Investor's Influence Expands In Region

By David Nakamura
Washington Post Staff Writer
Thursday, October 4, 2007

When real estate investor Victor B. MacFarlane comes to Washington, he arrives on a personal jet, sleeps at the Four Seasons in Georgetown and does business from an office on Connecticut Avenue that is still largely empty.

MacFarlane is not from the District, and he's still getting used to the place, but make no mistake: The 56-year-old magnate from San Francisco is quickly making a name for himself in the city's hot commercial real estate market.

In January, MacFarlane, who manages $15 billion in institutional assets, purchased the D.C. United soccer franchise with a partner for $33 million. Since then, MacFarlane has teamed with Monument Realty to finance a major mixed-use project near the new Washington Nationals baseball stadium; pledged $2.5 billion to jump-start JBG Co.'s plans to redevelop 42 sites across the region; and proposed building a massive development east of the Anacostia River in the District's poorest ward.

With so many projects in the region, MacFarlane cringes when people consider him an outsider.

"If I've not demonstrated that I'm committed to the area by now, I'll never demonstrate it," said MacFarlane, who is hunting for a D.C. residence to go with the $30 million penthouse he is building atop the St. Regis Hotel in San Francisco.

MacFarlane is among a group of high-profile investors who arrived over the past several years to spread their wealth in the District's flourishing commercial property market. Those in the industry said their presence signals a strong vote of confidence in the city's future.

But MacFarlane has set himself apart from his rivals because he has built winning projects in challenging urban areas that others never thought to enter. As one of the few African Americans to control such a large amount of institutional capital, MacFarlane made his reputation and fortune by helping to revitalize poor, long-neglected black neighborhoods.

That track record does not mean that MacFarlane does not encounter challenges in the District. Mayor Adrian M. Fenty (D) recently rebuffed MacFarlane's bid to acquire a 110-acre property known as Poplar Point along the Anacostia River for a mixed-use development anchored by a 27,000-seat soccer stadium. The mayor opened a search for other proposals in August.

But those who know MacFarlane say not to count him out. From humble beginnings, he has risen to become one of the wealthiest black investors in the country, with a portfolio that includes the Time Warner Center in New York.

"He's a guy who is savvy and shrewd and has a lot of cash behind him," said Sean Cahill, a senior development manager at Louis Dreyfus Property Group. "His track record is impressive, and his bank account is impressive."

MacFarlane has been defying the odds for years.

Raised in Middleton, Ohio, as one of four children of a single mother who worked for the federal government at Wright-Patterson Air Force Base, MacFarlane started in real estate as an analyst for Aetna Life and Casualty's property division. He met the woman who would become his wife, Thaderine, during a trip to New Orleans in 1982 to inspect a hotel where she worked as manager of the concierge desk.

"I was expecting Mr. MacFarlane to be this older Irish guy," Thaderine recalled with a laugh. Instead she met the 6-foot-6 MacFarlane. He asked her to lunch, but she declined because hotel policy forbade employees from dating guests.

"I'm not a guest. I own the hotel," the soft-spoken MacFarlane fibbed.

She agreed to lunch. Three months later, they were married.

MacFarlane used the same bravado to secure the deal that would help create his fortune. He had started his first real estate investment firm in 1987 but struggled to find a major client until 1995. That's when he persuaded the California Public Employees Retirement System to hand him $50 million to invest in neighborhoods still scarred from the Los Angeles riots of 1992.

At the time, few institutions were investing in urban areas, but MacFarlane argued that predominantly black neighborhoods with great density and buying power were being under-served. He teamed with former NBA star Magic Johnson to revitalize the Ladera shopping center, bringing in a grocery store, Starbucks and TGI Friday's. The retirement system turned a healthy profit.

"It was a poster child for what you can do and how you can make a difference," MacFarlane said.

His star rose rapidly. By the late 1990s, he had teamed up with Charles Berman, founder of Avalon Properties, and Gregory Vilkin, former president of Forest City Enterprises, with the goal of expanding MacFarlane Partners into three hot East Coast markets: New York, Boston and Washington.

A few years later, MacFarlane began talking to D.C. developer Herbert S. Miller, who was seeking funding for his own massive revitalization effort in downtown Washington: Gallery Place.

The two never struck a deal, in part because in April 2002, MacFarlane fell ill with a mysterious liver disease during a trip to Las Vegas. By the time he had entered the Stanford University Hospital emergency room two days later, doctors told him that he was days from death unless he received a liver transplant. He did. The donor was a teenager who had died in a car accident.

MacFarlane said the experience taught him to slow down and appreciate his family. In June, he surprised Thaderine with a trip to Europe for her 50th birthday, flying their five adult children and 120 friends along for a week-long cruise. The Neville Brothers and Ashford & Simpson provided the entertainment.

But, in fact, MacFarlane hardly slowed his work pace. In 2003, he bought a 25 percent stake in Forest City's $1.7 billion mixed-use development called the Yards, near the Nationals' new stadium in Southeast.

"We go back a really long time and share a similar vision about working on urban cores," said Deborah Ratner Salzberg, president of Forest City Washington. "For the Yards, we wanted a long-term partner who would give back to the community and be patient."

Asked why he came to Washington, MacFarlane said he was seeking to help neglected communities in a historically African American city.

"I want to make a lot of money, but I want to feel good about it," he said. Besides, he added: "I can't sink $10 billion into Detroit."

Two weeks ago, MacFarlane popped into town on his jet for a few hours.

He hustled to the Four Seasons to host a dinner for about 40 city residents, including D.C. Council Chairman Vincent C. Gray (D), touting MacFarlane's soccer stadium project at Poplar Point as a boon to long-neglected residents in Wards 7 and 8.

MacFarlane has not been shy about lobbying to win support for his plan. He hired well-connected locals, including Linda Greene, former chief of staff to council member Marion Barry (D-Ward 8). MacFarlane also pledged to build a youth athletic field in Ward 8 and gave $10,000 to the Barry Farm Recreation Center football team.

He also has made a personal pitch. Who better to bring housing, offices and shops to black neighborhoods, MacFarlane asks, than someone who came from similar circumstances?

"I didn't grow up with a silver spoon in my mouth. I slept on a couch with my sister in a community that looked like many of the ones we go into," said MacFarlane, who also plans to revitalize a city block in New York's Harlem neighborhood. "I'm not going to apologize for my success. That's supposed to be what the American dream is all about. But part of giving back is also demonstrating what can be done. If I'm in control of all this capital and won't make a difference, then who will?"

Barry has thrown his support behind MacFarlane, but other key officials remain skeptical.

"I don't know about just giving the community money," said Kwame R. Brown (D-At Large), a Ward 7 resident and chairman of the council's Committee on Economic Development. "He has no problem spending dollars, and he's well known in the industry. But what do District residents and the District get out of the stadium plan?"

The Fenty administration has had a similar reaction. MacFarlane wants to build 8 million square feet of development at Poplar Point, twice what city planners have envisioned, and has asked the city to pay for $350 million in infrastructure. He explained that cities routinely invest in major projects and pointed to the District's publicly funded $611 million baseball stadium complex.

Without the public money, D.C. United officials have hinted that they will leave for the suburbs. But Fenty aides said that an open competition for Poplar Point could result in a better package for the city.

"We put all of our eggs in one basket, and they tossed the basket," MacFarlane said, uncharacteristically showing frustration. "Without a [new] stadium, we're losing significant money every year. It's no fun."

MacFarlane hasn't given up. His spokeswoman, Julie Chase, recently hired Julia Hudson, daughter of D.C. lawyer James Hudson, one of Fenty's closest advisers. MacFarlane also has been talking with his friends at Forest City about another stadium proposal.

Until then, he's a fixture at RFK Stadium during D.C. United games. After the team's 4-2 victory over the New England Revolution last month, MacFarlane entered the locker room but seemed out of place among players who did not recognize him.

Before long, however, he was back in his comfort zone, huddling in a corner with business partners, planning another strategy session for Poplar Point.