Inside the Old Psych Hospital Reborn As a Home for Money ManagersBy
Harlan Crow builds campus for hedge funds and family offices
Old Parkland renovation is pet project of son of Trammell Crow
It’s the most exclusive club for financiers in Dallas.
With seven Jeffersonian-style buildings and manicured lawns, Old Parkland looks more like a college campus than a hive of private-equity firms, hedge funds, foundations and family offices. But the 9.5-acre site, where an abandoned hospital once stood, is now home to some of the city’s wealthiest investors.
Old Parkland is the pet project of Harlan Crow, 66, a son of swashbuckling real estate developer Trammell Crow, whose empire was in tatters when he gave up control in the late 1980s. It’s also a symbol of a decades-long effort to rebuild the family’s legacy. Step inside any of the buildings and you might think you’re in a museum, with Rodin sculptures in the hallways, a 17th century antique sofa in a lobby and a piece of curtain Abraham Lincoln is said to have grabbed after being shot on display.
“When I got involved in the late 1980s and early 1990s, it was not really clear that our company was going to survive,” Crow said, sitting in a wood-paneled room in his Old Parkland office, just past a Rembrandt Peale portrait of George Washington, a stain on the lapel of his rumpled suit jacket and a piece of white printer paper stuffed haphazardly in a pocket.
After nine years of renovation and expansion, the complex is now home to TRT Holdings Inc., owner of Omni Hotels and Gold’s Gym; Highside Capital Management, the hedge fund turned family office led by Lee Hobson; an outpost of Boston-based real estate private-equity firm Rockpoint Group; and the investment company of Roger Enrico, a former chief executive officer of PepsiCo Inc. Residency is by invitation only.
At the center of this financial hub is Crow Holdings, an $8.6 billion investment firm built on the remains of Trammell Crow’s real estate empire that included the Dallas Market Center, San Francisco’s Embarcadero Center, the Wyndham Hotel chain and thousands of homes. The Wall Street Journal in 1986 called Crow the largest landlord in the U.S.
Harlan Crow has spent the last quarter-century making his family wealth about more than just the buildings bought and constructed by his father. A prominent Republican contributor and friend of Supreme Court Justice Clarence Thomas, Crow hosted a fundraiser at his $39 million home last month for Marco Rubio. He has amassed a collection of historical documents that includes Sir Walter Raleigh’s last plea to King James, written a month before his execution in 1618, a memo from Lincoln condemning slavery written before he decided to run for president and a signed copy of Adolf Hitler’s “Mein Kampf.”
He also has a collection of statues in his backyard that he jokingly calls his “Garden of Evil.” There’s Vladimir Ilyich Lenin, Josef Stalin, Mao Zedong and Fidel Castro. Crow said he likes hunting for the best statues from dying regimes, though there’s also one of Margaret Thatcher on display.
“My father was wildly optimistic, and most of what he thought would happen did,” Crow said. “I have a little bit of a mentality that the world is dangerous, and the only thing you can really do is be morally, mentally and physically strong. The rest of the stuff, well you just do the best you can.”
Old Parkland was built on the site of the original Parkland Hospital, which opened in 1894. A new hospital had already been built by the time John F. Kennedy was assassinated during a Dallas motorcade in 1963, and Old Parkland had been converted into a treatment center for tuberculosis and psychiatric patients. The building eventually fell into disrepair, was covered with graffiti and became a blight on a gentrifying neighborhood five minutes from Dallas’s downtown and the same distance from its priciest neighborhood, Highland Park, where Crow lives.
Today, Old Parkland charges among the highest office rents in Dallas. It has a restaurant, a barbershop, a gym and a circular underground debate hall. A statue of Alexis de Tocqueville overlooks a central courtyard, and Crow said he plans to install a painting of George W. Bush standing in the wreckage of the World Trade Center towers.
“There’s a feeling of university campus more than an office building,” said Ben Weinstein, a managing director at Korenvaes Management, the family office for the founder of hedge fund HBK Investments. He used the campus network to raise money to fund the purchase of Super Chix, a fried-chicken sandwich restaurant concept, from Yum! Brands Inc. in August. “It’s nice to be part of a network that shares.”
When Crow took over from his father, the business was in dire straits. Not only had the firm purchased real estate projects and hotel properties on credit, it had lent to the developers it brought on as partners, according to Anne Raymond, then an accountant at the company and now No. 2 at Crow Holdings.
Harlan Crow began dismantling the empire. Two real estate investment trusts were spun out in 1993 and 1994, and Wyndham had an initial public offering in 1996. The real estate brokerage went public in 1997 and was later bought by CB Richard Ellis Inc.
Cowed by the experience of the 1990s, Crow and his executives decided they “never wanted to be forced sellers again,” said Mike Silverman, who has helped manage the family’s non-real estate investments since 1998. At the time, about 80 percent of the family’s money was invested in real estate; today it’s less than 40 percent, he said.
Crow Holdings still has two real estate development companies: Crow Holdings Industrial, a warehouse and manufacturing developer it started in 2013; and Trammell Crow Residential, a multifamily residential property developer begun in 1977.
In the wake of the financial crisis, the residential unit spun off some assets into an investment trust, Mill Creek Residential Trust LLC, to raise cash for the remaining business. This time, the family’s money was insulated, said Kenneth Valach, Trammell Crow Residential’s CEO.
The real estate arm began soliciting pensions and foundations to make investments alongside the family. The pitch worked: Crow Holdings raised $281 million for its first fund in 1998. It’s now raising a seventh, seeking $1 billion to $1.5 billion, according to a document published on the website of the State Universities Retirement System of Illinois. The first five funds have generated net internal rates of return -- a performance measure used in private equity -- of from 0.2 percent for a 2006 fund to 29 percent, the document showed.
By the end of the last decade, Crow Holdings had morphed into an investment firm that happened to be an owner of a real estate developer, rather than a real estate developer that happened to have investments. When it was forced by the Dodd-Frank Act of 2010 to register the real estate fund business as an investment adviser, it decided it might also try its hand at investing other families’ money.
Silverman and partner Kirk Rimer, formerly of Goldman Sachs Group Inc., pitched wealthy U.S. families, shooting for returns of inflation plus 5 percent and promising to keep money liquid during downturns. Including the Crow family, which pays the same management fees as external clients, the business now oversees almost $2 billion for 28 families.
Crow started looking for a successor last year but hasn’t found one yet. He has three children, all under 21. He said he doesn’t want to make the future success of the company dependent on family management. He also doesn’t plan to sell anything.
“The notion that we’d build something and sell it is antithetical to my dream of having something that’s -- I’m tempted to say, ‘to having something that’s permanent,’” Crow said. “But whenever my brain goes to the word ‘permanent,’ I think that is blasphemous. Nothing’s permanent, right?”
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