Pollack's Face-Lift Artistry
Newspaper: Arizona Republic
Location: Business Section, Front Page
Author: Catherine Regor
When Valley real estate investor Michael Pollack walked into a deserted furniture warehouse in Chandler, he had visions of grandeur.
The boxy building's low ceilings and exposed wires didn't deter Pollack, who has amassed a $200 million real estate portfolio by seeing the upside of older or rundown projects. He saw the foundation for the office building of his dreams.
Several months and nearly $2 million later, Pollack transformed the 31,000 square-foot former Reliable Furniture warehouse into what some call the Taj Mahal of Valley offices, complete with black marble floors, white roman columns, domed ceilings with hand painted frescos and chandeliers. Not lacking in amenities for employees, the building has a video arcade, workout room with big screen TV, billiards table and 1950s-style, diner for a break room.
The revamped warehouse at Baseline and Alma School roads became home to Michael A. Pollack Real Estate Investments last year.
"Class-A office space doesn't even begin to describe this building," said Patrick Cassidy, Pollack's marketing director, who has worked with him for the past two decades. "Michael knew what he wanted."
Pollack, who calls himself the "plastic surgeon of real estate," buys older neighborhood or strip shopping centers for low prices, rehabs them and then is able to fill them quickly with tenants by charging below-market rents.
In 1991, he paid $17 a square foot for his first Valley property, the tiny 23,000-square-foot University Central Center in Mesa that was 90 percent empty. He quickly filled it and began buying more properties.
Pollack now owns 52 retail centers across Arizona, and most of his early investments have increased in value several times over. Today, the typical shopping center in metro Phoenix is selling for $68 a square foot, according to Kammrath & Associates.
Pollack isn't the typical real estate investor. While many of his competitors sneak out for a round of golf to work off stress, the 46-year-old bangs out a drum solo in the office garage. On weekends, the married father of three sons hops into his Greyhound-like bus, equipped with computer, fax machine and golf cart to tour his properties across Arizona, Nevada and California.
Pollack's personal style also stands out. Instead of khakis and Oxford shirts, the uniform of the real estate industry, he prefers dark, double-breasted suits, accented with gold jewelry. His in-town car is a black Cadillac with gold trim rather than an SUV.
"He's flamboyant, even for the real estate industry," said Pete Bolton, senior managing director of the commercial real estate brokerage CB Richard Ellis. "But he's also a serious investor who has made some good acquisitions."
Pollack started buying Valley real estate when the market had hit rock bottom. He had the cash from past real estate investments in his hometown of San Jose, wasn't tangled up in the savings and loan mess and was able to buy most of his early properties for 20 percent of their original values.
The son of a developer, Pollack started his own real estate venture straight out of high school, building speculative homes. He then began buying apartments in the Bay area and even dabbled in Texas' real estate market before the oil boom bust in the 1980s.
"I believe money is made on the buy, not the sell," said Pollack, who still holds most of the first properties he acquired.
Pollack competes for tenants with many property owners who have bought recently and paid three to five times more for shopping centers than he did. That's why Pollack Investments can charge cheaper rents and still bring in consistent double-digit returns, real estate market watchers said.
"Michael hunts and pecks for deals that he thinks makes sense," said Cam Stanton, a broker with CB Richard Ellis. "He's a shrewd investor who has made few mistakes."
After a decade of buying, Pollack Investments now owns nearly 2 million square feet of retail in metro Phoenix, enough to fill two regional malls. The average retail vacancy in the Valley is nearly 6 percent, while Pollack's shopping centers are only about 2 percent empty.
"Michael keeps his centers nice and keeps them full," said Deon Flood of Prestige Printing.She and her husband, Phil, have leased space in Pollack's Waterfall Center in Chandler for the past 10 years.
"We have had a few bad landlords, so we can appreciate one that is fair," she said.
With the backing of less than a handful of silent repeat investors, Pollack still typically pays cash for properties he believes are undervalued. But pickings are getting slim. Phoenix's growth has attracted investors big and small to its real estate market during the past five years, and the prices have jumped with demand.
That means, there are fewer good buys.
"We don't read the obituaries looking for deals, but there will always be deaths and divorces motivating some sellers," said Pollack, who plans to keep building his portfolio.
Stanton said brokers bring deals to Pollack because he has the cash and financing to buy without delays.
Considering Pollack's lowball strategy toward purchases, his new headquarters building may look extravagant. But he paid only $1 million for the once dilapidated warehouse, and estimates it would have cost 30 percent more to build the now ritzy workspace from scratch.
Pollack's private office totals 2,000 square feet, as big as many Valley houses. There's a grand piano and a fireplace.
Things haven't always been so opulent. The new building is a big step up for Pollack Investments, which moved from a humble site in one of its Mesa shopping centers. All of the desks, including Pollack's, were crowded together in space smaller than his new lobby.
The new office had to be big enough for Pollack's advertising memorabilia collection. During the past 30 years, he has accumulated what he calls the largest private collection of props that pitched everything from beer to fine jewelry. One of his favorite pieces is a 7-foot tall flying helicopter used in a 1940 Hamm's Brewery display.
Pollack has had many offers for his extensive collection, which he declined to value. But he isn't interested in selling any time soon.
He also isn't interested in selling his company, despite plenty of interest from real estate investment trusts and other investors.
"Our style is a little lavish, and we aren't geared for the corporate environment," Pollack said.
With property prices high, Pollack is getting more into the development side of the business. His newest project is a Chandler office park. Pollack bought 13 acres at the southeastern corner of Arizona Avenue and Elliot Road this year, and calls it the "gateway to Chandler." He's not exactly an objective observer, however, as his group also owns the land on the northeastern corner of the intersection and the retail center Pollack Plaza on the northwestern corner. Plans call for turning the undeveloped land into Pollack Business Park South.
Whether buying or building, real estate is where Pollack plans to stay.
"I have never bought a share of stock and never will," he said. "When the stock market was up, people couldn't believe I wasn't in it. But now those people have lost a lot of money, and I am still making it in the real estate market."
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