People - MAY 13, 2014

Clarion Partners founder retires

by Andrea Waitrovich

Frank Sullivan, one of the founders of Clarion Partners, has plans to retire as managing director at the end of the month.

Sullivan has 43 years of experience in the real estate business. After graduating from the Wharton School at the University of Pennsylvania in 1971, he was recruited by Provident National Bank to join the real estate finance group.

In 1979 Sullivan joined Citibank as a regional acquisition vice president and was promoted in 1982 to chief acquisition officer, all in the real estate investment management department.

Sullivan left Citibank with two others to found Clarion Partners in 1984. While at Clarion Partners, Sullivan worked to raise and invest capital. At the time of his announced retirement, he was still managing $4 billion in separate accounts.

Sullivan is a veteran of the business and saw the evolution of real estate as an investment class.

“The industry has changed dramatically since I joined in 1971,” Sullivan says.

In the 1970s real estate was owned by private entities, with large amounts of debt capital from banks and insurance companies. Equity came from pooled syndicates or high-net-worth families.

“There was no transparency, no public market involvement, no serious research, and much was done behind closed doors,” Sullivan remembers. “Then came changes in ERISA, inflation and the emergence of commingled funds in the late ’70s causing institutions to begin investing.”

During the 1980s, the market looked strong, and funds continued investing.

“When 1989–1992’s debacle came upon us, with commercial real estate much of the causative factor, institutions began to shy away saying, ‘Tell me, again, why did I get into real estate?’ Then, real estate opportunity investing became the rage and much profit was made as the 1993–1997 recovery took hold,” Sullivan says. “Though an economic blip due to the internet crash occurred in 1999–2002, real estate at the operating level, i.e., cash flow, started to look ‘OK’ and in many ways better than the stock markets.”

For the past 10 years or so, even with the global financial crisis, real estate has held its own in comparison with other asset classes.

“Now with economic recovery well in hand and values restored, real estate is now recognized as an accepted investment class that institutions can participate in, with reasonably predictable results,” Sullivan says.

Now leaving the sector, he has an optimistic outlook for the future of real estate.

“As to the future, my crystal ball gets very foggy after three years, but I think, while values are high, I don’t see core product doing any significant retrenchment,” Sullivan says. “The economy looks OK, institutions aren’t that highly leveraged, there’s no serious overbuilding and rents look like they’ll trend, in the overall market, at inflationary levels, if not a wee bit more. In other words, steady progress, just what real estate should do in most portfolios, i.e., provide some stability due to cash flow, with at least moderate appreciation.”

Sullivan plans to spend more time with his wife of 30 years, Ellen, his three children and four grandchildren. All reside on the East Coast.

Sullivan said he would like to do things he did not have time for in his 43-year professional career. He would like to travel and pursue educational activities, as a teacher and as a student. During his professional career Sullivan for 20 years taught at New York University’s Business School. Sullivan will join two boards as a member and possible consider other similar roles.


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