Today we have another entry in our Meet Our Current Students Series:
At the Real Estate Club’s first spring semester meeting on Thursday, January 28, Michael Brennan, executive director of the Graaskamp Center, presented the Innovator Award to Hersch Klaff, managing director of Klaff Realty, a Chicago-based privately owned real estate investment company. Mr. Klaff is the fourth recipient of the award which was established to recognize outstanding individuals who have made a creative mark on the real estate industry.
Klaff moved to the United States from South Africa in 1978 to begin a career in accounting. After learning about the real estate industry from his clients, he left accounting and pursued his real estate broker’s license in Illinois. Klaff Realty was started in 1982. He closed his first deal, the $12 million acquisition of a former Marshall Field's building, after reading about the owner’s desire to sell in a newspaper, camping out at their office for three days waiting for a meeting and convincing them to give him a few days to find buyers. The deal closed in one month.
The focus of his speech was the constant search for new ideas and opportunities. Klaff began the first part of his real estate investment career acquiring large corporate assets in the Chicago Loop and repositioning them into multi-tenant buildings. After the real estate crash in the early 1990s, he saw an opportunity to buy distressed assets in suburban Chicago from banks that were eager to sell. While the locations of these assets were outside of his comfort zone, he used the same investment guidelines he had always used to produce returns of around 20% in a three to five year timeframe.
His next move was to team up with companies that specialized in liquidating retail stores, where the stores’ inventories were the focus and the real estate was rarely considered. This strategy involved acquiring assets from bankruptcy court, another first for Klaff. Going through and understanding this process gave Klaff a niche opportunity as the only real estate company utilizing this avenue for acquisition opportunities.
Klaff is currently searching for his next great idea, which may involve real estate in South America or a return to Chicago (Klaff was a strong bidder in the 2009 sale of the Chicago Cubs, which, believe it or not, was a real estate play). While many would see the obstacles in investing in a new arena such as a foreign nation or a baseball team, Klaff sees the opportunities that no one else can.
The Innovator Award was conceived from the paper entitled "Tradition and Innovation," written by Stephen Malpezzi, academic director of the Graaskamp Center. The paper's central theme is that a rich history cannot be established without continually implementing innovation. The award, sponsored by the UW Real Estate Club and the Graaskamp Center, is typically handed out each semester.
Eric Dowling is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Eric plans to combine his previous real estate experience with his MBA education to establish a career in private equity investments.