SANTA FE, N.M. -- After finishing reading a book on investing legend Warren Buffett one Sunday last fall, Dean Jernigan knew there was just one person with the deep pockets and smarts to help his small, self-storage property company expand.
Not Buffett. Bill Sanders.
Who? If you haven't heard of William Sanders, it's probably because he wants it that way. To those in the business, though, the 54-year-old investor is to real estate what Buffett is to the stock market.
"If there was one investor I would call, it wouldn't be Buffet," Jernigan said.
"It would be Sanders."
With the book on Buffet finished, Jernigan, chairman and chief executive of Columbia-based Storage USA Inc., got in touch with Sanders. Three months later, he sold Sanders a 28 percent stake in his company for $220 million.
In the six years since starting Security Capital Group Inc., Sanders has amassed a $5 billion real estate portfolio and put together from scratch two of the nation's biggest apartment and industrial-property companies.
He's so successful in anticipating and capitalizing on real estate trends that some investors say they would rather invest alongside him than the Oracle of Omaha.
His moves send stocks up
Like Buffett, he has built a faithful following, and news that he's taken a stake in a company can send its stock soaring.
Storage USA's shares, for example, surged 2 points to $33.75 on March 1, the day the news was announced.
It's the same with CarrAmerica Realty Corp. Sanders invested $250 million in the Washington-based office developer last November in return for a 39 percent stake. Carr's stock is up 26 percent since then, almost double the gain in the Standard & Poor's 500 Index.
"Bill Sanders has tremendous vision," said Howard Seaman, head of the independent real estate securities research firm Pharus Realty Investments of New York. "He spots trends three to five years ahead of everyone else."
In a business known for flamboyance, unbridled egos and shameless self-promotion, the Cornell University graduate is the exception.
Little has been written about Sanders; he almost never grants interviews. But people familiar with his organization paint LLTC picture of a workaholic, not afraid to interrupt an employee's Saturday night dinner at home with a phone call to discuss business.
A spokesman declined to provide information about Security Capital Group or Sanders, and Sanders declined requests for interviews.
He "likes to keep things close to the vest," the spokesman said.
Besides Storage USA and Carr, Sanders' holdings include controlling stakes in industrial property owner Security Capital Industrial Trust of Denver, apartment company Security Capital Pacific Trust of El Paso, and Security Capital Atlantic, an owner of apartments in the Southeast. An affiliate manages the three Security Capital companies.
Since founding Security Capital Group in 1990, Sanders has built a huge central database of economic and real estate information that any of the companies he owns stakes in can tap, a first in the industry. Carr and Storage USA are using the database to pick new acquisitions.
He also formed a New York-based division that helps these companies raise money directly from large investors without the help of Wall Street -- another first. That cuts costs and gives Sanders-backed companies cheaper money to use in aggressively bidding for properties.
"He's building an empire by offering one-stop shopping for institutional investors," said Sam Lieber, manager of the Evergreen Global Real Estate Equity mutual fund, which has holdings in some of the same companies as Sanders.
Solid gold coattails
Investors like Lieber flock to Sanders' companies for one reason: his sterling record.
In 1968, he founded Chicago-based LaSalle Partners, building it into one of the largest international real estate services firms, managing and investing in large office buildings and other commercial real estate coast to coast for clients such as Ford Motor Co. and Coca-Cola Co.
In 1990, he sold his stake in LaSalle and moved to Santa Fe. Golf and bridge weren't in the plans.
Instead, Sanders formed the company that would become Security Capital Group.
He raised $250 million from wealthy individuals and pension funds, selling them on the idea that he could scoop up quality properties cheap. Then he'd bundle them together as real estate investments trusts, or REITs, put in talented managers and make a killing selling stakes to the public once the market recovered.
The timing couldn't have been better. Desperate real estate investors were unloading properties in the 1990-1991 recession, just when Sanders started buying.
Sanders' first move was in March 1991, when he took a 21 percent stake in Property Trust of America, later renamed Security Capital Pacific.
Under Sanders, the company grew rapidly to a market value of $1.62 billion from just $35 million. Sanders' stake of about 38 percent is worth $620 million. Since then, the stock has averaged a return of 28 percent a year, double the 14 percent of the Standard & Poor's 500 Index.
Even with such heady growth, industry watchers say Sanders is no '80s-style high flier poised for collapse.
For one thing, Sanders is building his business on equity, not debt. That means his companies are in stronger financial shape and more likely to withstand the next slump in the economy and real estate markets. Both of Sanders' public REITs have debt that represents only about 25 percent of their market capitalization, well below the industry average of about 40 percent.
Yet, Sanders must navigate a host of obstacles that stem from rapid expansion, real estate experts say. Details can get overlooked. New managers brought into the company through acquisitions can clash with existing managers. That can divert attention from the business of property management, alienating tenants and investors.
And it remains to be seen whether Sanders' success in apartment and industrial properties carries over into the office and self-storage markets, his latest ventures.
Then again, if Sanders is as smart as people say, he probably has those things figured out already.
Pub Date: 6/09/96