After a well nurtured youth and graduation from the University of California with a BA in economics, I chose business as a possible stepping stone towards public service rather than accept a scholarship offer for two years of graduate study at Cambridge
What followed was further experience in my brother Martin’s home building business, then two years in commercial real estate brokerage, a year as the COO of a nursing home chain start-up, and ultimately an investor and developer of land for apartment complexes.
In 1968, when I was 29 years old, Martin and I started to build Manor House in Lancaster. Costs came to under $7,000 an apartment and interest rates for the first section were 6%.
Due to intense competition between the gas and electric utility companies, P P & L gifted us (can you believe?) us enough money to pay for the ground and put $75,000 in our pockets! (I recall their check came from their “Petty Cash” account.) The balance of equity came from the enhanced ground value. There was an 80% insurance company first mortgage for twenty years.
Along with the ground for the first two sections of Manor House came some added potential commercial frontage that we later sold off for the total price we had paid for the tracts a decade earlier.
By the late-70s my firm had constructed all of Manor House, Gateway Apartments in Wilkes-Barre, Springetts and Powder Mill Apartments in York, Hollidaysburg Manor in Altoona (later sold and with proceeds gifted to CARE), Grampian Hills Apartments in Williamsport, and we had started Roxalana Hills Apartments in Charleston, WV.
Here is a quote from Niall Ferguson’s, “The Ascent of Money, Financial History of the World” published in 2008:
“While American home purchasers in the mid seventies anticipated inflation rate of a least 12 per cent by 1980, mortgage lenders were offering thirty-year fixed rate loans at 9 per cent or less for a time, lenders were effectively paying people to borrow their money. Meanwhile, property prices roughly trebled between 1963 and 1979, while consumer prices rose by a factor only 2.5.”
It was an accident of history more than great acumen that created so much sudden wealth. We had borrowed on relatively long terms at relatively low interest rates of 6% to a high of say 8% (if that) while the Carter era inflation hit the high teens for about three years running and inflation continued at a lesser rate for decades.
Moreover, when the estate of a partner in three of the complexes determined to sell its interest (against my fervid advice), we negotiated a figure higher than what we sought to pay but with the understanding that we had three years at 6% to refinance. This turned out to be quite fortunate as huge inflation occurred during those years.
In short, what had been well leveraged investments with modest equity (largely “sweat” and often utility company inducements) so increased in value due to inflation that our equity became substantial, almost over night. Meanwhile rental income soared with inflation. And we paid out little income taxes due to heavy depreciation of the new properties.
We took pride in our usually competent and always conscientious management.
By the 1980s we had the resources and ability to borrow against current apartment complexes to fund the equity for construction of two more apartment complexes and four hotels.
Martin had shown the way at the very outset. I was very hard working and disciplined as Terry Field would likely vouch, and the “gods” were bestowing kindnesses that for some reason they have withheld from our more recent investments in Eastern Europe.
My other business ventures in the film industry and investments overseas were a mixed bag, at most.
I consider my most important career achievement to be in the realm of political activism. What Kevin Zeese, Mike Gray (‘may his memory be for a blessing’) and I achieved with Common Sense for Drug Policy went far towards beating back the ignorant and misguided War on Drugs and helped salvage hundreds of thousands of lives.
I also take pride in helping to support the American House Foundation that feeds thousands of disadvantaged children in Hungary, drug policy causes, and NewsLanc.com which critiques Lancaster rip offs and comments on state, national and world affairs.
All we can do is make the most of circumstances. Few have had my good luck. I measure myself against whether I have made the most of it.
