Hold on and raise money.
Such is the advice to his fellows in the commercial real estate industry from William “Bill” Wilson III, one of the most influential and successful commercial real estate developers over the last four decades in the San Francisco Bay Area.
Speaking to a packed house of commercial brokers and other developers at the Four Season’s Hotel in East Palo Alto, Wilson said he has confidence economic recovery will come, but he doesn’t expect it for another two or three years.
“They [banks] are going to have to eat some big deals,” he said. “I think we haven’t seen the bottom.”
Even though some San Francisco property values have already fallen by half, they have farther to fall, Wilson predicted. Banks still have not begun todisgorge all of the properties on which they have foreclosed and are biding time as they try to build a financial cushion to swallow future losses. At some point, they will not be able to wait any longer, he said.
Wilson cuts a singular path through Bay Area commercial real estate. His achievements are vast. Not only has he been a prolific developer of some of the region’s signature buildings, but he has also founded some of its noteworthy commercial real estate companies. Among his most well-known projects are the Oracle Inc. world headquarters in Redwood Shores; Foundry Square, The Gap Inc. headquarters and the Ferry Building renovation in San Francisco; 10 Almaden Blvd. in San Jose; the Pruneyard in Campbell; 48 Stockton St. in San Francisco; and the Franklin/Templeton Group campus in San Mateo.
He also founded San Francisco development company Wilson Meany Sullivan, San Mateo’s Webcor Builders and, in 1978, William Wilson & Associates. In the ensuing 20 years, the firm developed 33 properties with more than seven million square feet of offices, most of it on the San Francisco peninsula. In addition to Oracle and Franklin Templeton, company clients included IBM, Wells Fargo, Visa and Bank of America. The company merged with real estate investment trust Cornerstone Properties Inc. in 1998 in a $1.81 billion transaction. Cornerstone later merged with Equity Office Properties Trust Inc., the largest publicly traded office company in the country. Wilson served on the EOP board of directors alongside Sam Zell, its idiosyncratic leader, until 2004. EOP was sold to The Blackstone Group in 2007 for $39 billion.
Wilson spoke at the invitation of the San Francisco Bay Area chapter of the NAIOP Commercial Real Estate Development Association. Three hundred people attended. He was interviewed by Palo Alto developer Chop Keenan, a Wilson contemporary and a success story in his own right.
Keenan traced Wilson’s path from his youth growing up in Pasadena to becoming an engineering student at Stanford University to rubbing elbows with the likes of Zell. The theme of the event was “A Perspective of Six Recessions.”
Twice during his comments, Wilson cited his father’s repeated recollections of the Great Depression and the hardships that families endured for his own inherent conservatism and risk-aversion. “It gets drilled into your brain,” he said. Real estate development is an inherently risky business, he said, so he did all that he could to mitigate that risk. He did not do speculative office development. He arranged his construction financing and his permanent financing upfront. He favored large financial partners such as Wells Fargo Bank and Aetna insurance company.
After the event, Keenan noted that had some of those same business practices remained the standard, the industry would be in less dire straits today.
“The things we talked about, no one gets in trouble if you follow that template,” Keenan said. “Bill’s reputation is impeccable, and that’s attractive to the next prospective partner, tenant or bank.”
The NAIOP material promoting the event described him as a “legend,” a moniker that Wilson questioned with humor. He noted that legends were semi-fictional characters with a basis in historical fact, noting that other legendary figures in history included King Arthur, Robin Hood and Vlad the Impaler.
“I don’t think I’m up to that act,” he said.