It’s not a well known fact, but Joe Segal briefly owned a real estate brokerage business in the late 1980s.
During NAIOP Vancouver’s monthly breakfast meeting on Thursday, the legendary entrepreneur, philanthropist and real estate investor became interested in a group of properties owned by Olympia & York, then one of Canada’s dominant developers. Figuring that O&Y had lost interest in them, he put in a call to Alberta Reichmann, one of three brothers who founded the company.
The 18 income properties weren’t on the market at the time, but Reichmann was willing to listen to what Segal might offer, so Segal went to Toronto to see him. The potential acquisition included Block Bros., then a booming residential real estate brokerage.
Reichmann told his company’s vice-president to tell Segal “anything and everything” he wanted to know about Block Bros. Segal said he would come back in two weeks to talk with Reichmann again.
But Segal, knowing he could not get through all of the properties in two weeks, did not look at any of them.
“But I really didn’t care,” said Segal. “All was interested in, all the valuation, was in the income stream.”
He did some number crunching and eventually offered Reichmann $140 million.
“I said, ‘I’ll give you $140 million . . . or I’ll give you $145 million if you keep the brokerage business,’ ” said Segal.
Reichmann rejected that pitch and asked for $145 million – brokerage business included. Segal agreed.
Segal’s next step was to get financing. He called the president of his long-time bank and requested $100 million.
His plan was to pay the bank back through the sale of the properties. But the bank boss said Segal would have to wait six weeks until he and the board assessed the proposal.
So Segal went to Canada Trust, made the same offer to its president, who said approval would take six days or so. Segal set the second bank boss in motion, got his money, and then sold Block Bros. back to its president and brokers for $5 million.
It took Segal a year to pay back his $100 million loan. A few years later, Block Bros. and O&Y both went bust while Segal continued to build a commercial real estate portfolio now worth hundreds of millions.
The year was 1988, but with the credit markets still tight, investors developing deals today can probably relate to what Segal went through.
I wonder where that bank president who told Segal to wait six weeks is now . . .
Showing posts with label Joe Segal. Show all posts
Showing posts with label Joe Segal. Show all posts
Thursday, January 21, 2010
Segal expresses confidence in B.C. economy
Legendary entrepreneur Joe Segal isn’t worried about the B.C. economy these days.
While the global, national and provincial economies struggled in the past year, Segal’s Kingswood Capital firm has invested more than $150 million in commercial real estate.
“We’re going to be okay in British Columbia,” said Segal during a question-and-answer session at NAIOP Vancouver’s monthly breakfast. “But if the rest of the world goes bad, we’ll go bad, too – because we’re not an island.”
When asked if he is still a buyer, Segal said the answer depends on a particular property listing.
If the zoning is right, if the economy is right, if the property is right and the price is right, we’re buyers,” said Segal.
Around the time Segal was making his second request at a NAIOP breakfast in the past three months, comments, Bank of Canada boss Mark Carney told an Ottawa news conference that the country’s recovery is becoming more solidly entrenched. However, there won't be a sharp rebound in job growth for some time.
"Economic growth is expected to become more solidly entrenched over the projection period as self-sustaining growth in private demand takes hold," the bank said as part of its quarterly update.
Meanwhile, the bank said bankruptcies declined by four per cent in November from October. But the bank is also predicting the economy will grow by 4.3% this spring. On an annual basis, grow is expected to average 2.9% this year and 3.5% in 2011.
Which probably explains, at least in part, why Joe Segal isn't overly worried about his home province's economy as 2010 unfolds.
While the global, national and provincial economies struggled in the past year, Segal’s Kingswood Capital firm has invested more than $150 million in commercial real estate.
“We’re going to be okay in British Columbia,” said Segal during a question-and-answer session at NAIOP Vancouver’s monthly breakfast. “But if the rest of the world goes bad, we’ll go bad, too – because we’re not an island.”
When asked if he is still a buyer, Segal said the answer depends on a particular property listing.
If the zoning is right, if the economy is right, if the property is right and the price is right, we’re buyers,” said Segal.
Around the time Segal was making his second request at a NAIOP breakfast in the past three months, comments, Bank of Canada boss Mark Carney told an Ottawa news conference that the country’s recovery is becoming more solidly entrenched. However, there won't be a sharp rebound in job growth for some time.
"Economic growth is expected to become more solidly entrenched over the projection period as self-sustaining growth in private demand takes hold," the bank said as part of its quarterly update.
Meanwhile, the bank said bankruptcies declined by four per cent in November from October. But the bank is also predicting the economy will grow by 4.3% this spring. On an annual basis, grow is expected to average 2.9% this year and 3.5% in 2011.
Which probably explains, at least in part, why Joe Segal isn't overly worried about his home province's economy as 2010 unfolds.
Friday, November 6, 2009
Segal explains how Fields started
Here's more from Joe Segal's session at the November NAIOP Vancouver breakfast. In this segment, the legendary commercial real estate investor, philanthropist and retailer recalls how the Fields department store chain, a predecessor of Zeller's, started up . . .
4. “I started in the war surplus business, and in that business I sold everything from medical equipment to lighter flints to pounding equipment . . . You name it. It was a great experience.
"I had five bargain-centre stores. I used to buy army trucks. They were four-by-fours or six-by-sixes. Big trucks . . . So what are you going to do with the trucks. These were brand new trucks. They had maybe 400 kilometres on them – 2,000 was a lot. I would buy these things 20 at a time, and I would take the four-by-fours and would put a tack on the map and sell them as firetrucks in every small (community) in the (Greater Vancouver Regional District), on (Vancouver) Island, next door, (across) British Columbia. The six-by-sixes became logging trucks . . . I would get maybe $5,000. They would cost me $400 anyway. I was in the surplus business and I had five bargain-centre stores. At that time, Sears had just opened. You know, I have to tell the story that Sears put me in the retail business. I had a person that walked in the door and said, ‘I’ve just bought a deal from Sears.’ I said, ‘What’s the deal?’ He said, ‘Twenty thousand dresses and skirts. Women’s clothing.’ This was the end of the season catalogue. Sears had a catalogue operation on Smithe (Street) . . . He said, ‘I haven’t got the money to pay for them. I paid $1 a piece for them – 20,000 units.’ I said, ‘Okay, I won’t lend you the money, but I’ll give you a profit . . .’ So I bought 20,000 skirts and dresses and, you name it, women’s clothing . . . I gave him a profit of 10 per cent . . .
"Now, what am I going to do in a war surplus store with ladies’ dresses and ladies’ blouses? So I went down Hastings Street and mid-block between Abbott and Carroll, there was a 15-foot, perfectly empty store, and I rented it. I opened up with these 20,000 units and I had two or three ladies to run it, and that’s how I got into the clothing business. And after that, I started developing a relationship with Sears. In Vancouver, it never snows, and I would buy snowsuits from right across Canada. From Halifax. Toronto. Regina. Operations of the end of the season . . . One thing led to another. In the old days, you didn’t operate by a computer. You operated by the sliding rule. You know what a slide rule is? . . . You determined how many you were going to sell based on the early calls. Your 10-day calls. Your 30-day calls . . . If the trend flattened, you had a lot of surplus inventory. I would buy the surplus inventory. In December or November, or whatever it was, it was getting toward the end of the season. I would buy tons of this stuff and, then in December, when the calls picked up, I would sell it back to them . . .
"That’s how Fields started. At that time, I had all my ads and everything set up to start my first Fields store. If it wasn’t (going to be called) Fields, it was Thrifty. I said to myself: This is Thrifty and it’s going to guide me, because Thrifty is a connotation that’s cheap. It’s price-sensitive, and I don’t know where this business can grow. It may go up quick . . . so I changed the name to Fields, which really meant that it wasn’t a high price. It wasn’t a low price. It was the right price.”
4. “I started in the war surplus business, and in that business I sold everything from medical equipment to lighter flints to pounding equipment . . . You name it. It was a great experience.
"I had five bargain-centre stores. I used to buy army trucks. They were four-by-fours or six-by-sixes. Big trucks . . . So what are you going to do with the trucks. These were brand new trucks. They had maybe 400 kilometres on them – 2,000 was a lot. I would buy these things 20 at a time, and I would take the four-by-fours and would put a tack on the map and sell them as firetrucks in every small (community) in the (Greater Vancouver Regional District), on (Vancouver) Island, next door, (across) British Columbia. The six-by-sixes became logging trucks . . . I would get maybe $5,000. They would cost me $400 anyway. I was in the surplus business and I had five bargain-centre stores. At that time, Sears had just opened. You know, I have to tell the story that Sears put me in the retail business. I had a person that walked in the door and said, ‘I’ve just bought a deal from Sears.’ I said, ‘What’s the deal?’ He said, ‘Twenty thousand dresses and skirts. Women’s clothing.’ This was the end of the season catalogue. Sears had a catalogue operation on Smithe (Street) . . . He said, ‘I haven’t got the money to pay for them. I paid $1 a piece for them – 20,000 units.’ I said, ‘Okay, I won’t lend you the money, but I’ll give you a profit . . .’ So I bought 20,000 skirts and dresses and, you name it, women’s clothing . . . I gave him a profit of 10 per cent . . .
"Now, what am I going to do in a war surplus store with ladies’ dresses and ladies’ blouses? So I went down Hastings Street and mid-block between Abbott and Carroll, there was a 15-foot, perfectly empty store, and I rented it. I opened up with these 20,000 units and I had two or three ladies to run it, and that’s how I got into the clothing business. And after that, I started developing a relationship with Sears. In Vancouver, it never snows, and I would buy snowsuits from right across Canada. From Halifax. Toronto. Regina. Operations of the end of the season . . . One thing led to another. In the old days, you didn’t operate by a computer. You operated by the sliding rule. You know what a slide rule is? . . . You determined how many you were going to sell based on the early calls. Your 10-day calls. Your 30-day calls . . . If the trend flattened, you had a lot of surplus inventory. I would buy the surplus inventory. In December or November, or whatever it was, it was getting toward the end of the season. I would buy tons of this stuff and, then in December, when the calls picked up, I would sell it back to them . . .
"That’s how Fields started. At that time, I had all my ads and everything set up to start my first Fields store. If it wasn’t (going to be called) Fields, it was Thrifty. I said to myself: This is Thrifty and it’s going to guide me, because Thrifty is a connotation that’s cheap. It’s price-sensitive, and I don’t know where this business can grow. It may go up quick . . . so I changed the name to Fields, which really meant that it wasn’t a high price. It wasn’t a low price. It was the right price.”
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