Always Looking Up, No Matter How Steep the Slump

By Steven Pearlstein
Wednesday, May 13, 2009

Joe Robert had seen it all three times before: The cheap and easy money. The hype and speculation. The sudden drying up of credit. The crash. Each time, Robert had found a way to ride the real estate cycle to his advantage, jumping in when nobody else wanted to buy, then pulling back somewhere near the top.

But this time, he admits, he overlooked the early signs when international investors began to pull back quietly from the U.S. credit markets. Nor did he ever imagine that global markets could collapse so quickly and so completely. The consequences have been significant.

His publicly traded real estate investment trust has gone in little more than two years from trading at $21.32 per share before stock splits and other adjustments to a price so low that it has now been delisted from the New York Stock Exchange. The only solace for investors in his numerous private funds may be that they have taken less of a hit than investors in other commercial real estate ventures. Robert himself has now joined that exclusive club of former billionaires.

"It's one of my greatest disappointments that I missed it," he says wistfully. "Anticipating these turns is what we are paid for."

Of course, Robert has a few things on his mind besides the real estate market, like the two operations he underwent recently at the National Institutes of Health to have tumors removed from his brain, and the daily doses of radiation he's been receiving.

Other than the scar running across his shaved skull, however, you might never know that Robert is battling for his life. He's just as confident and upbeat as ever, curious about everything and quick to turn the conversation from his business to his real passion, school choice and charter schools and the myriad other children's causes he's championed as one of Washington's most active, best known and most generous philanthropists. Like the boxer he once was, he's eager to get back into the ring for the next round.

Ever since he got thrown out of Mount St. Mary's College in Emmitsburg, Md., during spring break of his freshman year, Robert has wanted to be in real estate. His first job back in 1971 was to lure potential customers from the beach at Ocean City to a free dinner where they would be shown a film narrated by former newscaster Chet Huntley about a new recreational community called Ocean Pines. If they wound up taking the tour and buying a lot, Robert got a bonus.

By 1973, Robert was hired to sell townhouses at a new project in Buckeystown, just south of Frederick, Md. Robert was able to sell most of the units even before the project was completed, but midway through construction, an Arab oil embargo sent prices and interest rates soaring and the real estate market into a tailspin. The developer ran out of money, the bank foreclosed on the project, and construction came to a halt. It occurred to Robert that there might be a good business in managing distressed properties for lenders that had little interest or expertise in being developers and landlords.

"I went to see Frank Saul at Chevy Chase Bank," Robert said, recalling details as if it were just yesterday. "He had just foreclosed on a project on the other side of Frederick, and he hadn't sold a unit in 12 months. I was just a kid and was $20,000 in hock. But I had all these people who had already put money down on the project in Buckeystown."

So Frank gave him a shot, and the project sold out in 60 days. Before long, Robert had sales marketing contracts with banks all over the region.

His big break, however, would come during the second market downturn in the early 1980s. For years, he'd been walking the corridors of the Federal Savings and Loan Insurance Corp. -- the government agency that insured the deposits at federally chartered savings banks -- introducing himself to officials, familiarizing himself with their operations and warning about the coming storm in the thrift industry. It all paid off in 1983 when he was awarded a contract to manage $120 million of assets from troubled thrifts, then the largest such contract ever awarded by the agency.

As it turned out, Robert was right about the industry's troubles, and he was rewarded with more business -- much more. By 1986, he had $7.5 billion under management with a nationwide operating platform that allowed him to move from just managing and selling the government's unwanted real estate to buying and selling assets for himself and investors.

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