An Executive Summary with Jim Klingbeil

The Executive Summary is a brief video series in which Bay Area real estate and land use professionals discuss the arc of their careers, personal interests, and the impact of ULI on their careers.

An Executive Summary with Jim Klingbeil

Jim Klingbeil is the Chairman and CEO of Klingbeil Capital Management (KCM), a multi-faceted national real estate company established in 1959 with holdings throughout the United States.  He has over 40 years of development experience with multi-family and residential product types in which he has developed, acquired, renovated, repositioned, managed and/or sold an aggregate of 185 apartment communities containing of 43,000 units in 47 metropolitan markets.

Mr. Klingbeil has served on many committees within the Urban Land Institute (ULI); and has been a ULI Trustee for over 30 years.  He served as President of ULI from 1991 to 1993.  He is a past Chairman and lifetime member of the ULI Foundation (ULIF) Executive Committee and Board of Directors.  Currently, Jim participates on the ULI Governance Committee, ULIF Board of Directors, ULIF Annual Fund Committee, and participates on the national Multi-Family Product Council.  Jim also finds time to participate locally.  He has participated with ULIsf on panels and the Excelling at the Game series; and has spoken at the Young Leaders Group (YLG) Learn From the Best, Fireside Chat and Lunching with Leaders signature events.

Full-Length Interview

I’m Jim Klingbeil. I’m chairman of the Klingbeil Capital Management, LLC. We manage apartments all over the United States.

First Job in Real Estate / Land Use Field:

Well, my first job in the real estate profession was as a principal. And I was a senior at Ohio State University on my way to medical school at Stanford University. And myself and another fraternity brother decided we ought to build garden apartments for students. The only difference between that and every other fraternity bull session I’d been involved in is the next day we actually started out and did it. We built 19 apartments in north Columbus. We really didn’t know anything whatsoever. I had never been in the construction business—I was a pre-med. He had exactly the same background. We were able to get a set of plans. We hired a contractor on a cost-plus contract—no top, no ceiling (didn’t know about that, then). Were able to borrow the money to build it.  And fortunately, or I probably wouldn’t be here, everything worked out.

Mentors in Your Career:

I had a couple very early in my career: a banker, by the name of Glic Schultz who was very, very helpful; and a mortgage banker from Indianapolis who financed me for probably 15 years. But the biggest set of mentors were the ULI members.

Greatest Career Satisfaction:

Development, by its very nature, if you’re successful at it is very satisfying. I think as I look back that’s a very interesting question. I think being able to conceive a multi-family development, which is my specialty, and then being able to develop it and finding out that yes, the tenants really appreciate it and they really like living there. We were kind of pioneers in the sixties. Many of the things we take for granted today didn’t exist. I mean our major competitor were FHA 608’s (private apartment buildings built for WWII veterans), which were two- and three-story, red brick buildings, steel casement windows, with a great set of restrictions. I remember, we built a lot of apartments in Indianapolis, Indiana; and our competition, the management basically restricted hanging fixtures, radio or TV after ten o’clock, wall-to-wall carpeting, air conditioning, outdoor living, swimming pools, rec facilities, you name it—and pretty ugly. So it wasn’t really hard to be successful back in those days because we kind of pioneered all of those garden apartment things that everybody takes for granted today—wall-to-wall carpeting, air conditioning, pleasant management—we wanted to take care of the tenant. We used to rent our apartments as quickly as we could turn them over. I mean I don’t think we ever placed a display ad in a newspaper until 1968, ’69.  The first seven or eight years were just a little ad in the paper and that was it. It was easy pickings, not like it is today.

Toughest Challenges Faced in Your Career:

They’re too numerous to enumerate. As a developer I went up and down. Well, the first three recessions I was a full participant. The more important thing is how do you survive and go through it? We started with nothing and so we were primarily a debtor. My father used to say, “Jim, the problem with you is that you get debt mixed up with equity.”  And I think to a great extent that was true because when you start with nothing you basically have to finance pretty heavily in order to be able to develop. How do you get out of it?  Integrity. Honesty. Hard work. And never give up. Normally, if you’re into workouts the financial institutions don’t want to take them over. As long as they trust you and you’re working as hard and as diligently as you can to recover as much capital or preferably all of their capital and their interest, they’ll stick with you. And that’s been our experience through every one of the recessions.

Lessons Learned from Past Real Estate Cycles:

Well, I think cycles, whether we like it or not, certainly are here to stay. They used to be ten to twelve years. Now, they seem to be shorter and sharper. You know, there seems to be a lot more volatility in it. These rules are easy to say.  They’re not so easy to do. But when it gets so good you can’t believe it’s ever going to end, my advice is sell everything you can. Hunker down because something bad is about to happen. And if you think about that, that was clearly the case with this last one. I didn’t see it coming. None of us saw it coming. If anybody tells you they did that’s surprising. But it really was frothy—very, very frothy. My dad used to always say, “If you can’t buy it, you probably ought to sell it.” And I think that’s true in the multi-family business.  Although, we’re very close to being back to where we were in 2006 and 2007. So I think the basic lesson is that when it really gets good it’s a good time to build liquidity just in case something does happen.

Favorite Places in the Bay Area / World:

Walton Park right outside this building is one of my favorite spots, which is why we’re here. And whether you know it or not, that was all warehouses, all hardscape. You’ll see that when you walk out the front door you’ll see an arch. That was a large warehouse. That whole green park that you’re looking at was solid concrete.  They did a competition and an old ULI land planner by the name of Tony Guzzardo submitted that.  He had the only green scape out of 12 applicants. And he tore it all up and what you see is what you have. And I think it’s created a tremendous amount of value. So that’s one of my favorite spots.

As for the rest of the world, ULI sponsored an Advisory Panel to Southwest England, Dorset. Prince Charles developed a town and it’s called Poundbury; and it’s a kind of an experiment in a small town to create housing, industry, office, pubs, groceries and it’s in a tough area. A group of us visited it and I have to say that I think Prince Charles is to be commended. It’s a very, very good example of the integration of all of that. Its walkability and there are lots of places that would be better off to emulate them.

One of my other favorite places is a little town called Portofino, Italy, which is a little harbor—not restored, but never allowed to develop other than what it was originally. I mean you can actually drive around or walk around it and every building has to conform to what it was 100 years ago.  And it’s kind of a step backward, but very, very pleasant.

Favorite Ways to Unwind:

Travel and hiking really, I think.  I haven’t been everywhere in the world, but I’ve been quite a few places.

ULI’s Impact on Your Career:

The thing about ULI—and I often call it a university without walls—but people who go to ULI and spend any amount of time are givers versus takers. When you go to so many industry association events they’re there to promote their own company, get financing, et cetera, and there’s much more of a competitive spirit in terms of sharing. I think virtually all ULI members, if they remain active, are people who believe in education, they believe in research, and they believe in sharing their experiences. And that to me is the big sort of universal thing about ULI. If you don’t want to share—and there are many in our industry that don’t—they’re just not active in ULI. They’re uncomfortable. And you only get out of an organization what you give. And so that to me is the distinctive thing about ULI in terms of the real estate industry.

The Executive Summary, developed by Rob DeWaters and Miles Garber, aims to foster wider professional and personal connections across the ULI San Francisco membership.