we buy or build (57:55)
• Office industry needs to re-imagine the workplace and that is Carr's approach (59:30)
• Working with designers from the hotel industry to integrate the feeling of a hotel into office use (1:00)
• Street experience is important- good operator in place with "fair" rent (1:01:10)
• Own retail and curate it with outside leasing and self management (1:02:30)
• Open to developing mixed use with residential (1:03:10)
  • Shared amenities among shared uses- office, retail and apartments (1:03:40)
  • Partnering with Insight Development on Wilson/Elm- Bozzuto to manage residential (1:04:40)
• Flat organization- major decisions made by senior management, nevertheless.  Each group has a leader and makes decisions on most focused.  (1:06:50)
  • Discretion to senior management at a certain level (1:07:20)
  • Operating Committee has a higher level (1:08:00)
  • Board has ultimate decision making call on major decisions
• Encouraged by team's passion (1:08:40)
• ESG- Right thing to do- LEED Certified or EnergyStar in every building, but wants to do better.  Solar energy in most buildings in DC.  Most advanced air filtration systems. (1:10:30)
  • Carbon neutral exploration (1:12:10)
  • Community- Focus on children- Washington Jesuit Academy (Boys 4th-8th Grade) (1:12:30)
    • Concert called Carr Cares- The Hamilton (Maggie Rose) (1:15:00)
• DC Real Estate Market (1:16:25)
  • Innovation based markets including DC and Boston thus far (1:17:00)
  • Great long term market with Amazon & other tech companies coming here due to talented workforce (1:17:50)
  • Market overbuilt and sluggish currently (1:18:35)
  • Urban company- placemaking, customer experience, but not expanding into suburban markets except for Arlington, Bethesda & Alexandria (1:20:00)
• Cares about "Doing the Right Thing"- Hard work & family.  Served on school and non-profit boards.  MIT Board.  Ran Boston Marathon 5 times for various charities (1:22:30)
• 25 Yr. Old self- Take advantage of every opportunity and don't be afraid to take risks.  Go for it now!  Don't give up…persevere through business and personal issues (1:26:20)
• Biggest Win- FNMA coming to Midtown Center- 750,000 s.f. which was initially lost and then won (after further review and revised proposal) Example of "Don't Give Up!" (1:28:30)
• Billboard Answer- "Persevere!" or "Thank You!"

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