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December 11, 2003

James N. Carbone

By JANET PARKER
For CBA

Firm: RREEF

Position: Partner and acquisitions office specialist

CREISP

Just as James Carbone is a long-time player in commercial real estate, so he says RREEF is a long-term player in the Seattle market.

Carbone, a partner with the institutional real estate investment advisor, began his career in 1979 as a commercial broker. Sixteen years later, he came on board with RREEF as a vice president of dispositions, flipping to an acquisitions focus in 1996. In his current capacity, he has overseen the acquisition of more than 8 million square feet of industrial property, 1.5 million square feet of office space and 300,000 square feet of retail property.

Of the company's outlook on Seattle, Carbone says, “Long term, we are very bullish on Puget Sound.” San Francisco-based Carbone says RREEF is very happy with its holdings in this market — amounting to about $800 million worth (or 9.7 million square feet) of properties.

Of RREEF's investments here, Carbone says, “By far our largest holdings by type would be industrial — representing more than half in terms of dollar value, and closer to 75 percent in terms of square footage.” The balance of the company's portfolio lies in office, retail and five apartment properties.

Carbone
Carbone

“RREEF will continue investing in the Puget Sound area, despite our view that it will likely be a mid-term recovery market as opposed to short term.” By this, Carbone says he means the expectation is little recovery prior to the next 18-20 months, “and, we think it will be two to four years before we see significant change.”

“We believe Seattle to be a long-term market — despite current economic conditions and their impacts on real estate fundamentals,” Carbone says. “I've already seen a few cycles in Seattle since I began covering it in 1996. We don't try to time the markets, or abandon them in downturns.”

Underscoring RREEF's activity in economically tough times, Carbone notes that year-to-date across the U.S., RREEF has closed some 32 transactions with an aggregate value in excess of $1.3 billion.

“From the acquisition perspective, we focus on replacement costs and the path of progress,” Carbone says. “In depressed times we can often acquire a property for considerable discounts in good locations with bright futures.”

Q&A with James Carbone
Q: If you could own any property on earth, what would that be, and why?
A: The old Kaiser Estate at Lake Tahoe in California, where some scenes of the movie “Godfather II” were filmed.

Q: Looking back on your career, what business deal still makes you smile?
A: Buying Valley Industrial Park for $35.5 million in 1999 and selling it 18 months later for $46 million.

Q: If you hadn’t gone into your chosen field, what would you be doing today?
A: Teaching.

Q: Who is your mentor?
A: Two: My father; and Jim King, a retired RREEF partner.

Q: What are you reading?
A: I just finished “The DaVinci Code” by Dan Brown.

By way of example, the Carbone recalls when the company acquired the 720 Olive Building in downtown Seattle in 1995. “A lot of locals thought we were nuts. Then it was considered outside the core of the central business district, and people didn't think the economics were compelling at the time. But, we bought the property for under $130 per square foot and sold it three or four years later for $260 per square foot.”

So how does Carbone view Puget Sound in comparison to the rest of the markets under his personal responsibility (including a portion of the Bay Area, Portland, Denver and Salt Lake City)? “The greater Los Angeles area including San Diego is by far the strongest across the boards,” he says, “especially in the industrial segment.”

He ranks Seattle second of his three major markets, with San Francisco being the laggard. “Seattle looks stable compared to the Bay Area.”

Addressing the road to recovery, Carbone says, “I think the industrial segment will rebound the soonest. Retail really never cratered and continues to be in reasonable shape. The apartment market has suffered partly because low interest rates have been allowing people to move into ownership. The tail of the dog will be the office market because of the overhang of available space.”

In addition to his role in acquisitions, Carbone is a member of RREEF's Investment Committee. He also serves as the firm's office specialist, responsible for nationwide oversight of acquisitions and dispositions of office properties.

Switching gears to discuss his pre-RREEF career, Carbone reflects on a West Coast groundbreaking deal in the multi-family market. “In 1991 my partner and I (as brokers) helped bring a New York concept to San Francisco. We were involved in the successful conversion of the first Bay Area industrial buildings (south of Market) to residential lofts.”

Another “fun deal” for Carbone was as a member of the board of directors of Goodwill Industries in San Francisco. “We purchased a building damaged in the 1989 earthquake. As a nonprofit corporation with a building rendered ‘uninhabitable' by the quake, we layered the purchase negotiations with obtaining restoration funds from FEMA (Federal Emergency Management Agency). That property is now considered a flagship facility by Goodwill standards.”

As for avocations, whenever he can, the Marin County native hits the mountain bike trails of Mt. Tamalpais, just north of the Golden Gate Bridge. A self-proclaimed family man, Carbone lives in San Francisco with his wife, Allison, 15-year-old son Nick and 9-year-old daughter Isabelle. The RREEF executive says in off times the focus is family, which includes a lot of time on snow and water skis and wakeboarding.


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