The Next Tycoon

The morning mist off Lake Winnipesaukee was rising gently toward the clear Wolfeboro, New Hampshire, sky as a select group of corporate executives gathered on the sweeping lakeside estate of Paul Montrone, chairman and CEO of Fisher Scientific International, a maker of test tubes and other scientific equipment. They had assembled with their spouses on this soon-to-be-sultry day in August of 1997 for Montrone's celebrated Wolfeboro Classic bocce tournament, an annual weekend gathering of the elite. Among those invited: real estate investment czar Sam Zell, founder and chairman of Chicago-based Equity Office Properties Trust and a man with a commercial appetite the size of a high-rise, and Alan Leventhal, son of the legendary Boston developer Norman Leventhal and CEO of Beacon Properties, whose industry-leading returns on investments had turned more heads than a Manny Ramirez poke over the Green Monster. The premise of the occasion may have been a genteel game of lawn bowling, but acquisition was in the pine-scented New England air. Dressed casually but with appropriate >=lan, Zell and Leventhal played on opposing teams. And while Leventhal lost the match, it would be his last setback of the day. Over a light lunch, the talk turned swiftly to business, nudged along by Montrone, a former member of the board of Beacon Properties. Suddenly, Zell was floating the idea of a buyout. Leventhal, drilled by his father to put the interests of their stockholders first, was interested. “Sam wanted to expand, and our portfolio matched him very well,” Leventhal recalls. Zell continued his pitch for 20 minutes before Leventhal stopped him short. “Sam, there are no social issues here,” he assured him. “It's just a matter of price.” After a few followup conversations, the corporate titans met again two months later for a dinner meeting at Leventhal's parents' waterfront condominium. Four days and $3.9 billion later, Leventhal — with characteristic stealth and speed — struck a deal. It was the same stealth and speed he would apply six years later when he turned the tables on Zell. That was when Beacon Capital Partners, the new company Leventhal started after selling off the old one, bought the prized John Hancock complex right out from under Zell's Equity Office — by then Boston's leading landlord — and other heavyweight suitors, including New York?based Tishman Speyer. Leventhal's winning bid for Boston's signature building: $910 million. There were no social issues here. It was just a matter of price.
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 M>=ridien 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. B