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Sentimentalists in the commercial real estate industry relish recollections of the old days when risk-taking entrepreneurs reigned over markets with the panache and verve of wildcat oil drillers.

Alas, legends such as Gerald Hines, Trammell Crow and Arthur Rubloff have largely passed from the scene today, displaced by a modern corporate culture with strict investing disciplines dictated by the heavy harness of institutional investors and public shareholders. The independent spirit of yore has become a scarce commodity.

Look hard and you can still find it, however. From its headquarters in the Chicago suburb of Skokie, the Alter Group continues to build industrial, office and even retail properties around the U.S. as a family-owned, self-financed development firm under the aegis of the man who founded it exactly a half-century ago — William Alter.

At the age of 76, the chairman and CEO presides over an organization that has erected some 100 million sq. ft. of commercial real estate in 42 different cities for a wide array of corporate clients.

Largely run day-to-day now by Bill's 44-year-old son, Michael Alter, the firm isn't resting on its laurels in this golden anniversary year. It's busier than ever, with 6.7 million sq. ft. of construction either under way or planned in two dozen markets carrying a value of $700 million. The company's total portfolio is valued at more than $2 billion. Revenues in 2004 registered $702 million, up from $692 million in 2003, according to company officials.

New frontiers

Alter, in fact, has embarked on new initiatives in recent years that have surprised many rivals. The firm has become expert, for instance, in the medical office category through its Alter+Care division, erecting buildings for everything from cancer treatment to Alzheimer's care.

The company has also entered the crowded Inland Empire industrial market in suburban Los Angeles with aggressive land acquisitions and speculative warehouse buildings, too.

Best known through much of the 1990s for conservative, generic-looking office buildings, the Alter Group has gone high-style with plans for a “green” speculative mid-rise of 470,000 sq. ft. in the Chicago suburb of Downers Grove. It will be the first Leadership in Energy and Environmental Design (LEED)-certified building in the region. Celebrated Chicago architect Helmut Jahn is designing the building.

These latest projects are a testament to Alter's continuing willingness to change stripes as markets evolve. Indeed, the firm bears absolutely no resemblance to its 1955 incarnation. Fifty years ago, when Bill Alter was a University of Illinois graduate with a degree in business, he began investing in tax-delinquent lots around Chicago. Soon he started putting houses, and later apartments, on those lots.

In the 1960s, Alter began constructing industrial buildings around the Windy City, and by the 1970s and 1980s, he was forging an expertise in build-to-suit assignments for corporate clients. Office buildings moved to the fore in the 1990s when the industrial sector waned, but then in 2002, the firm recommitted itself to industrial with the hiring of Patrick Gallagher as senior vice president from the Pizzuti Cos. Now, retail mixed-use has even crept into some Alter projects.

“This is a very cyclical business,” Bill Alter observes. “Over the years, we've tried to read the markets for signals on what is happening and then follow those signals. Often we looked to both coasts to identify trends first, because Chicago moved a bit more slowly.” Opportunistic land purchases have been a key all along, he adds. “I've tried to buy land when costs were low and wait for the growth to come to us.”

All of that takes money, and that may be the real genius of Alter. For the most part, the firm has shunned private equity investors who expect quick returns. It has instead financed its own deals with bank debt raised from longstanding partners such as Bank of America, Bank One (now part of J.P. Morgan Chase) and Wells Fargo. They've been steadfastly loyal to Alter, which by all accounts hasn't had a losing year in decades.

“We've never speculated carelessly on high-risk projects here,” Alter says. “Other developers got into that situation. But we've always been able to pay our bills on time and not run the company like a crap game.”

Alter has also resisted the temptation to merge with larger companies, take the company public or spin off a division such as a real estate investment trust for a big payday, although there have been plenty of offers from both rivals and investment bankers. The firm is loath to divest most of its assets after they're built, preferring in many cases to operate and manage them for the income stream, even if they do weigh down the balance sheet.

“Bill could never have managed a public company or merged with somebody else and taken on partners,” contends Howard Ecker, president and CEO of Jupiter Realty Services in Chicago, an owner and developer of hotels, apartments and office buildings, who has known Alter for four decades. “Bill is far too entrepreneurial. He's very strong-willed, a larger-than-life personality who isn't likely to ever abide by decisions made by a committee.

“Bill is one of the great men of real estate, often overshadowed by other developers who have more consciously sought out the limelight,” Ecker continues. “But around Chicago, nobody has ever made the mistake of underestimating Bill Alter.”

The prodigal son

Bill's son Michael, a Harvard University grad with a law degree from the University of Chicago, is no pushover either. He was contentedly practicing government relation's law for a big, downtown law firm when a conversation with his father about family estate planning precipitated a decision to join the firm in 1990.

As president since 1995, Michael Alter has proven to be a resilient executive. When industrial demand slowed in the early 1990s, Michael recognized industrial had become a commodity business. “Everybody was doing it,” he says. “We felt the office market gave us more value-added opportunities. In more recent years, as industrial evolved to much larger boxes with more of a land component, we got interested again.”

When Michael joined the firm, some 75% of its work was in metro Chicago and the rest spread around the country. That ratio has now reversed itself, with just 25% of all work done locally.

The company once took pride in doing it all: Brokering its own land deals, managing construction, marketing for tenants and managing its properties. Under Michael's leadership, Alter increasingly has pushed many of those functions to specialists in other cities.

In the Inland Empire, CB Richard Ellis (CBRE) helped Alter identify key sites for acquisition in Fontana and Rancho Cucamonga, where 500,000 sq. ft. and 830,000 sq. ft. distribution boxes, respectively, were completed early this year. It then engineered the sale of those buildings to CBRE's investment arm.

“Alter has only been here for a couple of years, but they're having a huge impact on Southern California,” says Darla Longo, executive vice president at the Ontario office of CB Richard Ellis. “They have a management team that knows how to get into a market and make deals. They recognize an opportunity and move on it while competitors are still thinking it over. They understood early on that the supply of vacant land is quickly running out in the Inland Empire.”

For his part, Michael Alter insists that he is unconcerned about Alter's market share in any city where it invests, and indeed he doesn't even keep track of the firm's revenues.

Growth has evolved naturally, he notes, as key clients such as Nextel have expanded, requiring Alter-built call centers to be erected in various regional markets.

The firm moved into secondary markets like Kansas City and Louisville, Ky., a decade ago when it realized that there really weren't developers capable of doing sizable commercial projects in those cities.

The expansion farther afield has clearly benefited Alter. “It's good to have market diversification as well as product diversification,” says Michael. “We were building in Atlanta five years ago when that market was red hot, but demand has cooled there now, and so we've switched our attention to Phoenix, which is going gang busters.”

A survey of Alter's current agenda, in fact, finds a wide variety of projects either under construction or in the planning stages. A 2 million sq. ft. logistics park is planned in Peru, Ill., 75 miles southwest of Chicago, an uncommonly remote location for the firm. Some 800,000 sq. ft. of office buildings are under development in the Virginia suburbs of Washington, D.C., and three medical office buildings are under development for the Christus Spohn Healthcare System in Corpus Christie, Texas.

Included in the survey is a 3 million sq. ft. mixed-use office and retail development dubbed Riverwalk Arizona, which is already started on the north side of Phoenix on land owned by the Pima Maricopa Native American tribe. The project will be the largest development of its kind, including an 800,000 sq. ft. shopping center.

Staying power

“Sometime in the early 1990s, this company took a very different turn,” recalls Richard Gatto, an executive vice president and a 22-year veteran at the firm. “The Alters said: ‘Make us national.’ I was given a sales and marketing budget. In the space of a few years, we grew from a local Chicago player to a Midwest and then nationwide player. We're painting on a far larger canvas now.”

There have been some missteps along the way, not surprisingly. Bill Alter acquired some 600 acres of raw land in rural Lake County, 35 miles north of Chicago, back in the 1970s. Almost 30 years later, the land is still sitting vacant, awaiting the extension of the Route 53 freeway (mired in political disagreements) that would make the land attractive to corporate tenants.

Out in Rochelle, 80 miles west of Chicago, the firm optioned 200 acres of cornfields some 18 months ago adjacent to the brand-new Union Pacific Global III intermodal center. The area was expected to become a major logistics hub. But no tenants materialized, and Alter quietly let its option expire recently. “We never got the activity we expected to see in Rochelle. That happens sometimes,” concedes Patrick Gallagher, the senior vice president who oversees industrial developments. “You just move on.”

These few miscues have hardly imperiled the firm's solvency. “This is one of the most well-endowed companies in Chicago,” says Joseph Ash, 78, the Alter Group's attorney since its founding.

Ash has maintained his relationship with Bill Alter over five decades, even as rivals from much bigger law firms have tried to muscle him aside. Although real estate remains an industry rife with merry-go-round executive changes, the senior management team at Alter has hardly budged over the past two decades.

People like Randolph Thomas, executive vice president overseeing development, who joined the firm in 1978 fresh out of college, entertain offers frequently from competitors but keep a grip on their Alter ties. “There's no better place to work,” Thomas concludes.

And maybe things won't change much in the future. Michael is just 44. His brother Harvey, who works in Alter's property management division, is 42. Another brother, Jonathan, is 30 and a student at college in Scotland. He might join the firm someday.

Bill may give up the reins before long. “I've had my turn at bat; now it's the next generation's turn,” he says. But if and when he does, Michael is predicting no seismic shifts in a post-Bill era.

“As a family company, I'm aware that we're something of an anachronism today in the development industry,” Michael says. “But as a family company, we've created a lot of organizational stability here.”

Establishing credibility with vendors and clients has aided the company's staying power, says Michael. “Our uniqueness has been an asset more than anything. I've got no plans to sell this company in my lifetime. After that, who knows?”

Lee Murphy is a Chicago-based writer.

An Alter Timeline

Alter starts Alter Realty Inc., a land brokerage firm, in Chicago.

Two major master-planned business parks, Oak Creek Center and Yorkbrook Park, are started in suburban Lombard.

Alter helps pioneer corporate build-to-suit development with construction of the $35 million Bell Labs office/R&D center in suburban Naperville.

Alter enters the Michigan market with a $10 million facility built for American Yazaki Corp., an automotive supplier in Canton.

Alter completes build-to-suits for Ameritech, Amoco, Motorola, Quaker and Allstate.

Michael Alter becomes president.

A healthcare division, called Alter+Care, is established. The firm eventually grows to rank as the 6th largest developer in the industry with $100 million in projects annually. (Ranked by Modern Healthcare magazine)

Alter reaches its 50th anniversary with 160 employees and annual revenues exceeding $700 million.

Michael Alter's WNBA franchise

A lawyer by training, Michael Alter has found a prospective second career beyond commercial real estate. The 44-year-old Alter announced early this year that he's investing more than $10 million to become the majority owner of a new Chicago-based team in the WNBA — the women's professional basketball league that plays its season mostly in the spring and summer.

The team doesn't have a name yet, though Alter has hired Dave Cowens, the Boston Celtics' star center of the 1970s, as the coach. No players have been drafted yet, but Alter is promising that his team will start play in 2006 at the University of Illinois at Chicago's Pavilion arena, which has a seating capacity of almost 10,000.

Alter played basketball in high school on Chicago's North Shore and later on the freshman team at Harvard University, where he earned a bachelor's degree in government. Michael Alter has had season tickets for the hometown Chicago Bulls for years, though he admits that he's so busy, he is rarely able to attend games.

The Bulls are valued at close to $300 million and Alter was looking for something far cheaper in which to invest. “The men's pro teams are so pricey that I don't see how you can make any money on them,” he says. “I wanted to start a women's team after I learned Chicago wasn't represented in the WNBA. I thought the city deserved a team. I think we can make a viable business of this, even if it doesn't become profitable overnight.”

He's got plenty else that keeps him occupied after hours. He runs the City Year Chicago, which sends 50 to 75 young people aged 17 to 24 into local public schools each year to tutor at-risk youngsters in grades K-2. It's a sort of urban Peace Corps, notes Alter, who donates a six-figure sum to the organization each year to help support the cadre of teachers.

The charitable impulse is undoubtedly inherited. In addition to other good works, Bill Alter, his father, is a backer of Keshet, a Jewish day school for disabled students in suburban Northbrook.
— Lee Murphy

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