Nearly 40 years ago now, Bill Passo turned from law to real estate for an entirely practical reason: With four young daughters at home, he knew there were going to be lots of family-oriented expenses coming his way.
“When I started practicing law, a new lawyer coming out of law school was making $700 a month. So it didn’t take much to make more than that,” said the founder & CEO of Passco Cos., an Irvine, Calif.-based real estate company with investment in the retail and multi-family sectors. The company also works on land entitlement and has done some development.
Twenty years ago, Passo was a pioneer in tenancy-in-common (TIC) investments in the commercial real estate sector. The multi-owner/investor real estate holding approach is now mainstream. Having started his current firm focused on California-based retail properties 15 years ago, he moved into multi-family during the last decade, compiling a 10,000-unit Class A portfolio. Passco’s retail holdings total around 2.5 million square feet. In addition to TICs, Passco handles DST and LLC investments for clients.
With his daughters’ progeny numbering 11, Passo speaks much like the kind of grandfather one would love to have—one filled with practical, friendly advice.
CPE: Your product focus shifted from retail to multi-family awhile back. Where is it now?
Passo: We’re now refocusing a bit on a return to retail. We see an opportunity to acquire properties that will meet our investors’ objectives, and are looking at locations that offer services and goods used by the local community. We focus on centers with food service, beauty, health—the sorts of things that are not acquired over the Internet. You’ll stop by and pick up your Subway sandwich or your Starbucks coffee while you drop off your dry cleaning. They’re convenient, neighborhood-type centers, as opposed to malls or big-box centers.
We’re also still investing in multi-family. We’ll close on two properties (in December 2013) and another in January.
CPE: After 15 years at the Passco helm, what stands out?
Passo: We have survived—and I have personally survived—another recession. Passco Cos. has now been through one major recession and a minor one. We have outlasted some 70-plus competitors that were in the business in 2007 and are no longer in the business. We’re now probably the second-largest provider of investment product of our type in the country.
I’m very proud of the fact that we have probably the best corporate infrastructure in terms of our investor services, our accounting and reporting to our investors, our timely provision of annual tax information and, of course, consistent performance in terms of cash flow and meeting investor objectives.
In my 38 years in the business of providing investment opportunities, including the 15 years with Passco Cos., we have never had a lawsuit or arbitration. We credit that to our outstanding investor communication, our services and sound underwriting in the acquisition of property. Our underwriting standards are such that there have been many times when we just didn’t have anything we could offer to investors because we couldn’t find anything that made sense.
CPE: In addition to those attributes, what differentiates Passco as a company?
Passo: We’ve always been driven by the quality of the product, versus how easy is it to raise the money. We never allowed ourselves to become market driven. The broker/dealer community that brings us clients has a need to place their investment funds somewhere. But we’ve never just bought something so that we’d be in a position to take the money. We’ve always focused on making sure that what we bought made sense. If it happened to occur at a time that was appropriate for them, then fine, we were available.
CPE: Describe a moment when the company was tested and came out stronger.
Passo: In 2003, we were going to buy the Puente Hills Mall, which was going to cost $145 million. No one had ever done a TIC deal of that size before. We got to the point where, on the last day, before we had to make the decision yes or no, the entire net worth of the company and myself was at risk. We would have six weeks to raise $52 million to close this transaction, and we were going to have to get a $96 million loan. Ultimately, I individually made the commitment that “We will do this.” And we did. It made national news.
CPE: Describe yourself in five words.
Passo: I can do it in two. “I care.”
CPE: What advice would you give your younger self as you went into the business?
Passo: I probably would say two things: No. 1, seek out the people who are doing what you want to do and are doing it successfully, and learn from them. Second, there was a book I read halfway through my career that I wish I had read at the beginning, which was Napoleon Hill’s Think and Grow Rich. The principles in that book, I think, apply to whatever it is in life that you would like to achieve.
CPE: If you weren’t in real estate, what would you be doing?
Passo: I’d be a teacher. I’d like to help people learn how to accomplish their goals. I think I do that already as a mentor. It’s always been my goal to make everybody who has ever worked with me or for me better off for the experience.
CPE: How do you spend your free time?
Passo: Actively. I ski, golf, scuba. My wife and I like to travel. We’re looking at traveling a lot more, and have trips to China and South America planned for 2014. I believe in that saying: I just want to live until I die.
CPE: What’s next for you and Passco?
Passo: I think we will see 2014 as perhaps the most successful year that the company has had. We’re becoming more brawny. We will continue to take advantage of some acquisition opportunities. We’re expanding our opportunities in value-added multi-family and retail, as well as the land development business. We have a full plate for 2014.