Victor MacFarlane: Think Differently And Find Hidden Opportunities
Victor MacFarlane is a trailblazer and multi-decade veteran of the real estate business who will be one of our esteemed speakers at Bisnow's Annual Multifamily And Mixed-Use Conference. But his career started like that of many university graduates: poring over job listings for a gig.
Victor had multiple graduate degrees and needed that first break. It wasn’t long before many companies saw in him the promise of a highly capable executive. He chose Aetna. While the insurance giant offered him positions in its law, corporate investment and real estate investment divisions, Victor chose real estate.
Starting out as newly minted senior analyst in a large organization typically means a multi-year, slow and incremental progression through the ranks. Victor’s case was different. Aetna, which had a large, established presence as a mortgage lender, had just started an equity investment unit. The new division allowed Victor to make a positive impact very early in his career. “I was interacting with senior real estate people inside and outside the company almost immediately,” he says. “If I had joined the debt side, I would have been the sixth or seventh person. That decision accelerated my career.”
It wasn’t long before he was trusted with managing others. In these roles, Victor faced a dilemma that confronts many young executives on the fast track. “The toughest part of managing people for me was that most of them were 20 to 30 years older than I was and had significantly more real estate experience than I did,” he says, reflecting on this period. Still, he learned how to master this situation with a mix of listening and judgement. “I listened to what they had to say, while still making my own decisions based on the information I received.”
Eventually he set up his own fund, MacFarlane Partners, in 1987. The decision proved to be highly successful as the firm established a track record building a sizable and well-regarded portfolio of real estate assets. Some of his proudest accomplishments come from the early '90s when the firm was fairly new. Until then, urban/inner-city investments weren’t seen as social investments. Investing in these sectors was not seen as appropriate for pension funds. Victor did original research to prove there was an institutional investment opportunity for such communities. He then worked with CalPERS (California Public Employees' Retirement System) and Magic Johnson to create the first institutional investment fund that put $50M into urban retail communities. That success spawned a torrent of investment in urban communities.
His deep experience in the field has given him particular insight to the challenges the real estate investment industry faces. Victor says the largest firms in the investment ecosystem typically get the most allocations from pension funds, making entry into traditional categories harder, and serving as a high barrier to entry. Smaller players have to rely on shorter-term niche strategies that usually don’t provide long-term revenues, which makes long-term profitability and viability much more difficult. The barrier to entry and the sustaining of steady returns has grown increasingly steeper.
He advises those thinking of establishing an investment fund to think carefully about where they can confidently raise capital. A former employer or a prior relationship are good places to start, Victor says. Also, having a truly differentiating strategy in screening for and selecting investments is absolutely essential. “You need to be really confident that your strategy isn't something that they can get from 50 others—and that you have sufficient capital to stay the course for years, if necessary.”
Hear from Victor and our other speakers at Bisnow's Annual Multifamily And Mixed-Use Conference on July 20 in Los Angeles. Sign up here!