Not Just Any Family Business

Bill O’Connor is the CEO of O’Connor, a family-owned real estate operating corporation founded in 1983 by Bill’s father, Jeremiah W. O’Connor Jr. His brother, John, serves as senior managing director and head of acquisitions and development. 

The firm has evolved from a classic family business that would buy and hold properties into a true mega-firm structured into two complementary verticals: O’Connor Group, a development firm with more than $30 billion worth of commercial real estate under its umbrella, particularly in the retail space, across North America, Mexico, and Europe; and O’Connor Capital Group, a private equity arm that holds $6.5 billion in capital for credit and equity CRE investments. 

Bill O’Connor sat down with CO to explain how his firm can develop properties across countries and time zones, raise billions in capital for private equity funds investment, and manage multiple asset classes as diverse as retail and multifamily. 

This interview has been edited for length and clarity.

Commercial Observer: Your firm seems pretty multifaceted. Could you walk us through your business model?

Bill O’Connor: Yeah, so we do a bunch of different things. We’re an investment management private equity company, headquartered in New York. We’ve got $5.5 billion assets under management. That’s from leading pension funds and sovereign wealth funds and some high-net-worth individuals. Our institutional product, where we raise pension fund money, is into retail, and that’s the bulk of our business that’ll buy or build retail centers across the U.S. and Mexico. We’ve been in that business for 45-plus years. 

We’ve also had a development side of the company, which is the other half, which we build for our own account or for others, with others, whether it’s retail or residential products. And we also have a growing industrial side of the business. In that business, the company will take some kind of market or entitlement or zoning risk, and once we solve that, we’ll bring in outside capital and build the product, and depending upon the client, or the market, we’ll build it to hold it forever, or we sell it. 

How big is your development arm?

It’s under 10 assets, but our development arm will do a project every 18 months. We just broke a new residential building in Watertown, Mass. We’ve just finished one in Charlottesville, Va., and prior to that finished one up in the Bronx, up in Parkchester. And then we have a couple of other projects that just haven’t broken ground yet, but are in the planning stages.

So what started first? Was it the development firm or the private equity component that invests in real estate? 

That’s a great question. We’ve always had both disciplines. The company actually was founded 45 years ago. So I’ve been running it for the last 15 years. But we’ve always felt that having a development team, construction people, and leasing people on our staff helped us be better investors on the fiduciary investment management side. 

How did you get involved in real estate at the start? 

I started when we were building a new project called Menlo Park in Edison, N.J., where I started as a construction associate. And then we opened up another project in White Plains called the Westchester, where I worked on leasing. And then I went back to business school, and then came out and went to an investment bank for a while, and then we opened up our London office, where I went for about five years over there, and then came back to the New York office to run it. 

Retail seems to be the asset class the firm is most active in. How have you seen retail evolve in recent decades during your time as CEO?

Certainly for most of our career, we grew up where the regional mall was just a fortress-type investment, and everybody wanted to be in the mall space. What we learned through the Global Financial Crisis in 2008, right into what we call the retail apocalypse —where everybody was going to shop online and we would never visit a brick-and-mortar store — straight to COVID and today’s tariff-related [headlines], is that good retail over time will remain good retail. From the pension fund world, we were really in the desert for a number of years where people didn’t want to invest in retail, and said it was too risky. 

What resulted was a lot of Class B and C properties went away that became something else. The A properties existed, and there was no new product built, so today the fundamentals are a very simple supply and demand story. No new retail has been built for 15 years. The bad centers have gone away. And what remains is very healthy retail, whether it’s open-air shopping centers, a handful of regional malls, and then there are some great, high-street locations. 

So retail is the old mode. If you took the Gap, for example, the Gap would want to be in every regional mall across Columbus, Ohio. There are eight regional malls, they wanted eight stores, because that meant two regional managers, that meant one distribution hub. And that’s how they looked at the world. Today, better retailers, they’ll only be in the top one or top two centers at a market. They don’t care about the rest. So if you own the top one or two centers, you’re gonna do fine. If you’re beyond that, it’s a very difficult path. Retailers are much more discriminating about the locations that they’ll go to. 

So where do you see retail going into the future? 

What has changed is people used to talk about online and in-store. What we’ve learned, and what the better retailers have learned, is that both the properties and the tenants have to speak both languages. You have to have a great physical offering, and your center has to be updated, and you have to have a great online offering for the tenant side. And both of those can coexist very well. 

Target took over the COVID and immediate post-COVID world because they really figured out the buy online/pick up in store. The curbside pickup experience was very good. And that’s something we focus on in our centers, really rolling that out, adding new parking spots and double parking lots, more parking spaces and great signage to help them do that business, which is very important. It is something that we never had thought about prior to COVID. It’s very important. You really have to keep your center up to date. And so without the capital wherewithal to reinvent their centers, the tenants are not going to go there anymore. 

How do you view the phenomenon of curbside retail and the REIT businesses involved in that? For instance, David Lukes of Curbline Properties.

Look, David is a good friend of mine. We’ve been in business with him a few times. He’s a great guy. You know, we have slightly different views on that. To support his thesis, we had 30 years of the central business district being the only thing people wanted to talk about, and prior to that it was the suburbs, and I think we’re having a little bit of a revenge of the suburbs in the 15-minute cities, which, you know, David’s thesis helps there. The extra day or two that people are spending in their suburban nodes, the better suburban nodes across the U.S, has led to an increase in sales, and we can see that. 

So I think retailers are really focusing on the better suburban markets, the better suburban nodes, being close to educational, medical and other job centers. I think that’s all working. I think from our client’s perspective, which are larger pension plans and sovereign wealth funds, the liquidity of that sector is a little more challenged. If you own 100 20,000-square-foot boxes across the U.S., trying to liquidate that is a little more difficult than calling it one center. We try to focus more on larger, what we call hybrid centers, that mix all of these uses together. For instance, a grocery store plus some sort of value-add retail, plus some sort of entertainment, plus some sort of daily needs. Those are the centers we try to focus on. 

Let’s talk about the residential side of the equation. You guys have 13,000 apartments. How did you find yourself also being a retail developer and residential property manager? 

It’s a core strength. Generally, we are underhoused across the U.S. To live, we need more apartments. So we try to focus on markets that we know well and others where we have done maybe a retail deal on that market. So our last project, we finished up in Charlottesville, Va., which was where we took a great shopping center there, where we took some excess land that was zoned for retail. We felt that there wasn’t enough demand for retail. We rezoned that to residential, and just to deliver the best in-class product in the market, which is leased up very well. We then worked on a downtown location of Watertown, Mass., It took us three years to get it zoned, and we are building the first new [residential conversion] project in that submarket in 20-plus years. 

So we’re trying to focus on markets that are difficult to access, where we know it may not be the quickest rezoning, but we know what we’ll get there at the end. And once we do that we have great value. So we’re not building garden apartments in a city we don’t like. We’re trying to focus on, you know, harder to build markets or markets that have demonstrated and will demonstrate above-average growth. 

What goes into securing $5.5 billion in capital?

So we’ve had a good track record of good partners on our investment side, the pension funds and sovereign wealth funds for many years. I think what we offer them, within retail, is certainly, our belief is that you have to have a dedicated retail team, or be vertically integrated from accounting to property management to leasing to construction and development. And retail is kind of a living business, so you can’t be on the investment side, you can’t be buying an office building on Monday and an apartment building on Tuesday, then buying the best retail asset on Wednesday. You really have to be deep into the weeds and focus on it, and our vertically integrated team allows us to talk to all the retailers before we buy the center. It gives us better knowledge to make those investments, and that’s what our partners and clients rely on us for.  

How would you describe your investment thesis? 

Well, $5.5 billion AUM sounds like a lot, but in the investment manager world we’re definitely the middle end of the range. So our size allows us to go into new businesses fairly quickly, and react to markets fairly quickly. And our size means we don’t have to chase the next new idea. We kind of stick to our knitting, and really try to find the right real estate angle to any of our investments. We don’t pick markets, we pick properties. 

And what would you say is the best advice you got in your real estate career? 

You can’t have a good deal with a bad partner. 

Brian Pascus can be reached at bpascus@commercialobserver.com.