Gaining Ground

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Gaining Ground
Chief Executive Bill McMurrow in his office at real estate company Kennedy-Wilson’s headquarters overlooking Beverly Hills.

Bill McMorrow traces his fortune back to a lucky break when he was 32 and George Graziadio, namesake of Pepperdine University’s business school, promoted him to lead a division at then-struggling Imperial Bancorp. After McMorrow helped stabilize Imperial, he bought a real estate auction house, Kennedy-Wilson Holdings Inc., for $1 million in 1988. Graziadio helped him in his first acquisitions soon after, and McMorrow’s childhood friend Thomas Barrack, head of real estate investment firm Colony Capital LLC, helped him get into Japan in the late ’90s. Today, Kennedy-Wilson is a real estate giant with 58 million square feet of property worldwide valued at about $12 billion. Now 65, McMorrow ’s leading the company as it continues its expansion into Ireland and other parts of the United Kingdom. He recently sat down at his Beverly Hills office with the Business Journal to talk about his childhood in Malibu, why he doesn’t eat meat and his lifelong friendship with billionaire Barrack.

Question: When did you start working?

Answer: I had my first real job when I was 8 years old. I was a paperboy. I had to pick up the newspapers, rain or shine, at the supermarket on my bike and it was six miles back and forth on Malibu Road. When I got paid for it, I had to give it to my dad and he kept it in this savings book for me. I’ve had a job ever since.

What other jobs have you had?

I had a bunch of jobs but probably the worst job I ever had: At 16 or 17, I had this crazy summer job where I worked at Farmer John from 3 in the afternoon to 1 in the morning. I can tell you when you got off at 1 a.m., you ran to your car to get out of there.

What’d you do there?

It’s hard to describe. They kill all the animals. I had to work in the ham room where they are hanging all the hams on huge racks and are shoved around the place and are prepared and then go out the door. If one of those things fell off on you, it had 1,000 pounds of ham on it, it could cut you in half. I had to clean (the racks the hams were on). You are working in a super dark, super hot place.

Sounds like it left a lasting impression.

To this day I don’t eat meat.

Your’re the second of nine siblings. What was it like growing up in a big family?

It was absolutely fantastic. My dad was unbelievably disciplined. I don’t mean it in a bad way but he was a tough guy. He was a Navy fighter pilot in the Second World War and he was the son of a Boston cop. When you are trying to run nine kids who are not that far apart in age, there are rules. I’m not sure I liked it all the time, but I think that created whatever discipline and work ethic I have.

How’d you become such close friends with Thomas Barrack?

Tom and I went to Loyola High School together and have been friends since we were 14 years old. It’s a funny bond that people at Loyola have when you become friends with guys, you stay friends for life. I might not see him for three or four years at a time, and (I’ll) see him again and it’s like (we) never were apart.

How did you transform Kennedy-Wilson from an auction business into a real estate giant?

On the third or fourth night after I’d bought the company, I was going home one night and was walking by the business development department. There was this one guy and I said if you ever find any condo buildings to buy, I would be interested in talking with you because Imperial Bank said that they would be my partner in these deals.

So what happened?

Two days later he comes into my office and says I’m talking to First Railroad Bank in Atlanta. They have these two condo projects, one in Palm Desert and one in Vallejo. I said I think we’d like to buy those.

Why did you say that?

It was like 60 townhouses and the bank was operating it as a hotel. George (Graziadio) drives out there and says Bill this is the stupidest deal; I’ll lend you all the money but you have to personally guarantee it. If he would have given me equity, I’d have had to given him more than half the profits.

What happened?

We had pro-forma-ed to sell these things for $135,000 a unit and they sold for $265,000 a unit. If you multiply that by 60, that’s more than $6 million more than we thought we were going to get.

What did Graziadio say?

He always would tease me. He loved me and I loved him. He teased me that I had goofed him. He said you should have let me have part of the equity on that deal. But I’d say George, you said it was the stupidest thing I’d ever done.

Did you learn anything from it?

Whenever people tell me it’s a bad idea, I usually think it’s a good idea. So I listen to people, but I always make up my own mind.

How’d you end up in Japan?

It was 1993 or so, my secretary got a phone call from this Japanese guy who wanted to do an auction for a project in Orange County. He said you’ve got to go to Japan and meet the bank that has the financing on it. I’d never been to Japan before. So, I go. It’s a long way, so while I was there I decided to meet some other banks. I started listening to these banks about some of these loans they were making here. They were so crazy.

How so?

In the early ’90s in Japan, if your family bought one acre in Tokyo in 1700 for $2,000, at the top of the market, it could have been worth a billion dollars. So the banks were going to these families and saying we’d like to provide you with credit and you should go to our investment banking department and look at buying properties in the U.S. So these Japanese investors ended up with debt on their property in Japan and debt on their property in the U.S. I thought, we have to open an office here. So in 1994 we opened an office in Japan.

How’d you start buying property there?

In 1997, I wanted to start buying office buildings in Japan and I couldn’t get any money from anybody. Tom Barrack said I’m going to Japan tomorrow and I said I’d really like you to meet the guy who runs our business in Japan. The next day, (Barrack) called me from Japan and said I’d like to give you $100 million of equity out of our third fund. I about fell off my chair.

So what did you buy?

There’s a picture on the wall out there that I will never take down of the office building we bought together in Japan in 1998. It was a $100 million acquisition and, at the time, it was the largest office building that had ever been bought in Japan by a non-Japanese, noninstitutional company. We sold that building a year and a half later to a sovereign fund in Asia and made a bunch of money on it.

How did that affect your Japan business?

If Tom hadn’t given me that money in 1998, Japan wouldn’t exist for us. I’m such a believer in fate.

Why are you going into Europe now?

The success we had in Japan and here in the United States made us study the European banking system. We started looking at that in 2010 and we came to the conclusion there are a lot of problems, and whenever there’s problems, that’s good for our business.

That’s sort of counterintuitive.

In 1998, when we bought our first big office building in Japan, I had just visited one of the senior guys in the bank (that we did business with there) and explained to him that we were looking at buying things in Japan. He said you are crazy; Japan is dead. Someone else in the company and I were walking to the elevator and I said buy everything we can. If you’ve got everything going the other way, that means there’s not as much competition. The same thing happened in Europe.

Will you go into other regions?

Our focus the next couple of years is the United Kingdom and Ireland. There are banks outside those countries that have lent into those markets and we talk to all of those banks that might be in Spain, France or Germany. But the geography as far as we want to operate in is those two countries.

How often do you see your building acquisitions?

All the time; all over the world. When we bought a portfolio in London, there were 170 properties and I looked at 60 percent of them myself. If (an investor) called and said Bill have you ever been to the building and I said no, there’d be a pretty quick click on the other end of the phone and there’d be no money.

What is your favorite thing to do for fun?

I try and live every day. Certainly I like to work. We have a great group of people here. But outside the company, I’m a big ocean person. I like to go to Hawaii. The friends I have over there are not business people. We do a lot of paddling and surfing, and we do some crazy stuff in the water, too.

Like what?

I’ve this one friend who likes to take extreme risks and likes to bring me along. We do this thing called canoe surfing, which is a four-man canoe but doesn’t have any flex in it at all. So say it’s a 10- or 12-foot wave, you are going straight down. To get into these waves, you got to get towed in. You’re happy if you survive it.

Do you like to travel elsewhere?

I love to travel since I grew up not traveling. When you have nine kids, and you are going on vacation, you are getting in your car to go somewhere. I just love going to new places. I am going to Africa for the first time this summer, to Tanzania.

How did you meet your wife?

I met her through one of the guys at Kennedy-Wilson in 1992. I’ve been with her now for 20 years and we’ve been married for 17 years. She’s a really incredibly creative person.

What does she do?

She’s involved with a retailing business that has a store in Hawaii. I thought it was the craziest idea when they told me they were going to take over the retailing at the Four Seasons resort on the big island of Hawaii because I figured what woman would go on vacation and then go shopping. It turned out that I was so unbelievably wrong. Women go on vacation to these high-end resorts and after a couple of days on the beach they want to go shopping.

What’s your typical day?

I’m up at 4 a.m. every day and so I spend the first hour getting organized for the day. Then – I have a gym at home – I work out for an hour and then come here by 7 o’clock. The biggest part of my job is finding new opportunities. I spend a lot of my time outside the office meeting people trying to find new things, new capital partners and deals.

Will your son work in real estate?

He’s 15. I talk to him about it driving around in the car but I was also brought up in a family where you never talk about money. That was how I was raised so I don’t talk to him about money.

Not at all?

I did get some advice from a friend about how to get him more engaged in understanding business. He said buy some stocks he would relate to and talk to him about that, and a couple of years ago I bought him Apple, Starbucks and Disney.

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